Global Anti Money Laundering - the UK's approach

In a recent report, the Financial Action Task Force (FATF) assesses the effectiveness of the UK’s AML/CFT system.

The UK faces significant money laundering (ML) risks from overseas, due to its position as a major global financial centre and the world’s largest centre for cross-border banking. The main money laundering (ML) risks include high-end ML, the laundering of proceeds from fraud and tax offences, drug offending and human trafficking, transnational organised crime and corruption, as well as cash-based ML.

The UK also faces severe threats from international terrorism. Terrorist financing (TF) activity in the UK is usually low-level, involving small amounts of funds raised by UK-based individuals to fund their own travel to join terrorist groups, to send to terrorist associates, or to finance their own terrorist attack plans.

 

What is the UK’s overall level of compliance and AML/CTF effectiveness?

The FATF assesses that the UK has implemented an AML/CFT system that is effective in many respects. Particularly good results are being achieved in the areas of investigation and prosecution of ML/TF, confiscation, the implementation of targeted financial sanctions related to terrorism and proliferation, protecting the non-profit sector from terrorist abuse, understanding the ML/TF risks facing the country, preventing misuse of legal structures and co-operating domestically and internationally to address them.

However, it was identified that major improvements are needed to strengthen supervision and implementation of preventive measures, and ensure that financial intelligence is fully exploited.

Case studies also demonstrated that the UK proactively and systematically investigates TF alongside terrorism-related investigations, that TF investigations are well integrated into broader counter-terrorism strategies, and that agencies co-ordinate and cooperate well across jurisdictions, regions, and sectors.

The UK’s AML/CTF system is further strengthened by the Joint Money Laundering Intelligence Task Force (JMLIT) which facilitates public/private information sharing including on TF and ML investigations.

 

Money Laundering investigations, prosecutions and confiscation

The UK routinely and aggressively pursues money laundering investigations. Over 2000 prosecutions and 1400 convictions are achieved annually. Where prosecution is not possible, the UK uses a wide range of other methods to disrupt offenders, including pursuing the predicate offence, seeking civil recovery, taking action for tax offences, or obtaining serious crime prevention orders to restrict behaviour.

The UK also actively pursues confiscation. Once assets are identified, a variety of tools are available to the UK authorities including criminal restraint and confiscation, civil forfeiture, cash forfeiture and unexplained wealth orders. Cash is also seized at the border, with authorities proactively targeting high-risk ports.

 

Terrorism and Proliferation Financing

The UK has demonstrated its ability and willingness to use all available measures to disrupt TF, including freezing, seizure, and confiscation, as well as the removal of legitimate benefits and entitlements, orders to restrict activity and movement, and new powers which permit the seizure of funds in bank accounts. These actions effectively prevent terrorists from raising, moving and using funds.

The FATF assesses that the UK has a good understanding of the TF risks associated with non-profit organisations (NPOs) and applies a targeted risk-based approach to mitigating those risks.

The Office of Financial Sanctions Implementation (OFSI) was established in 2016 and has undertaken significant outreach to improve financial institutions’ understanding of their obligation to implement targeted financial sanctions (TFS), particularly in the banking sector, where proliferation-related assets are most likely to be found.

 

Key additional AML/CFT considerations

The report also looks at a number of other key areas relating to AML/CFT including financial intelligence, preventive measures, supervision, transparency and beneficial ownership, and international cooperation.

 

Financial Intelligence

Available financial intelligence and analysis is regularly used by a wide range of competent authorities to support investigations of ML/TF and related predicate offences, such as Australia’s Financial Intelligence Unit AUSTRAC. However, the UK has made a deliberate policy decision to limit the role of the UK Financial Intelligence Unit (UKFIU) in undertaking operational and strategic analysis which calls into question whether suspicious activity report (SAR) data is being fully exploited in a systematic and holistic way and providing adequate support to investigators.

 

Preventive Measures

AML/CFT compliance was not found to be consistent across different categories of financial institutions. The report raises concerns about the low level of SAR reporting in many sectors, including some identified as being at high risk, as well as the quality of SARs being filed.

 

Supervision

Generally, there are strong systems in place for doing background checks and looking at the fitness and propriety of persons owning or controlling regulated activities.

 

Transparency and Beneficial Ownership

The UK has acted as a global leader in this space, promoting the use of public registers of beneficial ownership and using a variety of fora to encourage transparency in this area. The UK has a good understanding of the ML/TF risks posed by legal persons and arrangements.

 

International Cooperation

In general, the UK provides a broad range of constructive mutual legal assistance and extradition. Informal co-operation amongst law enforcement agencies and prosecutorial authorities is facilitated through an extensive overseas criminal justice network, including intelligence officials, investigators, and prosecutors. Foreign counterparts may also submit requests to the Joint Money Laundering Intelligence Task Force (JMLIT).

 

How can the UK improve its AML/CFT system?

The FATF recommends a number of priority actions for the UK to take to improve its AML/CFT system:

  • Increase the human resources and IT capacity of the UK Financial Intelligence Unit (UKFIU), and review the UKFIU’s role to ensure that financial intelligence is fully exploited and that it is better able to co-operate with foreign FIUs.
  • Reform the suspicious activity report (SAR) regime and modernise reporting mechanisms.
  • Continue to improve the quality of information available on the people with Significant Control (PSC) register to ensure that the information is accurate and up-to-date.
  • Both the Financial Conduct Authority (FCA) and Her Majesty’s Revenue and Customs (HMRC) should consider how to ensure appropriate intensity of supervision for all the different categories of the respective supervisory population from low risk to high risk.
  • Ensure the UKFIU provides assistance to a larger extent to international partners.

Nyman Gibson Miralis provide expert defence in transnational money laundering investigations. Contact us if you require assistance.