Category: General News & Cases

Lastest news concerning AML from press releases and publications

  • Money Laundering Scam Alert

    Money Laundering Scam Alert

    Some commercial electronic verification companies may contact you stating that all client due diligence verification must now be done electronically making paper copies no longer acceptable. This is just a marketing ploy and is not correct in any shape or form.

    The law and guidance on conducting client due diligence remain as set out in the Money Laundering Regulations 2007 and issued guidance  You should continue to make your judgments based on the risk assessment of the client and/or the services they offer.

    The Regulations are clear that verification of a customer’s identity maybe by documents, data or information, or even a combination of different types of evidence. Newly released FATF Recommendations do recognise the use of technology in conducting business and the need for technology to be involved in the customer due diligence process. This is not at the expense of more traditional methods.

    We, at BTC Corporate & Compliance are great believers in electronic verification; however it is just one of many tools available to the regulated firm, which they can use in the given circumstance. This is one reason why we do not commit firms to contracts and minimum usage when using our electronic verification services.

  • Revised FATF Recommendations

    The long awaited revised FATF Recommendations on International Standards on Combatting Money Laundering and the Financing of Terrorism and Proliferation was finally published on 16 February. Following several rounds of consultation the revised Recommendations contain no real surprises in the publishes outcome, but a lot of disappointment has been aired by various groups who feel that the FATF has not gone far enough to tackle corruption and tax evasion despite the FATF’s best intentions.

    Serious tax crimes have now been added to the list of predicate offences. The smuggling offence has also been clarified to include offences relating to customs and excise duties and taxes. These changes mean that financial institutions and other regulated business types need to be on the lookout for suspected tax evasion by their clients. This was an area of concern during the consultation phase as many felt that the many, if not most, private sector regulated businesses  lacked the requisite expertise to detect tax crimes and that the playing field remains far from level creating an inequality and further burden for businesses faced with the task of digging out possible criminality. Whereas many countries did not may tax crime a reportable offence, all countries will now need to ensure that tax crimes are included in their anti-money laundering legislation to track down the proceeds of fiscal offences.

    Another area of contention surrounds the identification of beneficial ownership. Despite the intention of clarifying and simplifying the requirement to identify ultimate beneficial owners (UBOs) the corporate veil remains. The new requirements for nominee directors and shareholders to disclose their status to the company registry, or be licensed, will start to reduce the risks in relation to the camouflaging of ownership.

    The FATF have finally included domestic politicians in their definition of PEPs removing what was a somewhat ridiculous anomaly. The focus has increased globally with the risk of corruption high on the agenda of the G20. Non-conviction based asset forfeiture now also features on the agenda.

    The former nine Special Recommendations on Terrorist Financing are now incorporated into the main 40 Recommendations reflecting the close connection between terrorist financing and anti-money laundering measures. A new addition of proliferation financing has been added to assess countries’ compliance with targeted financial sanctions of UN Security Council Resolutions that focus on the financing of proliferation activities, specifically targeting Iran and North Korea.

    The revised standards are a first step and countries now need to implement their recommendations into law with the new standards being incorporated into evaluations by February 2013. In the UK we would expect the fourth European Directive in be in place by this date, followed closely by our own revised Money Laundering Regulations.

    The long awaited revised FATF Recommendations on International Standards on Combatting Money Laundering and the Financing of Terrorism and Proliferation was finally published on 16 February. Following several rounds of consultation the revised Recommendations contain no real surprises in the publishes outcome, but a lot of disappointment has been aired by various groups who feel that the FATF has not gone far enough to tackle corruption and tax evasion despite the FATF’s best intentions.

    Serious tax crimes have now been added to the list of predicate offences. The smuggling offence has also been clarified to include offences relating to customs and excise duties and taxes. These changes mean that financial institutions and other regulated business types need to be on the lookout for suspected tax evasion by their clients. This was an area of concern during the consultation phase as many felt that the many, if not most, private sector regulated businesses  lacked the requisite expertise to detect tax crimes and that the playing field remains far from level creating an inequality and further burden for businesses faced with the task of digging out possible criminality. Whereas many countries did not may tax crime a reportable offence, all countries will now need to ensure that tax crimes are included in their anti-money laundering legislation to track down the proceeds of fiscal offences.

    Another area of contention surrounds the identification of beneficial ownership. Despite the intention of clarifying and simplifying the requirement to identify ultimate beneficial owners (UBOs) the corporate veil remains. The new requirements for nominee directors and shareholders to disclose their status to the company registry, or be licensed, will start to reduce the risks in relation to the camouflaging of ownership.

    The FATF have finally included domestic politicians in their definition of PEPs removing what was a somewhat ridiculous anomaly. The focus has increased globally with the risk of corruption high on the agenda of the G20. Non-conviction based asset forfeiture now also features on the agenda.

    The former nine Special Recommendations on Terrorist Financing are now incorporated into the main 40 Recommendations reflecting the close connection between terrorist financing and anti-money laundering measures. A new addition of proliferation financing has been added to assess countries’ compliance with targeted financial sanctions of UN Security Council Resolutions that focus on the financing of proliferation activities, specifically targeting Iran and North Korea.

    The revised standards are a first step and countries now need to implement their recommendations into law with the new standards being incorporated into evaluations by February 2013. In the UK we would expect the fourth European Directive in be in place by this date, followed closely by our own revised Money Laundering Regulations.

  • FATF Release new guidance

    The Financial Action Task Force, the global standard-setter in the fight against money laundering and terrorist financing, has revised the Recommendations after more than two years of efforts by member countries. The Recommendations are used by more than 180 governments to combat these crimes. The revisions, made with inputs from governments, the private sector, and civil society, provide authorities with a stronger framework to act against criminals and address new threats to the international financial system.

    The cost of money laundering and underlying serious crime is very large, estimated between 2 and 5% of global GDP. The revision will enable national authorities to take more effective action against money laundering and terrorist financing at all levels – from the identification of bank customers opening an account through to investigation, prosecution and forfeiture of assets. At the global level, the FATF will also monitor and take action to promote implementation of the standards.

    The revised FATF Recommendations now fully integrate counter-terrorist financing measures with anti-money laundering controls, introduce new measures to counter the financing of the proliferation of weapons of mass destruction, and they will better address the laundering of the proceeds of corruption and tax crimes. They also strengthen the requirements for higher risk situations and allow countries to take a more targeted risk-based approach.

    Giancarlo Del Bufalo, the President of the FATF, said:

    “Adoption of the revised Recommendations demonstrates countries’ shared commitment to fight money laundering, terrorist financing and the financing of the proliferation of weapons of mass destruction.”

    “The revised Recommendations include requirements for stronger safeguards in the financial sector, strengthened law enforcement tools and improved international cooperation.”

    The main changes are:

    Combating the financing of the proliferation of weapons of mass destruction through the consistent implementation of targeted financial sanctions when these are called for by the UN Security Council.

    Improved transparency to make it harder for criminals and terrorists to conceal their identities or hide their assets behind legal persons and arrangements.

    Stronger requirements when dealing with politically exposed persons (PEPs).

    Expanding the scope of money laundering predicate offences by including tax crimes.

    An enhanced risk-based approach which enables countries and the private sector to apply their resources more efficiently by focusing on higher risk areas.

    More effective international cooperation including exchange of information between relevant authorities, conduct of joint investigations, and tracing, freezing and confiscation of illegal assets.

    Better operational tools and a wider range of techniques and powers, both for the financial intelligence units, and for law enforcement to investigate and prosecute money laundering and terrorist financing.

    For more information on the FATF Recommendations, please visit the publication page on www.fatf-gafi.org/recommendations

  • Identifying counterfeit euros

    Identifying counterfeit euros – consultation decision

    HM Treasury (HMT) have published the results of their consultation on the UK’s implementation of European Union (EU) Regulations 44/2009 and 45/2009, requiring Currency Exchange Offices and Money Transmitters to have procedures in place selectively to check euro notes and coins using an approved method.

    Following the consultation, the Government has decided to create a new criminal offence for failure to comply with the checking requirements of the EU regulations in relation to counterfeit euros.

    You can read the full report by following the link below.

    UK enforcement measures for EU Regulations 44/2009 and 45/2009 on counterfeit euros on the HMT website (Opens new window)

  • ICAEW Disciplinary Consent order made on 3 October 2011

    The followng consent orderwas made by the ICAEW investigation committee

    With the agreement of Richard Braysher of 2 High Road, Eastcote, Pinner, Middlesex, HA5 2EW, the Investigation Committee made an order that the member be severely reprimanded, fined £5,000 and pay costs of £1,280 with respect to a complaint that:

    1 Between 28 September and 3 March 2010 Mr Braysher failed to comply with written assurances he had given on or about 28 September 2006 following a Quality Assurance Visit that he would:

    Under the Money Laundering Regulations 2007:
    a. have procedures in place to perform on-going client due diligence;
    b. attend external training on the money laundering regulations and;
    c. undertake a compliance review.

  • Shah v HSBC: Court of Appeal Says the Identity of Staff Making SARs in Good Faith is Not Disclosable

    Shah v HSBC: Court of Appeal Says the Identity of Staff Making SARs in Good Faith is Not Disclosable

    The Court of Appeal in London ruled on 13 October that HSBC Private Bank did not have to disclose the identity of employees who had made internal reports which had led to suspicious activity reports (“SARs”) being filed with the authorities unless there was a firm suggestion on bad faith on their part.

    The judgment is the result of satellite litigation arising from the more famous 2010 case of Shah v HSBC, in which the Court of Appeal ruled that parties which had suffered loss as a result of SARs being filed were entitled to demand proof from the regulated institution responsible that the suspicion on which the SAR was founded existed.

    On the particular facts of the original case, the High Court ordered HSBC to identify the employees by function, but not by name. The Shahs appealed the court’s refusal to order the disclosure of the names of the employees, and HSBC cross- appealed against the court’s finding that its obligation to make standard disclosure required their names to be revealed in the first place (with the names only being protected by PII, and not as of right).

    The Judgement of the Court of Appeal
    Within HSBC there were three stages of AML reporting:
    1. The relationship manager with a particular client would report any AML suspicion to the compliance department;
    2. The compliance department would report the matter internally to the MLRO;
    3. The MLRO would then, if appropriate, file an SAR with SOCA.

    HSBC had disclosed a series of memos, internal reports, and similar documents. With the exception of the MLRO, the identity of all employees concerned had been redacted; they were identified only by the department (client relationship, compliance or MLRO) that they worked for. The documents did however reveal the information based on which the MLRO formed his suspicion.

    The Test for Disclosure

    The court found that the redacted identities of the employees concerned was not material on which HSBC relied to prove its case. As a result, the relevant question was: is the material either material which would adversely affect HSBC’s case or material which would support the Shahs’ case?
    In answering the question it was important to remember that the issue remaining in the wider case of Shah v HSBC after the previous decision of the Court of Appeal was a narrow one: did HSBC have a genuine suspicion at the time when the SARs were filed? Accordingly, the Shahs did not put forward a positive “case”; they simply sought to test the bank’s case that it did have such a suspicion. For that reason, the court ruled that the only circumstance in which the employee identities would be disclosable was if they adversely affected HSBC’s case.
    The Shahs had stated that two employees of HSBC (“Ms S” and “Mr J”) might have had the motivation to make an internal AML report in bad faith. One had asked for a loan from Mr Shah and been refused; the other had received an abusive email from him after a transaction had been delayed. The Shahs submitted to the court that if any of the anonymous employees concerned in making an internal report turned out to be Ms S or Mr J, they might be able to allege bad faith.

    Refusing disclosure, Lord Justice Lewison commented:
    The more I listened to the explanation of why the claimants wanted the names, the more convinced I became that, to use the familiar cliché, this was a fishing expedition… [the Shahs] did not say that even if Ms S’s name was revealed as one of the sources [the Shahs] would be able to assert bad faith; merely that they might be able to do so. Even that possibility was only tentatively advanced. It is all speculation and surmise.

    The court concluded that, absent a firm suggestion of bad faith by the Shahs, HSBC was entitled to withhold the identity of the staff concerned as being irrelevant to the matter under dispute. For that reason, the bank did not have to rely on the doctrine of public interest immunity.
    Conclusion

    This important judgment provides reassurance to employees of firms in the regulated sector of England and Wales that their identities will be protected if they make internal AML reports, unless there is a firm suggestion that in doing so they acted in bad faith. It also makes clear that there is no absolute requirement to disclose the identity of the MLRO who makes an external SAR, although as a regulated firm is now required to show that it had suspicion if its reporting is challenged, it may be that it will be necessary for the MLRO (if no one else) to come to court and explain why he made the report that he did.

  • Former ATT President Charged With Tax Fraud

    Former ATT President
    Former ATT President
    Andrew Meeson, the former President of the Association of Taxation Technicians and three of his business associates who administered a pension scheme, have been charged with stealing £5million through a tax fraud targeting the pension industry.The four – three men and a woman – were arrested last year in dawn raids carried out by HM Revenue & Customs (HMRC) investigating an alleged multi million pound fraud. The raids took place at residential and business premises in the West Midlands, Derby and Leicester.

    Simon De Kayne, Assistant Director of Criminal Investigation for HMRC, said: “Four people have been charged linked to what we believe is a fraud resulting in over £5 million being stolen from public funds. We are committed to bringing such cases to the courts and depriving those involved of the proceeds of their crime.”

    Meeson resigned from his role as president of the ATT last week in order to fight the charges.

    On April 8 2010, the Pensions Regulator took action to suspend Tudor Capital Mgt from acting as trustees from pension trust schemes at the same time HMRC obtained search warrants for the company.

  • 01.09.11 Money Laundering Regulations cease to apply to stocktakers from 1 October 2011

    As part of its review of the Money Laundering Regulations and in order to ensure its effective and proportionate implementation by businesses in the UK, the Treasury has reviewed the risk of money laundering and terrorist finance with HMRC and the Institute of Licensed Trade Stock Auditors.

    As a result the Treasury has announced that stocktakers who do not carry out bookkeeping or other accountancy services will be exempt from the Money Laundering Regulations (MLR) 2007 from Saturday 1 October 2011.

    This means that they will no longer need to register with HMRC.

    This decision also supports the Government’s policy of reducing regulatory burdens on businesses.

    HMRC continue to encourage stocktakers to be diligent and report suspicious activity to the Serious Organised Crime Agency (SOCA). More information can be found at www.soca.gov.uk.

    Stocktakers who offer bookkeeping or other accountancy services will stay on HMRC’s register.

    From Monday 3 October 2011 HMRC will be writing to the stocktaking businesses already registered with them to give the opportunity to de-register for MLR.

    If you do not receive a letter from HMRC but wish to deregister, you should write to the registration team to let them know. Your letter should include details of your registration number and the reason you wish to deregister.

    The address for applications to deregister is:

    MLR Registration Team
    7th Floor Central
    Alexander House
    Southend on Sea
    Essex
    SS99 1AG

  • 11.07.11 Solicitor Jailed For Corruption

    A Henley-on-Thames based solicitor is serving a 16 month prison sentence for abusing his professional position.

    James Thorburn-Muirhead was sentenced on 29th June after a SOCA investigation revealed his links to a drug dealer, his involvement in the theft of clients’ monies and his failure to disclose information under the Suspicious Activity Reports regime.

    SOCA’s initial interest was in Muirhead’s relationship with convicted drug trafficker Steven Smith and the suspicion that he was involved in laundering the proceeds of Smith’s criminal activity. However, the investigation soon uncovered other serious offences.

    Muirhead had been operating as a sole proprietor solicitor, trading as Thorburn & Co in the affluent Oxfordshire town. Search warrants executed at his offices and home address in July 2007 resulted in the seizure of several hundred conveyancing files along with accounting records and computers. The evidence linked Muirhead with a drug trafficker, but also pointed to other criminality including the misappropriation of money from clients’ accounts.

    In July 2009 Muirhead was charged with 10 counts of theft and false accounting, one count of money-laundering and one count of failing to disclose under the Proceeds of Crime Act. Following a plea bargain offered by his defence team with Muirhead pleading guilty to four counts of Theft and False Accounting and the one count of Failing to Disclose.

    Muirhead’s benefit from criminal conduct was agreed at £196,198.00 and a Confiscation Order was made for the same amount, payable within 9 months. A two year default sentence will apply if he fails to meet that deadline, and he will still be liable to pay the sum. He was also ordered to pay a Compensation Order of £12,666.67 and will pay £25,000.00 towards prosecution costs.

  • 12.05.11 ICAEW Fine Accountant £5,000 for breach

    At a Disciplininary Council meeting a Mr P R Honeywell FCA was found to have failed to comply with Money Laundering Regulations2007 in that, following a practice assurance visit, he failed to:
    (i) document a client due diligence review; and
    (ii) identify clients for whom his firm, Honeywell (Monmouth) Limited, provides payroll services.

    On 18 June 2010 the case manager wrote to Mr Honeywell asking him to provide additional information to address the outstanding issues arising from the visit. These are summarised as follows:

    Details of the steps he has taken to establish the adequacy of the money laundering procedures undertaken by social services on clients that are referred to him and the basis on which he is able to rely on these procedures

    Just before the hearing day, the defendant’s solicitors wrote to the tribunal putting forward various points said to be in mitigation. This included that the Practice Assurance visit had ‘passed’ the defendant’s practice in most aspects and that it was unrealistic to expect the Money Laundering Regulations to apply in relation to clients in receipt of social services funding for their care.

    The tribunal did not view either of these points as mitigation. First, Chartered Accountants can be expected to comply with professional standards and partial compliance does not excuse what amounted to a wilful refusal to cooperate with the ICAEW with regard to the areas of non-compliance. In relation to the Money Laundering Regulations, whilst the defendant’s conduct did not amount to the most serious of breaches, the defendant had failed to show any willingness to engage with the ICAEW on this. Had he done so and discussed how he could carry out a modified version of identity checks and thereby compliance, the tribunal might have been more sympathetic.

    It was the role of the ICAEW to maintain the standards amongst the profession of chartered accountancy. An important part of this is the Practice Assurance. An equally important part of a chartered accountant’s professional standards and indeed the protection of the public, is compliance of money laundering requirements. The defendant had fallen below the professional standards expected of chartered accountants.

    The tribunal ordered that Peter Royston Honeywell FCA be severely reprimanded, pay a fine of £5,000 and costs of £2294