The FSA's Consultation Paper on Enforcement Financial Penalties Closes Tomorrow

The Financial Services Authority (FSA) is in the final stages of consulting on proposed changes as to how to make to Decision Procedure and Penalties manual (DEPP) and Enforcement Guide (EG) fall into three categories:

1. A new framework in DEPP for determining the appropriate level of financial penalty in enforcement cases, with the intention of improving the transparency and consistency of our penalty-setting process, and increasing penalties in line with our credible deterrence strategy;
2. An explanation in DEPP of our approach in cases where a person claims the imposition of a financial penalty will cause serious financial hardship; and
3. Amendments to the statement in EG of our policy in relation to publicising our action in criminal investigations.
   
   

A link to the FSA's can be found here: http://www.fsa.gov.uk/pubs/cp/cp09_19.pdf

The link to the online response form is here: http://www.fsa.gov.uk/pages/Library/Policy/CP/2009/cp09_19_response.shtml

The deadline for comments is tomorrow, however they usually allow a few days grace.

I'll be one of the talking heads discussing this with an audience in the City later on today. Might see you there!

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Ireland And Liechtenstein agree OECD to the exchange of information re tax matters

The Republic of Ireland is continuing to tighten the rules that can be used against money launderers, in this case tax evaders.

At the signing ceremony, on 13th October 2009, The Minister for Finance, Mr. Brian Lenihan T.D., stated:

"Ireland fully supports the renewed efforts of the OECD on transparency and effective exchange of information on tax matters. Ireland has a system of full exchange of information and is fully in compliance with OECD standards. We agree that all countries and territories that have not yet committed to the OECD standards, including major financial centres, should do so.”

This Exchange Agreement will allow the Irish Revenue Commissioners to request information which is relevant to an Irish tax investigation directly from the authorities in Liechtenstein. Information that would typically be relevant is bank account information and beneficial ownership information for companies and other entities established in Liechtenstein.

This Exchange Agreement with Liechtenstein is the ninth that Ireland has signed, following the signing of agreements with the Isle of Man, Guernsey, Jersey, the Cayman Islands, Gibraltar, Anguilla, the Turks and Caicos Islands and Bermuda.

With thanks to our friends at the Association of International Accountants.

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More Statutory bodies can now receive "whistle blowing reports"

With the issue of ethics having returned to the business world with the failure of the international banking system, you may be surprised to learn that there has only now been an extension to the UK accounting bodies of a statutory protection for whistleblowers.



With effect from 1 October 2009, the The Financial Reporting Council (FRC). and three of its Operating Bodies, the Accountancy and Actuarial Discipline Board (AADB), the Financial Reporting Review Panel (FRRP), and the Professional Oversight Board (POB), have been added to the list of bodies to which employees can responsibly disclose information under the “whistle blowing” provisions of the Employment Rights Act (1996).

"The Act protects workers from any detrimental treatment from their employer if, in the public interest, they make a disclosure of wrongdoing to specified bodies.

The Public Interest Disclosure (Prescribed Persons) (Amendment) Order 2009 means that individuals will now be protected if they make a qualifying disclosure in good faith to the FRC, the AADB, the FRRP and the POB – provided that they reasonably believe that the information disclosed is substantially true and that the wrongdoing falls within the scope of the FRC’s responsibilities.

FRC Chief Executive, Paul Boyle, welcomed the extension of the Act to the FRC and said: “The FRC’s effectiveness is enhanced by its ability to keep in touch with developments in the markets. We welcome this new protection for individuals who make disclosures to us within the terms of the legislation and we hope that it will encourage those who have information which may be relevant to our regulatory".

My thanks to the Association of International Accountants for bringing this development to my attention.

Met Police Human Trafficking unit under threat

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The Metropolitan Police's (Met) Human Trafficking Team was set up in 2007 and is now threatened with disbandment (again) with a proposal for their work to be given to other Met officers. As far as I can tell, the reason behind this proposal appears to be a money saving exercise.

The unit appears to be the victim of the old problem that specialisation costs.

A decision is expected within the next few weeks. You can find a link to a Press Association article here: http://www.google.com/hostednews/ukpress/article/ALeqM5jGCErLyU7Jbqj0EoNb2j9D7bzZEA

Why have I picked this story out? Because in July 2009, SOCA published it's 2009/10 UK Organised Crime threat Assessment. The report identifies five general areas of concern of which Human Trafficking falls under Organised immigration crime is a key area of concern. FYI the map is of the US Human Trafficking picture. In theory, the UK then aligns its response to such criminal activity sector by sector.

If the Met go ahead with this decision, my concerns would be as follows:

1 The Labour Government of the UK will talk about harm reduction strategies, but will not fund them properly. Here Labour have form with their inadequate funding of the war in Afghanistan.

2 The message to human traffickers will be sent out that the risk of being caught and prosecuted in the UK has reduced. Thus making the UK a more attractive target on a risk assessed basis.

Since human trafficking is thought to be the third most profitable activity in the organised crime world (after illegal drugs and arms trafficking) one would expect professional money launderer to get busier!

Do you agree?

Let me know your thoughts.

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Does the Italian Tax Amnesty create problems for UK MLROs? Part II

The AML Watchman’s view: I think that, in this hypothetical question, you would have to make an SAR to the UK’s SOCA and possibly even a consent request. My thought process is outlined below. But I’d love to hear what you would do and why? That is what the comment box below is for.

Why? Well unless the client came to you to regularise their entire tax affairs under the limited legal professional privilege (LPP), when you and your firm might be able to take advantage of legal professional privilege, you may want to consider whether or not you and your firm were being used to maintain possible criminal activity by not reporting the balance of the clients fund or activity.

How would you know whether the rest of the funds were legitimately obtained? The overseas reporting exception might not work. In this case although the Italian Government appears to have addresses the false book-keeping crime how could you know what other criminal infractions may have been committed in order to get the funds to your firm originally? So unless you are willing to expend a possibly huge amount in Enhanced Due Diligence and legal opinion the only way to be sure to manage your personal legal liability under PoCA, would be to disclose to SOCA.

Why might consent be required? The mention of organised criminals taking advantage of the Tax Amnesty should put you on warning that this possibility, no matter how slight, that a connection between a criminal gang and your client might exist. The only people who should know this should be SOCA and their law enforcement contacts. Giving them the opportunity to disrupt such a payment should, hypothetically address your liabilities under PoCA. If, however, a client were to ask your firm to organise or to effect a transfer toward the end of the amnesty period but the consent request then takes longer to process than the closing date of the Amnesty, then it’s a yippee skip round the Christmas Tree event for the lawyers.

Just a thought.

Anyway, over to you.

Does the Italian Tax Amnesty create problems for UK MLROs? Part I

Here is an interesting conundrum re Suspicious Activity Reporting (SAR) and the 3rd EU AML Directive. The highlighted Bloomberg article outlines the confluence of a Tax Amnesty, Money Laundering, Tax Evasion, the bank induced recession and the law of unintended consequences.

This proposed Tax Amnesty law was approved by the Italian Government on 2nd October 2009 (see BBC article: http://news.bbc.co.uk/1/hi/world/europe/8288185.stm) and it poses an interesting challenge to UK AML regulated MLRO’s and firms.

Here is a hypothetical question for you which may highlight why. An existing client, probably with an Italian connection, wants to repatriate funds / financially convertible assets to Italy. Your routine monitoring of transactions illicits an admission that your client wants to take advantage of the announced amnesty. Under UK AML regulation and law, where does that leave you and your personal reporting obligation?

Well I’ve got a view (it’s Part II ) but I’d love to hear what you would do and why?

Has the SFO got the balance right? II

I hadn't seen this article by Peter Oborne on the impact on the proposed size of the SFO fine, but I've included a link by way of balance.

Has the SFO got the balance right?

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"The Serious Fraud Office (SFO) is right to pursue BAE Systems for past offences but not at any cost. Dragging itself the Government and BAE through the courts for years to try to prove its case is too risky."

This business editorial ask's an interesting question about balance and proportionality of the Serious Fraud Offices’s actions.

This link to a BBC article gives more information: http://news.bbc.co.uk/1/hi/business/8284073.stm

Given the importance of ethics in modern business I’d be interested in your views about whether:

1) You think that the SFO have got it right? And
2) You think the recently fined Attorney General (Baroness Scotland) has the integrity to make a decision on prosecution?

Cheers

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