The Action Plan—tackling money laundering and terrorist funding

Corporate Crime analysis: What are the main practical issues with implementing and enforcing the government’s Action Plan? Zia Ullah, partner, and Victoria Turner, associate, in the financial services disputes and investigations team at Eversheds, explore some of the key issues.

Original news

An Action Plan published by the Treasury and the Home Office sets out the government’s plan to stop money laundering and the funding of terrorism. The Action Plan outlines the measures the government will introduce to stop money laundering, when these measures are due to be completed and the actions taken by the government so far. The plan is published along with a consultation asking for views on potential changes to legislation and options to reform the anti-money laundering (AML) and counter-financing of terrorism regime. The consultation closes on 2 June 2016.How will the proposals contained in the Action Plan be implemented in the UK and internationally?

The Action Plan includes a wide-ranging set of proposals, including:

  1. law reform
  2. boosting enforcement power
  3. improving law enforcement capability and capacity
  4. better national and international co-ordination
  5. raising awareness, and
  6. measures to counter the financing of terrorism

Top of the list is the reform of the current suspicious activity report process and supervisory regime and the strengthening of enforcement agencies powers. The Home Office will hold central responsibility. They will have an October 2018 deadline for full implementation. Capability and capacity building will be led by the National Crime Agency (NCA), who have until June 2017 to deliver the up-skilling programme for high-end money laundering.

Increasing international reach is a key theme, with the NCA due to create new International Liaison Officer posts in a number of important jurisdictions before the end of 2017. A complex area will be the plan for the UK to work the G20 Financial Action Task Force and others on international information-sharing, looking at the impact of data protection rules and other issues. Naturally the anti-terrorism plans are also heavily international, with the National Terrorist Financial Investigation Unit, Foreign and Commonwealth Office and Charity Commission all having a role to play.

Can you identify any cross-jurisdictional issues in relation to enforcement?

In addition to the issues flagged by the Action Plan itself—such as legal barriers to effective international information-sharing, and the non-transparency of asset ownership in many jurisdictions—there are a number of key cross-jurisdictional issues affecting enforcement.First, despite offering clear benefits, UK direct asset recovery agreements with individual countries are still relatively few in number.

Second, technical and procedural differences (and, in some cases, fairly clear deficiencies) across international legal systems will always be complicated for enforcers to manage.

Finally, de-prioritisation of international requests compared within domestic enforcement activity is always an issue, as is the inherent complexity of the Mutual Legal Assistance system. Experience has shown that effective international enforcement often depends on very close working—for example, providing dedicated UK individuals based in the other territory—which is not always practical to achieve.

What challenges must be overcome if the Action Plan is to work in practice?

While well intentioned as a response to some of today’s low-level, low-value box-checking, those tasked with implementing the proposed new risk-based approach will need to consider carefully the regulatory relationships involved. Information-sharing and working closely with enforcers are both positive ideals, but private sector parties to the ‘strengthened partnership’ will want to see these new, often more involved, obligations set out clearly and transparently so they can plan business resource accordingly.It will also be crucial to establish quickly milestones for progress for each of the Action Plan tasks. At present delivery of an ‘effective multi-agency investigation response for complex high-end money laundering’ or ‘a new approach for international law enforcement and prosecutor co-operation’ appear to be closer to aspirations than concrete steps. With the Action Plan task of putting regional asset recovery teams on a sustainable financial footing is arguably illustrative of budgetary pressures affecting all enforcement spending, without clearer commitments there is a risk that progress will not be maintained.

What is the likely impact of the Action Plan for corporate crime lawyers?

With significant change being proposed, there will be a clear need from clients for quality advice, both once the reforms are finalised and in the period beforehand.While certainly likely to reduce many regulatory burdens, the other side of the risk-based approach will surely result in more demanding obligations for clients in the higher-risk areas, especially in relation to high-end money laundering.

Considering the more sophisticated, partnering role the Action Plan envisages that, for business in relation to the most serious areas of risk, clients will need assistance that is similar in some respects to the anti-bribery and corruption work arising from the Bribery Act 2010. The government is proposing new corporate criminal offences regarding failing to prevent money laundering and failing to prevent fraud, which we envisage will be similar to that of the current failing to prevent bribery offence. Understanding how these new offences will potentially shape AML frameworks of regulated entities and how they will feed into the requirement for both regulated and non-regulated firms to implement adequate procedures, will be vital.

Trying to move beyond box-ticking to a more of an partnership approach may also make legal advice itself less concerned with compliance, shifting towards how clients can show themselves as effectively and responsibility discharging their new obligations in a trusted relationship with the regulators.

Zia Ullah is a specialist in financial crime. He advises on a range of regulatory compliance issues with specific focus on sanctions, AML, plus anti-bribery and anti-corruption. He was previously the global head of sanctions at Barclays.

Victoria Turner specialises in financial crime, fraud, AML, anti-bribery and corruption compliance and international financial sanctions. Victoria frequently conducts audits upon AML and sanction control frameworks of a variety of payment institutions. She also regularly advises clients in respect of compliance issues, internal financial sanctions, the Money Laundering Regulations 2007 and the Proceeds of Crime Act 2002.

Interviewed by Kate Beaumont.

The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

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