International Aid, Fraud, PEPs and Accountancy Firms.

The Coalition Governmemt of "Call me Dave" Cameron wishes to enshrine minimum compulsory contributions to internatuional aid into the UK budget.  Please see the following link for details.   Guardian Newspaper Article

However, the UK’s Independent on Sunday newspaper yesterday reported allegations of US $ 1 billion (approximately) of bank frauds in the Kabul Bank leading to international aid to Afghanistan being suspended. The article goes onto list PEP family members and two international accountancy firms as being linked to this story.

Now come on people, the surprise here is…..?

Your comments, as ever, much appreciated.

The Hindu : News / National : SC notice to Centre in money laundering case against Lilawati Hospital

Image via Wikipedia The Hindu : News / National : SC notice to Centre in money laundering case against Lilawati Hospital

India's move to implement modern AML controls starts to bear fruit.

FSA should be brought to book over Gartmore probe | Markets & Analysis

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FSA should be brought to book over Gartmore probe Markets & Analysis

Now here is an interesting article for those who have to work not only in the AML regulated sectors but also closely with UK Government regulators.
If the key point of the UK AML regime is reporting suspicion (and people will find out about investigations) and the current POCA rules require disclosures to the Government, how can you tell if a client of yours is subsequently cleared and the Government department responsible does not announce it?
Your comments are welcome.

Related articles

• Rambourg faces no penalties from FSA (independent.co.uk)

gulfnews : Saudis form agency against money laundering and terror financing

gulfnews : Saudis form agency against money laundering and terror financing The Kingdom of Saudi Arabia continues to bring its response to AML and CTF into line with international best practice.

Jeddah: A horrible flood great people

I've just completed my second day of tutoring Saudi's first Certified Anti Money Laundering Officer (CAMO) course and as with all the best courses the delegates are participating and appear to be enjoying themselves.

So like the other participants, I'm starting to relax and in between the discussions on SARs, AML Enterprise Risk Management and an unexpected trip to highly proficient local dentist I'm beginning to form an impression of this large city.

Most of you will recall that Jeddah, apart from being the traditional access to Mecca, recently suffered severe flash floods that that killed over 100, ( the link is to a BBC news site with a brief video clip), during the Haj. Now as you travel the City there is still evidence of the recent damage (real pot holes and the debris left from the flood waters and big big traffic jams).

Nevertheless I've been impressed by the courtesy and helpfulness of the denizens of this city who have been unfailing helpful me. They have gone out of their way to help and to ensure the success of this event and I found myself wondering whether there is a truism here.

Just as in AML it is the people who the critical component for success so it is with cities. You can damage the infrastructure and nature can and will remind you how powerful she is, but in the end, is a city actually just the sum of its people? I'd link to think so.

Azerbaijan: Change for the better. Oh and a Happy Christmas to you all!

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You may recall that, on 12 December, 2008, The Council of Europe AML specialists (MONEYVAL) called "on its member states and other countries to advise their financial institutions to pay special attention by applying enhanced due diligence to transactions with persons and financial institutions from or in Azerbaijan in order to address the ML/FT risks*.

On the 14th December 2009, MONEYVAL stated that Azerbaijan has been upgraded its AML and CFT programmes. It did this by withdrawing it’s advice to pay special attention to transactions emanating from or in anyway involving passing through the country.

Here is a link with slightly more detail: http://www.coe.int/t/dghl/monitoring/moneyval/About/AZE_StatDec09_en.pdf

Well I'm travelling off on my first vist to the Kingdom of Saudi Arabia to tutor a week long AML course so I'll be travelling over Christmas itself.

So let me wish all you readers and contributors a very Merry Christmas (or Season's Greetings according to your faith)and a Prosperous New Year!

I'd welcome your thoughts on "Operation Rize"

Last year the Metropolitan Police undertook a co-ordinated series of raids against three London Safety Deposit Box businesses under the code name "Operation Rize".

I think that this operation may well become a turning point in how, why and where the Proceeds of Crime Act is used in the UK. The link to an excellent article is below.

http://www.dailymail.co.uk/home/moslive/article-1222777/The-raid-rocked-Met-Why-gun-drugs-op-6-717-safety-deposit-boxes-cost-taxpayer-fortune.html

However, before I sound off on the subject, I'd welcome your thoughts on Operation Rize. Was it, from your point of view a success or an overreaction? Was it exactly what POCA was designed to do or was it an abuse of process?

The floor is yours.

Where is the Pan-Am bomber?

The following excerpt is from today's Times of London.

"The Lockerbie bomber restored communications with his Scottish monitors today, but not before some serious questions were raised about the arrangements for keeping watch on a man convicted of killing 270 people."

Where is he? Is he at home? In hospital? Shouldn't he be dead by now?

Where did the time go?

Dear Readers,

Thanks for your patience. Its been a busy last quarter and I've shamefully let the blog slip.

My apologies.

Anyway, were back with lost to discuss, so here goes.

Cheers

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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• No hiding place (news.bbc.co.uk)

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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And the JMLSG Consultations Parts I & II end in October

Just because the UK AML Regs 2007 will be subject to review so, in the ever changing world of the joint Money Laundering Steering Group (JMLSG) notes parts I & II are out for consultation already.

You can find more details at the following:

Part I, closing date for comments October 9th 2009: http://www.jmlsg.org.uk/content/1/c6/01/64/34/JMLSG_GUIDANCE_-_cover_note_Jul_09_doc.pdf

Part II, closing date for comments October 21st October 2009: http://www.jmlsg.org.uk/content/1/c6/01/65/70/PART_II_-_Cover_note_to_consultation.pdf

In both cases, the JMLSG Board is looking at:

• areas of omission
• provisions of the Guidance that are difficult to implement or effect
• provisions of the guidance that no longer reflect current practice

So my advice is, get cracking and you MLRO's out there start looking to build time into your lives to amend your existing procedures accordingly.

Review of the UK's 2007 Money Laundering Regulations announced

HM Treasury (HMT) and the Better Regulation Executive have announced plans to review the UK’s anti-money laundering regime under the 2007 Money Laundering Regulations.



http://www.hm-treasury.gov.uk/fin_crime_review.htm

As well as focusing on guidance, communication and engagement with stakeholders., the two departments are particularly interested in:

• Views on how the regulations are designed,


• How they work in practice,


• How effective and proportionate they are and


• How much engagement there has been.

I found the following sentence particularly noteworthy. “The review will also consider supervisory arrangements, industry practice and the customer experience under the regulations.”

To this end, HMT will start the next month with a “Call for Evidence” document, which will explain the issues that they are especially interested in.

It is thought that the review contribution period will last until December 2009.

Whilst respondents will be free to make comments on any area of the regime under the 2007 Regulations, HMT have made clear that they will not be reviewing the wider operation of the separate suspicious activity reporting or consent regimes. (After all, that is a Home Office issue!)

Interestingly, HMT have announced that they intend to hold meetings in Belfast, Edinburgh and Birmingham as well as London. Now I am a great believer in participatory democracy, so either watch this space for details or get out there and contribute.

So if you have a view on the current AML regime in the UK, now is your time to voice it!

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Book-Keepers can launder money.

We are now some 22 months into the UK's implementation of the 3rd EU AML Directive, and I'm still encountering people who argue that book-keepers don't need to be registered for anti-money laundering purposes.


Wrong. You and your firm do either with a professional body like the International Association of Book-keepers (http://www.iab.org.uk/ ) or HMRC.


Why, because book-keepers have access to company financial records, which they can manipulate and steal from which is why they were deliberately included in the Anti-Money Laundering regulations in the first place.


Now the example above is of a US book-keeper will serve up to 16 years in prison – with four years fixed – and he will have to pay his former employer, $500,000 in restitution.


IMHO, The addition of money laundering to theft charges will become the norm in the UK as well.

Any questions?