AML enforcement increase should prompt companies to review policies

Out-Law Analysis | 18 Sep 2019 | 3:43 pm | 2 min. read

Companies should review and update their anti-money laundering policies as the UK government and regulators continue to increase the penalties for non-compliance.

A UK authority's issue of its highest ever fine for money laundering offences is evidence that the UK government and regulators are determined to clamp down on money laundering offences, as outlined recently by independent research.

Disrupting money laundering is a priority for the UK government as it responds to a report last December by intergovernmental body the Financial Action Task Force (FATF) which called for more action on money laundering by the UK's statutory and professional supervisors.

Clamp downs will be helped by improvements in information sharing, for example via the proposed reforms to the suspicious activity reports (SARs) regime and greater use of unexplained wealth orders. These will lead to better detection rates, with law enforcement encouraged to use all the tools at its disposal to ensure deterrence. This will support the current trend for increasingly hefty fines for the most serious failings.

The biggest fine yet issued by UK tax authority Her Majesty's Revenue and Customs (HMRC) was imposed on west London money transmitter Touma Foreign Exchange. It was fined £7.8 million for failings under the Money Laundering Regulations. It was found to have had failings in risk assessments and associated record-keeping; policies, controls and procedures; fundamental customer due diligence measures, and adequate staff training

Director Hassanien Touma has been banned from acting for any business governed by anti-money laundering regulations after failing to pass a vetting test to ensure he was fit to carry out the role of an officer in a money services business.

Companies can reduce the risk they are exposed to by reviewing and updating compliance policies and making sure that compliance activity is properly resourced and fully supported from the very top of the organisation. At a minimum they should carry out and document the results of risk assessments and ensure policies are supported and enforced. They should have controls and procedures in place; fundamental customer due diligence measures, and adequate staff training.

The FATF published a mutual evaluation report on the UK's response to money laundering and terrorist financing in December. While the report was generally positive about the UK's actions, it identified room for improvement in the approach taken by supervisors, both statutory and professional body.

Since then, there has been a strengthening of controls on money both by the three statutory supervisors HMRC, the Gambling Commission and the FCA, as well as by the 22 accountancy and legal supervisory bodies. This looks set to continue, particularly if the UK's Economic Crime Plan 2019 -2020, published over the summer, is anything to go by. This lists seven priority areas agreed in January 2019 by the Economic Crime Strategic Board. These include ensuring that the powers, procedures and tools of law enforcement in the public and private sectors are effective and strengthening their capabilities to deter and disrupt economic crime.

As with all penalties for misconduct, money laundering sanctions must be proportionate, dissuasive and effective. The Sentencing Council's Definitive Guideline for fraud, bribery and money laundering offences provides a suitable framework, allowing for fines for the worst breaches of up to four times the amount laundered or the saving made. There is also the possibility of increasing this further in cases with aggravating factors.

The Definitive Guideline says: "The fine must be substantial enough to have a real economic impact which will bring home to both management and shareholders the need to operate within the law. Whether the fine will have the effect of putting the offender out of business will be relevant; in some bad cases this may be an acceptable consequence".

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