Supervisors (Tricky Qs) Flashcards
Aren’t the professional bodies best place to supervise their firms as they have the expertise in their areas?
If that were true then our results would show adequate risk identification. At present, over half of all supervisory bodies are failing to identify where the risks are. The system is just not working.
Whilst they may have expertise in their area, it doesn’t mean they have expertise in AML supervision. The international standard setter for AML rules has praised countries for having a unified approach that allows them to pool expertise and have a broad view of the entire economy that allows them to take more sophisticated approaches to risk assessment.
You base your research on the lack of fines. Are fines really an effective deterrent or can they just be seen as a cost of businesses?
Fines should be seen as one of a package of tools. Fines are important but only useful if they’re meaningful – HMRC fines (2014-15 to firms who broke the rules) only amounted to £800K – less than the average price of house in central London. An average fine of £1000 isn’t going to be an effective deterrent. We’re also calling for more individual accountability for senior managers responsible for ensuring their firms comply with the rules.
Won’t a super supervisor cost a lot of money to set up and run?
It’s false economy to allow professional bodies to supervise, if they aren’t actually supervising. We know that one supervisor (Bar Standards Board – supervises barristers in England and Wales) in particular didn’t carry out any proactive monitoring at all in 2013. (NB – Bar Standards Board received AML supervisory responsibilities under Money Laundering Regulations 2007)
Billions of pounds are being laundered in. If we can even take a small dent off that, it will more than cover the cost - + protect our economy and other economies around the world.
How do you know that the system isn’t working at present?
The Government has admitted that billions of pounds of corrupt money are being laundered through the UK each year but only millions of pounds are currently being investigated, with large geographical gaps.
Back up with key messages from report: risk isn’t identified, no consistency etc.
Isn’t the current AML regime causing a lot of unnecessary red tape at the minute? (Also, issue of de-risking. NB de-risking = banks refusing custom to certain groups of people)
Yes, as we set out in our report, the current system isn’t working. One of the problems we highlight is that supervisors are not taking a risk-based approach, which can lead to perceptions of unnecessary red tape.
How? If they’re just taking a blanket approach, they’re not looking into the specifics of individual cases, so not tailoring their approach to the specifics of that individual case. We don’t support banks stopping services in a blanket way to certain groups of people. They need to take a specific risk-based approach.
Do you have any evidence of conflicts of interest causing problems for supervisors
It creates a risk that conflicts could happen.
Shaky: ICAEW: One accounting body put out a press release after the U-turn saying that the presumption of responsibility had gone too far. One case of one AML supervisor criticising another supervisor for trying to strengthen
Why have you only focused on 22 of the 27 supervisors?
Our focus is money laundering linked to high net worth politicians and officials and therefore we have only focussed on the sectors relevant to this risk – financial services, legal services, accountancy, property, luxury goods and company formation services.
But most AML compliance want to change their careers because they’re scared that they’ll get jailed. Isn’t that a bad thing?
We need strong deterrents because this is a job that needs to be done well if we’re to stem the flow of corrupt money and secure our economy. The UK’s role as a safe haven facilitates global poverty, enable terrorist financing to move undetected. It is vital that we get this right.
FYI The Senior Managers Regime doesn’t jail people – the worst you get is a fine or dismissal.
I’ve checked, the reverse burden of proof, as currently drafted, only applies to regulatory action. It does not apply to the criminal offence of reckless mismanagement of a bank.
The FCA’s regulatory powers in respect of individuals include:
• penalties
• suspend individuals from undertaking specific functions or prevent them from undertaking specific regulated activities
• Publish a statement of the misconduct.
So you want these people to be abolished (AML supervisors)?
We’re not calling for any purely AML supervisors to be abolished.
Many of the supervisors are representative bodies and have other roles, so taking the supervision functions wouldn’t lead to abolishment. None of the (22 that we look at are purely AML supervisors) ones which are also professional bodies are just AML supervisors (e.g. the solicitors regulation authority for legal services but they supervise a whole range of different things e.g. conduct of solicitors, how solicitors protect client money, negligence)
We’re sure you have good intentions and we want the same things – to improve the AML situations. But we feel that the current situation isn’t working.
Have you ever worked in this sector? What makes you an expert?
TI-UK has been working on the issue of money laundering since 2006. We also run all our research through a committee of external experts that work in the private sector, legal sector, media, academia etc. so we have external scrutiny of our research before launching.
So you’re saying that the whole AML situation should be nationalised (public sector)?
We’re calling for consolidation and we see – in particular – a big problem with the professional bodies who are also responsible for promoting their sector. Mention conflict of interest point.
So you’re saying that the banks are great? Why do the banks do so well? Are you banker lovers?
Even though the banks are ahead of the other sectors, we’re still seeing large amounts of money flowing through (Gov says hundreds of billions laundered through UK banks each year) so it’s obviously not adequate:
• We still need adequate deterrent (SMR) and we don’t think that the current level is providing a credible deterrent. We’re calling for senior management accountability
• Beneficial ownership – need for more transparency over who owns companies so that due diligence professionals can be more effective in detecting illicit funds
Is London the most attractive place for corrupt money?
Due to the illicit nature of money laundering, it is impossible to give a definite answer. However, London is one of the largest and most internationalised financial centres in the world, which increases its attractiveness to those wishing to launder money.
There’s not enough action being taken. What is enough action?
There needs to be a credible deterrent against businesses and individuals who facilitate money laundering. At present, no sector in the UK is subject to such a deterrent.
Are you saying it’s wilful ignorance?
There is a sliding scale of complicity. Some are fully complicit, and should be dealt with by criminal sanctions. However, many are simply not carrying out their obligations to detect and prevent illicit and corrupt funds being laundered through their businesses – and we believe this is due to the inadequate and structurally unsound AML regime.
