Financial Crime Highlights: 11th – 15th March

March 15, 2019 5 minute read


Head of Financial Crime, Livia Benisty shares her financial crime highlights from the week that’s past.

The UK government has been busy this week; of course I’m referring to reviewing and commenting on the existing financial crime arrangements and not the other thing people are talking a lot about. With HMRC making announcements, OPBAS releasing their report, and committee reports from both the Commons and the Lords, I thought it might be helpful to clarify exactly what’s happened and who said what. Hope you find it helpful.

1. OPBAS report highlights weaknesses in Money Laundering supervision

OPBAS is the Office for Professional Body Anti-Money Laundering Supervision. It’s the body set up to ‘supervise the supervisors’ of the accountancy and legal profession. OPBAS’ role is to ensure the 22 professional supervisors maintain consistently high standards. The report released last week shows these standards are far from being met.

To give you some relevant background: in 2017 the National Risk Assessment found that professional ‘enablers’ such as lawyers, tax advisors, accountants and notaries were particularly vulnerable to facilitating money laundering. In 2018, the UK’s Mutual Evaluation Report by FATF noted inconsistencies in the standards of supervision of these bodies.

The OPBAS report offers more insight into the particular issues, highlighting lack of appropriate governance, supervision, enforcement and reporting. The most damning element was that most accountancy supervisors were more concerned with membership, with 92% expressing concern as to the impact proper enforcement would have.

Interestingly, for RegTech geeks like myself, the ability to evidence the use of AI and data analytics by one supervisor to determine an appropriate risk based approach was highlighted, providing an indication of the positive light in which these technologies could be viewed going forward.

Note this report was released the week after HMRC reported a crackdown on estate agents (see last week’s round-up for more details). The Treasury Select Committee report discussed below noted that OPBAS only supervises professional body supervisors and not the statutory ones which includes HMRC (with the FCA and Gambling Commission). It’s possible that the supervision arm of HMRC moves under OPBAS at some point, as there is a perceived conflict between that and their tax revenue function (with the supervision being referred to as a ‘bolt-on’).  

2. Commons’ Treasury Select Committee publishes report on AML supervision

On the 8th March, Treasury Select Committee published a report on AML supervision and sanctions implementation. The report makes a number of conclusions and recommendations.  

In my opinion, the key issues were around the granting of power to Companies House to perform greater checks against money laundering, the recommendation that there be a centralised database of PEP’s and concerns around enforcement post-Brexit, in particular noting that OFSI was not sufficiently effective in deterring UK based sanctions violations.

Companies House is a bugbear of mine and has been for a while. It’s not fit-for-purpose without proper requirements to verify and validate. There are also many types of unsupervised entities involved in company formation and I don’t foresee meaningful change in the UK’s regime until this is dealt with.

On PEP’s it is not totally clear whether the database refers to a list of the functions which should be considered a PEP or actual database of the names of people in those positions; the more I read it, the more I think it’s the latter.

Finally on OFSI, remember in January it imposed its first monetary penalty for sanctions. It will be important to see how this develops, but the Government is called upon to review the effectiveness of the office this year (2 years after its formation).

Other recommendations looked at HMRC’s supervision of estate agents, requiring a better estimate of the scale of financial crime, and suggesting reforms to the corporate liability framework.

3. UK Government makes changes to High Net Worth Visa requirements

Given the general calls for improvement to the UK’s framework, it’s also worth noting the announcement last week regarding the changes being made to the UK’s Tier 1 visa (the so-called ‘gold plated’ visa). Currently applicants must demonstrate they have £2mn to invest in the UK and they have been in control of those funds for 90 days. That is being expanded to 2 years, or they can provide evidence of the source of funds.

The reforms are to be implemented on March 29 (nothing else going on that day is there…?). The whole Tier 1 Scheme was suspended in December 2018 and then reinstated the next day following opposition.

FinTechs might also want to take note: the Home Office also announced changes to the start-up and innovator visa for those looking to start their first UK business, or more experienced business people with £50k to invest (a reduction from £200k). This start-up visa replaces the graduate entrepreneur route.

4. Lords’ publishes report on Bribery Act, and suggests broadening ‘failure to prevent’ offense

That last point above links to a comment by the Lords’ post legislative scrutiny report on the Anti-Bribery Act published yesterday (Thursday, 14th March). The committee called the act a ‘model piece of legislation’ and highlighted the ‘failure to prevent’ offence, holding companies to account if employees pay bribers. In 2017, this offence was expanded to Tax Evasion. It does not yet apply to Fraud or Money Laundering, where it still has to be demonstrated that the offender is the ‘directing mind’ of the company. This leads to claims that big companies can generate more ‘complicated’ management structures to insulate themselves from prosecution.

Peers on the committee have called for a decision to be made on whether the failure to prevent offence should be broadened. However, as noted in this article, the offense places a burden on companies of all sizes due to ‘lack of clear guidance on what constituted adequate measures to prevent bribery and corruption’.