While the widely-reported Mutual Evaluation Report of the UK by the Financial Action Task Force (FATF) was complimentary about the UK’s efforts in the fight against financial crime, giving the highest rating yet for any of the 60-plus countries evaluated so far, that may be where the good news ends. Although the UK legislation derives from European Directives, it is the Government’s intention that there will be no material change due to Brexit.
The new National Economic Crime Centre, housed within the National Crime Agency (NCA), is tasked with coordinating the national response to economic crime. However, we still await an outcome to the Government’s 2017 consultation on a proposed corporate offence of failure to prevent economic crime, which would have a significant impact on law firms’ own compliance obligations, as well as the rest of the business community. That may come: Sir Brian Leveson, President of the Queen’s Bench Division, and the new Director of the Serious Fraud Office, Lisa Osofsky, indicated their support for such a provision when giving evidence to a Parliamentary Select Committee on 20 November 2018.
Proposed improvements to the UK Suspicious Activity Reporting regime include improved IT systems and a greater than 30 per cent increase in NCA staffing. The government plans to legislate in 2019 to introduce a register of beneficial ownership for overseas entities which own or purchase UK property. The government also plans to take further action to mitigate the risks presented by the misuse of limited partnerships.
The recent Solicitors Disciplinary Tribunal (SDT) fine of £45,000 plus £40,000 costs (Sharif 11805-2018) for anti-money laundering breaches, particularly in relation to the controls applied to Politically Exposed Persons (PEPs) is but one instance of fallout from the Panama Papers; we expect more. It is also a reminder of the wider need to ensure that the systems and controls required by The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017) are in place.
We have commented previously on the failure by many firms to carry out, where applicable, risk assessments and independent audits: it is now over a year and a half since the MLR 2017 came into force. System failures can be identified by the randomness (or otherwise) of press attention or SRA audit.
The Law Society’s Practice Note on the Criminal Finances Act 2017 has been revised and approved by the Chancellor.
See www.legalrisk.co.uk/news for links to the documents mentioned. We are advising many leading international and smaller firms on their policies, controls and procedures, risk assessments and audits.