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29/04/09 – UK Anti-Money Laundering Regime Brought Again Into Question
Questions have arisen in regards to the UK anti-money laundering and combating terrorist financing (AML/CT) regime in both the financial and non-financial sectors. In regards to the financial side, a recent report has indicated potential non-compliance within certain firms with respect to the procedures of AML/CT.
According to The Times, the Financial Services Authority (FSA) has recently stated that, despite AML obligations, small and medium-sized financial institutions have insufficient command and controls to prevent them doing business with those individual or organisations blacklisted by the HM Treasury. The FSA concluded that ‘there is significant scope across the industry for improvement in firms’ systems and controls’.
The Times also highlighted a range of common but inaccurate beliefs amongst British financial institutions. For instance, that the ban of financial services applied to foreign entities only, when in reality a proportion of them is based in the UK. Additionally, that the sanctions were only required in regards to transactions over a certain size, when the FSA has never actually set a minimum. Furthermore, that firms were allowed to screen clients retrospectively, when the regulations actually impose due diligence procedures to be undertaken before new clients are taken on.
As to the non-financial sector, The Law Society, the professional body of solicitors in England and Wales, has recently responded to a call for evidence from the House of Lords, who highlighted the lack of detailed cost/benefit analysis into the effectiveness of the Financial Action Task Force's recommendations, various European Directives or the UK AML regimes.
The response from the Law Society shows evidence that strongly suggests that the regulated sector is spending significantly more on compliance than the UK government is recovering in criminal property. As a consequence, the Law Society has issued different recommendations that aim to improve the assessment of effectiveness of AML regimes, the recovery of criminal property and the flow of information from enforcement agencies to the private sector.
Clearly, there is an imbalance within the AML regime and more needs to be undertaken in order to sum up the rewards against the burdens of AML obligations. Yet during this crisis, is it feasible to enforce small and medium institutions, likely to be strapped for cash, to spend more monetary reserves on compliance with AML? Should the legal profession be burdened with AML obligations if the recovery is relatively weak? In light of these questions, the FSA and other regulatory authorities may need to report further on the UK and its AML regime.
Sources
The Times Online: 28 April 2009
The Financial Services Authority: March 2009
The Law Society: February 2009
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27/04/09 - Anti-Money Laundering Legislation Tabled in Guyana: Update
Last week Finance Minister Dr Ashni Singh tabled the report of the examination of the anti-money laundering bill in the National Assembly and it should be passed on Thursday this week.
The Guyanese government had previously urged the Special Select Committee, headed by Dr Singh, to fast-track the passage of the long awaited anti-money laundering legislation, which has been under review for nearly two years.
Mr Singh stated that the reasoning behind the delay was due to the thorough analysis of the draft legislation to ensure that there were ‘no loopholes’.
Head of State, Bharrat Jagdeo, had indicated that Guyana had been contemplating offshore banking and, according to Kaieteur News, was the reason given for the delay. The President stated last Thursday that they ‘had to make [offshore banking] compatible with being fully transparent and not being a tax jurisdiction where people can hide their money’.
The Anti-Money Laundering and Countering the Finance of Terrorism Bill is to amend the Money Laundering Prevention Act and bring it more in line with international recommendations. The new legislation is expected to incorporate the 40 + 9 recommendations of the Financial Action Task Force and establish the Guyana Revenue Authority, the Customs Anti-Narcotics Unit, the offices of the Attorney General, the Director of Public Prosecutions and the Financial Intelligence Unit (FIU) as the authorities for investigation of financial crime.
Furthermore, it provides for oversight of export industries, the insurance industry, real estate and alternative remittance systems. The FIU is to be declared an independent body answerable only to the President and its authority is to be strengthened through the granting of broader roles and responsibilities. This would remedy the criticisms that the FIU has had to endure on an international scale as certain previous loopholes had prevented it from carrying out its mandate.
It is yet to be determined how the new legislation will affect money laundering obligations of lawyers in Guyana. If the FATF Recommendations are to be fully incorporated, as highlighted by an article released by the Office of the President, anti-money laundering obligations would need to be extended onto the legal profession. Lawyers in Guyana would need to be wary of any upcoming obligations.
We will continue to keep you updated on Guyana. Please visit us or subscribe to our RSS system on the homepage to learn more about this and other news and updates.
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22/04/09 – Implementation process of the Third Directive in Spain: Update
Spain, along with Ireland, France and Belgium, has not implemented the Third European Directive on Anti-Money Laundering as of yet. Considering that the implementation deadline was set for December 2007, the European Commission has announced the filing of actions before the European Court of Justice to force these countries to adopt the Directive’s provisions.
In the meantime, Spain continues the internal process to comply with its European obligations. On 3 April 2009, the Spanish Ministry of Economy released a draft of the implementation Act that will be eventually sent to the Parliament for discussion and approval. The Ministry has opened, however, a public consultation with stakeholders for 15 days, in order to get their views on the text and to hear proposals for improvements. The Higher Council of the Spanish Bars (Consejo General de la Abogacía) took advantage of this opportunity and has submitted today a thorough Response highlighting the stringent burdens that is placing in many independent professions, particularly lawyers.
According to the Council, the draft goes well beyond the purpose and wording of the Directive, making compliance hard for lawyers, particularly for those working solo or in small law firms. The Council’s response stresses that the draft does not differentiate between larger and smaller law firms, and between lawyers continuously involved in covered transactions and those that rarely advice or work in those operations. This means, in real terms, an economic impact for legal professionals, who will need to make substantial investments setting up compliance mechanisms and tools, training personnel, creating compliance officer posts, etc. The Council also includes several other comments on different sections of the draft which are directly and indirectly related to the legal profession.
Once the stakeholders’ participation has finished, the Ministry of Economy will seek the approval of the text before presenting it to the Parliament. This process, according to sources from the Council and the IBA’s Anti-Money Laudering Implementation Group, may take several months to finalise. Under the current state of affairs, the implementation Act should not be expected before the end of this year.
Please click here for the text of the implementation Act draft prepared by the Spanish Ministry of Economy.
Please click here for the full comments made by Consejo General de la Abogacía.
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15/04/09 The European Commission takes action against Belgium and Ireland: Update
Action has been brought forward against both Belgium and Ireland for failure to implement correctly the Third Money Laundering Directive.
This directive adopted in 2005 builds on existing EU legislation and incorporates into EU law the 40+9 Recommendations of the Financial Action Task Force. Anti-money laundering legislation within the EU has been tightened by the directive, as obligations became extended to lawyers, notaries, accountants, real estate agents and casinos. Additionally, the directive sets out safeguards and measures, such as identification and verification of customer’s identities, record keeping and training of personnel, to combat money laundering and terrorist financing.
Yet both countries have failed to implement the directive correctly, with the deadline having passed on 15 December 2007. Almost a year later, on 10 December 2008, action was brought in front of the European Court of Justice (ECJ) against Ireland by the Commission, who declared that the country had failed to fulfil its obligations by not adopting any laws regarding the definition of a ‘politically exposed person’ or setting out guidelines on simplified customer due diligence.
On 9 January 2009, action was bought against Belgium for failing to adopt all the laws and regulations necessary to comply with the Third Directive on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing.
These actions have now been registered with the ECJ and the cases are currently pending, with dates of trials soon to be set.
We will continue to keep you updated on these two cases. Please visit us or subscribe to our RSS system on the homepage to learn more about this and other news and updates
Entry on the Official Journal of the European Union for the action against Belgium can be found here.
Entry on the Official Journal of the European Union for the action against Ireland can be found here.
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08/04/09 – G20 affirms the importance of AML/CFT in combating the financial crisis
In response to the heightened recession, leaders throughout the world met in London on the 2nd of April to deal with the global financial instability. The G20 reached an agreement to tackle the global crisis with measures worth $1.1 trillion. Resources to the International Monetary Fund (IMF) will be tripled in order to support countries with troubled economies. In addition the G20 maintained the necessity to strengthen financial supervision and regulation by preventing the adoption of protectionism, restoring lending and rebuilding trust.
AML/CFT areas were also highlighted as G20 called on all jurisdictions to adhere to the international standards on anti-money laundering. With the pledge for the removal of tax havens, the leaders affirmed that one of the recourses for financial stability would need to be enhanced transparency in financial transactions.
As such regulatory institutions, such as the FATF, are to report the AML implementation status of different countries at the next G20 Finance Minsters and Central Bank Governors’ meeting. This will further assess any measures or sanctions requirements against non-cooperative jurisdictions.
In their declaration report of 2 April, the leaders agreed ‘that the FATF should revise and reinvigorate the review process for assessing compliance by jurisdictions with AML/CFT standards, using agreed evaluation reports’. As such increased disclosure methods will be required regarding transactions involving con-operative jurisdictions on behalf of financial institutions. These criteria are likely to affect most institutions under due diligence obligations including that of the legal profession.
This comes a day after the IMF announced its launch of a donor-supported trust fund to finance technical assistance in AML/CFT. The operations, starting in May 2009, will provide about US$ 31 million over five years for the contribution to the strengthening of global AML/CFT regimes.
In its press release, Mr Murilo Portugal, Deputy Managing Director of the IMF, is quoted to have said ‘Global financial stability hinges on collective action at the international level, but also on effective national systems. Robust AML/CFT regimes are an important pillar of the international regulatory and supervisory system and parcel of the current efforts to strengthen the global financial framework.’
A report of the G20 Declaration can be found here.
Further information regarding the IMF trust fund can be found here.
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