CISI LEEDS23rd May 2013

John Horan BA (Hons)MICT Ltd

Tel: 02071250147Mobile 07733887262

Website: www.mict-ltd.com E-mail john.horan@mict-ltd.com

Some common acronyms

SAR = Suspicious Activity Report

SOCA = Serious Organised Crime Agency

KYC = Know Your Customer

KYR = Keep Yourself Right

SAR

Written internal report with regard to suspicious activityNote activity not “transaction”

Could be the client

What he/she wants

Where they want it

SOCA

Home of the United Kingdom Financial Intelligence Unit (FIU) Previously National Criminal Intelligence Service

(NCIS) Before that National Drug Intelligence Unit (NDIU)Soon the be the National Crime Agency (NCA)SOCA covers England, Wales and Northern IrelandNDA will cover England and Wales (at the moment)

Know Your Customer

Beware of: secrecy insufficient or suspicious information

Needs to check with someone else activity inconsistent with normal business

Business lacks viability but continues to trade sudden changes in transactions particularly upwards See saw effect does not follow market

Take all reasonable steps in each particular circumstances

What is the rationale behind the instruction or business.

Do not generalise or stereotype

Know Your Customer

Key areas

Risk based approach (CDD & EDD) All bodies FATF etc. recognise Money Laundering

cannot be completely eradicated Prescriptive approach abandoned

PEPs and Sanctions

Senior Management responsibility

A risk based approach

Risks posed by the client Complex business structure with no legitimate

commercial rationale Easier to conceal underlying beneficiaries

Politically Exposed Persons In a public position and/or location which carries

a higher risk to exposure of corruption Based in, or conducting business in/through high

risk jurisdiction Business involves significant amounts of cash

We do not deal with criminals!

Money Launderers come in all shapes and sizes The bigger the money launderer the more

legitimate he appears A veneer of respectability often hides a corrupt

interior It is not difficult to fool even an astute person

Why launder?

Prevents unwanted attention from Law Enforcement

Prevents victims retrieving their property or being compensated for their loss out of criminals proceeds

Ensures profit from crime available for Lavish lifestyle, holidays, etc Re-investment in criminal activity

Who launders?

Organised Crime Paramilitaries Drug traffickers

Tax evaders!!

Legislation

Money Laundering Regulations 2007

Proceeds of Crime Act 2002

Terrorism Act 2000

And a plethora of amending legislation!

Legislation

Money Laundering Regulations 2007Imposes obligations on the regulated

individual/firmPoliced by the designated regulatory bodies

ICAEW, HMRC, FCA, OFT RPA etc.Can prosecute/penaliseBreaches used to corroborate money laundering

charges

An implementation guide to the Money Laundering Regulations 2007

SeniorManagementResponsibility

Ensure staffunderstand

training

Createprocedures and systems

Train all relevant staff

Risk based approach

Appoint MLRO

Review procedures

annually

Money LaunderingRegulations

2007

Legislation

Proceeds of Crime Act 2002Creates the money laundering offences

Targeted at individuals

Wide ranging and draconian

Provides for restraint and confiscation

Offences under the Proceeds of Crime Act 2002

Enters intoAn arrangementWhich facilitates

Acquisition retentionUse or control

Tipping OffFailure to

disclose

AcquisitionUse

Possession

Concealing, DisguisingConvertsTransfersremoves

Proceeds of CrimeAct 2002

Legislation

Terrorism Act 2000Criminalises the financing of terrorism

Principal difference to Money LaunderingFunds can be from a legitimate sourceSmall amountsTerrorism can be a cheap crime

Who investigates?

52 Territorial Police Forces in the UK less now that the Scottish have amalgamated

3 Special Police Forces Ministry of Defence Police (MDP) British Transport Police (BTP) Scottish Drugs Enforcement

Administration (SDEA)Other agencies

Serious Organised Crime Agency (SOCA)

Her Majesty’s Revenue and Customs (HMRC)

Department of Works and Pensions (DWP)

Social Security Agency (SSA) Serious Fraud Office (SFO) Financial Conduct Authority (FCA) Prudential Regulatory Authority

The Bribery Act

Government guidance• Tough rules...directed at making life difficult for the

mavericks responsible for corruption• Largely about common sense• Core principal proportionality• No one wants to stop firms...taking their clients to

Wimbledon• Creates clarity and a level playing field. (Kenneth Clarke Secretary of State for Justice

Mar 2011)

The law enforcement attitude

Legislation is designed to be self enforcing The old standby, good systems and procedures Likely to be regulator enforced rather than

Law enforcement agency enforced.– LEA enforced usually means gone over to the

“dark side”– Regulator enforced usually means breaches –

deliberate, accidental or negligent

The law enforcement attitude

Be careful! All agencies will be looking for a quick win

“pour encourager les autres” Witch hunts will not be on the agenda Remember an offence under the Bribery Act

may form the predicate offence under the Proceeds of Crime Act 2002

Predicate offence?

Forms the basis for a money laundering investigation

Bribe of £50,000 to win contract of £2million– All £2million = proceeds of crime = confiscation– “Fruit of the poison tree”

Confiscation orders

2008/2009 – 5,382 orders made for £145.5million £62 million

2009/2010 – 5,335 made for £134.6 million £64.2 million

2010/2011– 6,231 made for £195.4 million £74.5 million

2011/2012– 6,150 made for £161.6 million £104.2 million

2012/2013– 6,227 made for £277.5 million £108.3million

4MD

The Fourth EU Directive on Money Laundering Key areas of change

– One off limit reduced from €15,000 to €7,000– Previously Casinos only caught by Due Diligence

extended to other gambling institutions– Tax evasion to be predicate offence in all EU

countries (already is in the UK)– PEPs to include domestic PEPs

CISI LEEDS23rd May 2013

John Horan BA (Hons)MICT Ltd

Tel: 02071250147Mobile 07733887262

Website: www.mict-ltd.com E-mail john.horan@mict-ltd.com