AML

The UK’s Serious and Organized Crime Strategy

By November 6, 2018 No Comments

SOC it to ‘em – The UK’s Serious and Organised Crime Strategy

Last week the UK unveiled its new strategy to tackle Serious and Organised Crime (SOC) which costs the country £37bn a year. The strategy applies the Pursue, Protect, Prevent and Prepare model to crime fighting as part of a wider “whole-system approach”. The Pursue pillar takes aim at the “business” of organized crime and sets out the ways in which the UK has and can continue to strengthen its financial crime controls by:

  • Continuing to grow initiatives such as the Joint Money Laundering Intelligence Taskforce (JMLIT) and the Joint Fraud Taskforce
  • Adopting the recommendations made by FATF in its forthcoming evaluation of the UK
  • Making “full and effective” use of Unexplained Wealth Orders
  • Launching the new National Economic Crime Centre to coordinate multi-agency operations
  • Reforming the SARs regime
  • Tackling weak standards in the legal, accounting and estate agency sectors through the work of OPBAS and expanding the “Flag it up” suspicious activity campaign
  • Improving the quality of information held in Companies House and getting tough on Scottish Limited Partnerships. The UK will also introduce a register of overseas owners of UK property and introduce ownership registries in British Overseas Territories.

Thirty eight different agencies are listed with some counter-SOC responsibility. If well organized the strategy will address many of the weaknesses that have plagued the UK for some time.

Culture clash – 1MDB and Goldman Sachs

To date, the 1MDB investment scandal has forced one Prime Minister out of office, caused one foreign bank to close and cost a handful of bankers their jobs. Last week, Goldman Sachs became the latest financial institution to fall into the crosshairs of investigators. Two former high-level executives were implicated in facilitating deals worth $6bn for the fund. Roger Ng, a former managing director will be extradited to the US where he will face charges of violating the Foreign Corrupt Practices Act. His US counterpart and former Goldman Sachs partner, Tim Leissner, has already pleaded guilty to conspiring to launder money and to paying bribes to foreign officials.

This development in the 1MDB scandal is especially embarrassing for Goldman Sachs and should be taken as a warning to other banks. The deals orchestrated by Ng and Leissner passed over the desks of 30 different executives all of whom signed them off, despite there being red flags over how the sovereign fund had been raised. The reason for this? The bank was more concerned with making deals – earning $600m from business relating to 1MDB – than on prioritizing compliance. Although much progress has been made across the banking sector since 2015 this case should be a stark reminder that failing to imbue a culture of compliance from the top down is likely to end in trouble.

Treasure hunting

The illicit trade in cultural artifacts earns criminal networks over a billion dollars each year. At the peak of the ISIS caliphate, the terrorist group made headlines when, in 2015 alone, they made a reported $30m from the trade. Since the dissolution of the caliphate however, the problem of illicit antiquities trading no longer grabs headlines. But this week, EUROPOL announced they have disbanded an international group who traded real and forged archeological goods. In simultaneous raids in Spain and Bulgaria, local law enforcement seized over 30,000 items including Roman helmets, ceramics, coins and spears.

The group used online auction sites to sell their looted and forged goods. Not content with making money from stolen goods, they also created multiple user profiles to place fake bids to drive up prices. What is interesting here is the lack of financial crime controls that could have identified or stopped these transactions. Auction houses and antique dealers will only be classed as obliged entities when the Fifth Anti-Money Laundering Directive (5AMLD) comes into force in January 2020. The directive doesn’t stipulate whether it will be applied to online as well as physical establishments. As the trade in illicit artifacts evolves, could this be a weakness in future AML controls?

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