Supervisors (Sector top lines)

Question 1

Financial Services

Answer 1

The Gov has identified banks as the highest risk sector in the UK in terms of overall vulnerability to money laundering

In financial services, around a third of banks dismissed serious allegations of money laundering regarding their customers without adequate review.

The banks are leading on SARs, but there are flaws in the system

Still £billions every year

We need:

• senior managers to held responsible for AML failures
• increase transparency BOT
• Financial services firms submit the most SARs to law enforcement. However the NCA assesses hundreds of billions of pounds are laundered through UK banks and their subsidiaries each year and the FCA has found systemic failings in banks AML control frameworks.
  • The FCA provides the benchmark in the UK AML regime for transparency over its enforcement and sanctions regime and produces a large amount of analysis on the AML threat and compliance risks in the sector.
  • Even though the level of enforcement against banks is greater than in any other sector, it is unlikely to provide a real credible deterrent as there is a lack of individual accountability and the fines issued may be seen as just a ‘cost of businesses’. An average of £8 in fines per year doesn’t match the billions of pounds the NCA say is being laundered into the UK each year.

Question 2

Accountancy

Answer 2

In the accountancy sector, at least 14 different supervisors take some responsibility for supervision, leading to widespread variations and inconsistency in enforcement.

There is no independent AML enforcement authority for the accountancy sector. Instead, the wide range of accountancy institutes claim responsibility over their own membership groups, whilst also being responsible for promoting, lobbying and championing their sector. (follow up with conflict of interest main points)

• The majority of accountancy supervisors are also professional bodies for the sectors they supervise – leading to conflicts of interest in direct breach of the Clementi principle.
• The Government has assessed the accountancy sector as high risk in terms of money laundering - money launderers can use accountants, wittingly or un-wittingly, to provide legitimacy and to enable access to other regulated sectors without detection.

Question 3

Legal services

Answer 3

In legal services, 42% of the most serious reports of suspicious activity were assessed to be poor quality or incomplete.

• The legal sector supervisors in England and Wales are independent from their professional bodies – but this separation hasn’t been applied to supervisors in Scotland or Northern Ireland.
• The Government has acknowledge that there are complicit legal professional facilitating money laundering and that levels of compliance with the regulations are mixed.
• 42% of the most serious type of reports of suspicious activity in the sector were assessed to be poor quality or incomplete, raising concerns about ‘gaming’ of the reporting system.

Question 4

Trust and company service providers (TCSPs)

Answer 4

HMRC is the main supervisor for TCSPs but there is no public record of any AML regulatory enforcement action against TCSPs and the Government has confirmed that the scale of the misuse of services provided by UK TCSPs is an intelligence gap.

• TCSPs can be involved in the creation of front companies and complex corporate structures for money laundering.
• The Government has found that there are inadequate control environments in place to prevent the misuse of this service by criminals.
•

Question 5

Luxury goods retailers

Answer 5

The Government believes a significant number of luxury goods retailers have failed to register for supervision with HMRC. This represents a key risk, as those who have failed to register are more likely to be involved in facilitating money laundering.

• Luxury goods retailers fall under the regulated category of ‘High Value Dealers’ when they sell items over £12,000 in cash – they are supervised by HMRC
• A 2014 report on the luxury goods sector found that 56 per cent of respondents in the industry cited bribery, corruption, fraud and money laundering as factors which caused them the most concern and acknowledged that the globalised nature of the sector had increased the risks.

Question 6

Art & auction houses

Answer 6

In the art and auction house sectors, only 15 reports of suspicious activity were submitted (0.004 per cent of the total), despite money laundering risks being well- recognised in this sector.

• Similar to luxury goods, art and auction houses fall under the regulated category of High Value Dealers when they sell items over £12,000 in cash and are supervised by HMRC.
• High value art ownership is one of a very small number of ways to own something of high value completely anonymously. The sector represents a relatively easy opportunities to launder large sums of cash, since few art dealers and auctioneers are equipped to deal with the risk of their businesses being used to launder the proceeds of corruption.
• Auction houses have filed only 15 suspicious activity reports out of a total of 354,186 in the year to September 2014 (0.004 per cent of the total).

Question 7

Estate agents

Answer 7

In property, the entire estate agency sector only submitted 179 reports of suspicious activity in 2013/14, which is only 0.05 per cent of all reports submitted.

• Our recent research found that over £180m worth of property in the UK has been brought under criminal investigation as the suspected proceeds of international corruption since 2004, which was described by law enforcement authorities as “only the tip of the iceberg”.
• Only 0.05% of all suspicious activity reports in 2013/14 were from the estate agency sector, despite numerous studies indicating the attractiveness of UK property for the corrupt.
• HMRC is the supervisor for estate agents, but there are no reported cases of enforcement against estate agents for breeches of the rules.