Dr. Nicholas Ryder Professor in Financial Crime Globalisation and the fear factor of the financial crime compliance regimes Dr. Nicholas Ryder Professor in Financial Crime 25 World Business Congress of the International Management Business Association

Introduction What is money laundering? The scale of money laundering How is money laundered? A global money laundering policy The United Kingdom 25 World Business Congress of the International Management Business Association

What is money laundering? Money laundering is: the illegal process or act that relates to the proceeds of criminal activity, by which these individuals or groups attempt to, disguise, hide or distance them from their illegal activities. 25 World Business Congress of the International Management Business Association

The extent Between 2 and 5 % of Global GDP (IMF, 1998), Between $590bn and $1.5tn per year (FATF, n/d), $1.6tn (United Nations Office on Drugs and Crime, 2009) and There is no visible data on the amount of money laundered. 25 World Business Congress of the International Management Business Association

The how Financial institutions, Virtual currencies, Cash intensive businesses, Property transactions, Stocks, shares and other investments, Case intensive businesses, Mobile devices and Cash couriers. 25 World Business Congress of the International Management Business Association

A global policy Criminalisation of money laundering, Implementation of international legal AML instruments, Recognition and implementation of international best practices and industry guidelines, The adoption of a risk based strategy, Creation of AML authorities, Criminalisation of money laundering, Mutual legal assistance, Preventative measures and confiscation of the proceeds of crime (Ryder, 2012) 25 World Business Congress of the International Management Business Association

Key Players United Nations: The Vienna Convention (1988) Palermo Convention (2000) Corruption Convention (2003) European Union: Council of Europe Convention (1990) Warsaw Convention (2005) Money Laundering Directives (1991, 2001, 2005 and 2015) 25 World Business Congress of the International Management Business Association

Key Players Financial Action Task Force: Established in 1989, 40 recommendations tackled money laundering, Not legally binding, Best international standards, Remit extended to include terrorist financing since 9/11 (9 Special Recommendations) and Extended in February 2012 to include bribery and corruption. 25 World Business Congress of the International Management Business Association

The United Kingdom The current legislation: Terrorism Act 2000 Financial Services and Markets Act 2000 Financial Conduct Authority Hand Book Systems and Controls or SYCS Proceeds of Crime Act 2002 (Part 7) The Money Laundering Regulations 2007 25 World Business Congress of the International Management Business Association

The Compliance Regime Regulated sector are required to report any allegations of money laundering to the National Crime Agency, Regulation 7 due diligence requirements Suspicious transactions sent to firms MLRO Complete a suspicious activity report (SAR) and file it with NCA. NCA will determine if more investigation/action is required. 25 World Business Congress of the International Management Business Association

Compliance Regime How do you define suspicion? R v Da Silva [2006] EWCA Cro,. 1654. K v National Westminster Bank, HMRC, SOCA [2006] EWCA Civ 1039. Shah v HSBC Private Bank (UK) Ltd. [2010] EWCA Civ 31; [2010] Lloyd’s Rep F.C. 276 (CA (Civ Div). 25 World Business Congress of the International Management Business Association

The Compliance Regime Defensive Reporting: In 2008, the Serious Organised Crime Agency received 210,524 SARs; 240,582 in 2010, 247,601 in 2011, 278,665 in 2012, 316,527 in 2013, 354,186 in 2014 and In 2015 381,882. 25 World Business Congress of the International Management Business Association

T The Compliance Regime Compliance costs: £250m p/a (British Bankers Association), £90m (KPMG, 2003), £650 (Alexander, 2007), £1bn (Harvey, 2005) and Reviews to reduce costs include: Better Regulation Executive and Competition and Markets Authority. 25 World Business Congress of the International Management Business Association

The Compliance Regime FCA have adopted a credible deterrence strategy imposing financial sanctions on individuals and firms Issuing private warnings, public statements of misconduct, unlimited financial penalties and a prohibition order. 25 World Business Congress of the International Management Business Association

T The Compliance Regime MLRO: Bank: Michael Wheelhouse was fined £17,500 (October 2008), Sudipto Chattopadhyay fined £14,000 (May 2010) and Syed Itrat Hussainn £17,500 (May 2012). Guaranty Trust Bank (UK) Ltd £525,000 (September 2012) Coutts & Company £8.75m (March 2012), EFG Private Bank £4.2m (March 2013) and Standard Bank Plc £7.6m (January 2014). 25 World Business Congress of the International Management Business Association

The Compliance Regime   1999 2000 2001 2002 2003 2004 2005 2006 2007 Prosecutions 126 129 182 256 300 552 1,327 2,379 2,318 Convictions 39 50 75 86 123 207 595 1,273 1,348 Convictions (%) 30.95 38.76 41.21 33.59 41 37.5 44.84 53.51 58.15 25 World Business Congress of the International Management Business Association

Recent Developments Fourth Anti-Money Laundering Directive Implements five important changes: Risk based approach, Potentially exposed persons, Beneficial ownership, Tax crimes and Scope. 25 World Business Congress of the International Management Business Association

Recent Developments Action plan for anti-money laundering and counter-terrorist finance: A stronger partnership with the private sector Enhancing the law enforcement response Improving the effectiveness of the supervisory regime Increasing our international reach (HM Treasury, 2016) 25 World Business Congress of the International Management Business Association

Recent Developments Criminal Finances Bill (2016): New corporate offence for employees to facilitate tax evasion, amendments to the confiscation of the proceeds of crime and the refocusing of the SARs regime. 25 World Business Congress of the International Management Business Association

Conclusions Too many governments place restrictions on AML measures, Too many vulnerable governments have not criminalised all forms of money laundering, Too many governments place restrictions on AML measures, International cooperation not sufficient and Laws and regulations fail to keep pace with new ways to launder money. 25 World Business Congress of the International Management Business Association