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Rise in anti money laundering inquiries poses challenge for banks, says expert

Out-Law News | 12 Jun 2017 | 4:31 pm | 1 min. read

Requests from foreign authorities for the UK's assistance in anti money laundering (AML) investigations rose last year to record levels.

The number of mutual legal assistance requests from overseas rose 12% to 163 in 2016 and have climbed 123% since 2012, when just 73 requests were made, according to a report in the Financial Times.

The rise follows an increased emphasis on AML by the UK's Financial Conduct Authority (FCA). In January the regulator fined Deutsche Bank £163 million for failing to maintain an adequate anti-money laundering framework and the FCA has also fined Bank of Beirut and Sonali Bank. The fine was the largest ever imposed by the regulator for AML control failings.

Financial services litigation and compliance expert Michael Ruck of Pinsent Masons, the law firm behind Out-Law.com, said the FCA's 2017 business plan stated that the body would seek to use its power to impose criminal sanctions to prosecute money laundering in circumstances where regulatory action is not having the desired impact.

“UK and overseas regulators and prosecutors have made it clear they are focusing on AML for the foreseeable future,” Ruck said. “FCA fines make it clear that the FCA will take action, even in circumstances where systems and controls do not come up to scratch but there is no evidence of money laundering identified. This action is supported by significant fines imposed recently against banks and others by overseas authorities.”

He said the increased focus by the FCA and its overseas peers meant financial institutions needed to step up their own efforts to combat money laundering.

“The rise in the number of mutual legal assistance treaty requests from overseas authorities comes as no surprise in light of this,” Ruck said. “The challenge for banks and others is to identify where the bar is being set by the various authorities and to seek to identify the specific financial crime risks for the business they are conducting.”

Last year the FCA introduced new reporting obligations for financial services firms, requiring them to complete an annual “financial crime report” to help deal with issues such as money laundering.

Meanwhile EU member states are required to transpose the fourth AML directive into national law by the end of this month. The directive came into force in June 2015 and member states had two years to implement its rules into national legislation.

The directive introduced a number of requirements including an obligation for EU states to maintain a central register on the ultimate beneficial owners of businesses, accessible by banks and other service providers doing due diligence into their clients.

The data on mutual legal assistance requests came from the Home Office and was revealed following a freedom of information request by Thomson Reuters' legal division.