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AML: HMRC flexes enforcement muscle to the tune of £7.8 million
Nicola Finnerty
The government and enforcement agencies have collectively and consistently maintained that tackling money laundering is a top law enforcement priority. Donald Toon, Director of Prosperity at the NCA has said that money laundering is: “a facilitator for almost all serious, organised, and major crime. Tackling it is absolutely a strategic priority for law enforcement for the UK, and that is agreed across policing, the National Crime Agency and all of the law enforcement agencies”.
However, in March of this year the House of Commons Treasury Committee published its report on Economic Crime: Anti-money laundering provisions and the current sanctions regime (the Treasury Committee Report) and in summary, the Committee found a surfeit of regulators and enforcement agencies but a lack of resources and coordination. The fractured nature of oversight, they found, resulted in a lack of investigation, information, analysis and ultimately enforcement.
This supports what many political and legal observers have questioned for some time; whether the government’s commitment extends to action in this area. Below, we recap on the anti-money laundering (AML) landscape, some of the key suggested weaknesses in the UK’s AML regime, and look at what practitioners can expect to see in the coming year.
Following the entry into force of the Money Laundering Regulations 2017 (MLR 2017), which implemented the provisions of the 4MLD into the UK, there have been a number of key institutional developments:
The NECC was set up in November 2018 as part of the Government’s Serious and Organised Crime Strategy. It is designed to coordinate the UK’s national response to economic crime - particularly money laundering and corruption offences. The clear intention is to address the perceived gaps created by the multi-agency approach. Speaking at the Cambridge Symposium on Economic Crime in September this year, the Solicitor General praised the NECC and outlined its role as an overseer, declaring that it “truly amplifies the notion of ‘shared responsibility’” operating as “a collaborative, multi-agency centre, which brings together law enforcement and criminal justice agencies, government departments, regulatory bodies, and the private sector”.
Furthermore, the National Economic Crime Plan 2019-2022 states that the NECC will; 1) undertake a collective threat assessment; 2) resolve evidence gaps through a long term research strategy; 3) Improve information sharing between AML supervisors and review information sharing barriers; and 4) Develop public-private action plans to combat economic crime threats.
In January 2019 the Economic Crime Strategy Board dubbed “Taskforce” was launched to ensure that appropriate resources are allocated across the relevant agencies to (in theory) enable the Government’s objectives to be met. It puts a firm emphasis on a public-private partnership to fight financial crime and money laundering in particular. This partnership was reiterated in the Economic Crime Plan 2019-2022 (above) and appears to be at the core of the government’s ambitions.
On 18 June 2019 the Law Commission published its report on the AML framework (following a 2 year consultation). The report criticised the Suspicious Activity Reporting (SARs) regime as inefficient and burdensome, echoing the Financial Action Task Force’s (FATF) assessment that the system was not effective enough when set against the scale of threat faced by the UK. The Home Office is now due to implement a SARs Transformation Programme (with £3.3 billion investment) which aims to fundamentally reform the SARs operating model and deliver a regime with much better IT, enhanced feedback and a reformed, and better funded, UK Financial Intelligence Unit.
It is hoped that this will lead to a deeper assessment of reports and continued scrutiny of those, for example, in the legal, accountancy sector and trust and company service providers who were highlighted in the report for low levels of reporting compared to the banking sector. The next iteration of the regime is to be launched in December 2020 and is expected to include an upgraded SAR submission process for reporters tailored to all different reporting sectors’ needs, improved law enforcement tools to access and analyse SARs and a better system workflow to support UKFIU in managing SARs.
So where are we now?
As referred to in the Treasury Committee’s Report there is still a relative lack of enforcement for AML breaches. According to publicly available data (a freedom of information request reported in the media in March 2019) no prosecutions had been brought under the MLR 2017 between June 2017 and October 2018. In addition, HMRC’s own records indicate that total fines levied on businesses for non-compliance with the Money Laundering Regulations from introduction to April 2019 amounted to a mere £294,879. This represents 0.002% of a “sector” valued, on the most conservative estimates, at £10 Billion. That said HMRC levied a record fine of £7.8 million on Touma Foreign Exchange Ltd in September for a wide range of serious failures under the MLR 2017 (see below).
Many reasons for the lack of enforcement to date have been cited – including:
So whether enforcement action will keep up with the frequent political pronouncements on fighting money laundering remains to be seen, but the UK’s drive to be seen to be a clean place to do business post-Brexit cannot be underestimated. While enforcement and prosecution for AML failing to date has been characterised as “no carrot, no stick”, the signs are this seems about to change.
This blog was first published and appeared in Money Laundering Bulletin on September 18 2019.
For further information on the issues raised in this blog post, please contact a member of our criminal team.
Nicola Finnerty is a partner in the criminal litigation team. She has experience of fraud, corruption (including the Bribery Act) and cartel matters, financial compliance, money laundering, asset seizure and confiscation cases, through to sexual offence cases, drugs, murder and offensive weapon crimes.
We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.
Nicola Finnerty
Nicola Finnerty
Nicola Finnerty
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