UK: Probing Dirty Money: Treasury Committee Announces AML And Economic Crime Inquiry

Last Updated: 17 April 2018
Article by Anita Clifford

Speed read: Anita Clifford puts in to context the Anti Money Laundering and sanctions inquiry announced by the Treasury Committee, a lower house parliamentary committee, on 29 March 2018. 

Today (29 March 2018), the Treasury Committee announced a full-scale inquiry into the money laundering regime and the impact of economic crime on consumers in the United Kingdom. The announcement comes amidst growing concern over the effectiveness of the United Kingdom's Anti-Money Laundering (AML) framework in Part 7 of the Proceeds of Crime Act 2002 and the money laundering regulations which operate in parallel. A Sanctions and AML Bill is currently before Parliament for consideration and the Law Commission is currently conducting its own full scale 9-month review of Part 7 as part of its Thirteenth Programme of Law Reform. Real estate has been earmarked as a focus of the new Inquiry. Announcing the Inquiry, Committee Chair Nicky Morgan MP, noted: "It has been claimed that the UK, particularly the London property market, is becoming a destination of choice to launder the proceeds of overseas crime and corruption – so-called 'dirty money'".

Call for evidence

As a first step, the Inquiry has called for evidence from the public on AML and economic crime weaknesses. Submissions are due by 8 May 2018. In relation to AML, evidence is sought on several matters including the weaknesses in the current legislative and regulatory landscape and its impact on and unintended consequences of the regime for individuals, firms and the wider economy, and the effectiveness of the Treasury and its bodies in supporting and supervising the regimes.

Similar issues are flagged for consideration in relation to the second arm of the Inquiry which focuses on economic crime and its effect on consumers. Pertinently, however, the Inquiry has also called for evidence on the potential for technology and innovation to assist those committing and combatting economic crime and the security of consumers' data.

Analysis

The Inquiry's interest in the regulatory aspect of the AML regime, alongside its other focus areas, is to be welcomed.

Since 2003, duties to undertake appropriate client identification and develop and implement AML controls and systems have applied to the financial sector. Over time, adherence to these duties has become crucial to the fight against illicit money flowing into the United Kingdom. In 2007, the duties were expanded and extended to more business activities identified as vulnerable to exploitation by money launderers such as legal professionals. Most recently, they have been refined so as to compel regulated persons to adopt an individualised risk-based approach under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 and independently audit for AML compliance. The 2017 Regulations implement the EU's Fourth AML Directive (4MLD).

The AML requirements, imposed on persons such as banks, estate agents, legal professionals and high value dealers, have been backed by criminal sanction since 2003. Fifteen years on, prosecutions are rare. Although there have been successful prosecutions of the principal money laundering offences, contrary to sections 327 – 329 of POCA, very few prosecutions for breach of the money laundering regulatory requirements have been instituted. Similarly, there have been very few prosecutions of the failure to disclose a suspicion of money laundering offence under section 330 of POCA, applicable to regulated persons, even though concern about the United Kingdom's attractiveness to money launderers has not diminished.

Difficult to square

Under the current regulatory framework, a person – which includes firms and corporates – who fails to discharge a duty is liable to two years' imprisonment or to a fine (section 86). As distilled, the provisions capture a range of serious AML breaches, such as the failure to undertake appropriate Customer Due Diligence (CDD) prior to the start of the customer relationship, assess a matter for money laundering and terrorist-financing risk, conduct ongoing monitoring of a business relationship, identify a Politically Exposed Person (PEP), train employees in AML and develop and implement robust AML controls.

Falling short of the regulatory provisions presents a grave money laundering risk. The absence of prosecutions, however, calls in to question the deterrent value of the offence provisions. Relatedly, the lack of prosecutions for failure to adhere to the legal requirements may be difficult for responsible firms who do adhere – and spend considerable time and resources doing so – to square.

The pattern to date has been to use non-criminal enforcement powers to hold persons accountable for AML failures. Serious AML deficiencies have attracted non-criminal enforcement action by authorities which possess both civil enforcement and criminal prosecution powers yet choose not to use the latter. In 2017, the FCA fined Deutsche Bank AG in excess of £163 million for failing to maintain an adequate AML control framework. In January 2018, Business Insider reported that although it was not publicly known, HMRC had enhanced its investigation of estate agencies and issued a greater number of financial penalties for AML deficiencies.

In its 2017/18 Business Plan, published on 18 April 2017, the FCA indicated an intention to start using its criminal powers:

"[w]here firms have poor AML controls, we will use our enforcement powers to impose business restrictions to limit the level of risk, provide deterrence messages to industry, or both. We will generally use our civil powers, but if failings are particularly serious or repeated we may use our criminal powers to prosecute firms or individuals."

A change in the approach has already been foreshadowed by at least one authority but just when a failing is 'particularly serious' is open-textured.

Tension

Against this background, one matter likely to attract consideration by the Treasury Committee is the discernible tension between the civil and criminal routes towards AML accountability. Non-criminal enforcement action can result in early resolution by firms wishing to continue business and avoid further reputational harm. High fines may be put towards future investigations. In contrast, the criminal route requires gathering sufficient evidence of AML weaknesses to a higher standard with no certainty of result in a criminal court. The fines ordered to be paid by a criminal court are unlikely to match the civil penalties imposed for the same underlying conduct. This tension is likely to attract the scrutiny of the Treasury Committee.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions