This blog is dedicated to bringing you the news that touches the people dimension of regulatory compliance. It's not only about regulations, policies, procedures and systems.
It's also about people, and about understanding what leads them to make errors of judgement, and in some cases, to act in brazen disregard of the rules.
Here's our selection of key compliance news from this month.
FATF's assessment of UK's AML/CTF measures
The Financial Act Task Force has published its latest assessment of the UK's anti-money laundering and counter terrorist financing measures.
There is much to be admired in the current regime. The assessment roundly praised the UK's understanding of ML/TF risks and given it the top rating for its controls and measures, the highest of 60 countries assessed so far.
But, it's not all good news. Concern was expressed about its links to offshore jurisdictions - such as the British Virgin Islands and Cayman Islands - territories linked to the Panama Papers scandal.
The FATF report points out that the UK faces:
"… significant ML risks from overseas jurisdictions, in particular from other financial centres (including some of its Overseas Territories and Crown Dependencies) due to its position as a major global financial centre and the world's largest centre for cross-border banking."
Although the FATF welcomed the UK's robust approach to tackling money laundering - singling out its 7,900 investigations and 1,400 convictions, it noted that:
"The main ML risks include high-end ML, cash-based ML and the laundering of proceeds from fraud and tax offences, drug offending and human trafficking, and organised crime."
Echoing alarms raised by Transparency International, it also highlights the significant risks "from laundering the proceeds of foreign predicate crimes, including transnational organised crime and overseas corruption".
Unsurprisingly, the FATF report also acknowledged the lack of oversight in respect of trust registers - again, a flaw that garnered attention in the Dankse Bank scandal.
NCA comes out fighting
The National Crime Agency's role in the fight against illicit finance didn't go unnoticed in the FATF report, with praise for its innovative approaches in maximising intelligence "including intelligence sharing with the private sector through the Joint Money Laundering Intelligence Taskforce".
The agency, which handles around 500,000 Suspicious Activity Reports (SARs), is already responding to its recommendations. It has announced new measures to tackle the misuse of Scottish limited partnerships (SLPs) and increase transparency.
Reforms include requirements on firms to:
- Be registered with an anti-money laundering supervised agent (such as an accountant or lawyer)
- Demonstrate an ongoing link to the UK
- Make annual filings to ensure the information held by Companies House is accurate
In addition, Companies House has new powers to strike off dissolved limited partnerships and dormant firms.
This crackdown should hopefully prevent Scottish firms being used to launder dirty cash, but will it be enough or will the problem just move elsewhere? Hmm, could it be linked to the surge in Northern Irish Limited Partnerships?
Shakira faces tax evasion charges in Spain
Pop star Shakira is facing charges of tax evasion by Spanish prosecutors. According to the charges, she allegedly failed to pay $16.3m in taxes after listing the Bahamas as her official residence between 2012 and 2014. Prosecutors claim she was in fact living in Spain with her partner, Barcelona's Gerard Piqué during that time.
Shakira denies wrongdoing and says the authorities - which has also pursued successful cases against Lionel Messi and Cristiano Ronaldo - are using her "as a scapegoat". She was named in the Paradise Papers, with Madonna and Bono.
Maybe she can take inspiration from the Beatles, who turned their tax woes into a musical anthem in 1966? Taxman provided the opener for the Revolver album.
EU crackdown on tax fraud
Plans have been announced by the European Commission to combat tax fraud.
It aims to improve cooperation between tax authorities and Payment Service Providers (credit and debit card providers). Since over 90% of online transactions involve Payment Service Providers, better data sharing would enable tax authorities to have oversight of the VAT obligations in relation to cross-border sales. It would also help combat fraud across the e-commerce sector. Plans will now be submitted to Member States for agreement.
Ten bankers arrested in Estonia
As part of an ongoing investigation into the Danske Bank money laundering scandal that we reported on last month, ten of the bank's former employees have been arrested in Estonia.
Around €200 billion were made through its non-resident unit between 2007 and 2015. Possible US action is weighing heavily on the bank dragging its shares down by 50% since March, wiping $15 billion of its value.
Yet, spare a thought for its current employees who have done nothing wrong but are still tainted by the scandal. Research shows this can lead to bias and even harm their future mobility.
EU States agree to step up monitoring of money laundering
Following a successive money laundering scandals across the EU at Danske Bank, Latvia's ABLV Bank and Pilatus Bank in Malta, European Member States have agreed to strengthen supervision by the European Banking Authority (EBA).
Under the plans, the EBA would have the power to force banks to implement anti-money laundering controls and collect information, even if national authorities failed to act.
The measures would ensure the rules are applied equally and authorities cooperate closely with each other, according to the Council of Europe statement.
It's also recommended a 'post-mortem' of recent cases at EU banks to understand how they happened and shape future policy.
However, the plans do nothing to tackle uncooperative States who fail to impose or publicise sanctions for fear of reputational damage, despite this being one of the best deterrents.
Katanga Mining pays $22m
Katanga Mining Ltd, a subsidiary of Glencore PLC, and former executives have agreed to pay $22 million to the Ontario Securities Commission (OSC) for failing to disclose risks after doing business with Dan Gertler, an Israeli billionaire who was subject to US sanctions.
The US Department of the Treasury, who investigated at the time, said:
"Gertler has used his close friendship with DRC (Democratic Republic of Congo) President Joseph Kabila to act as a middleman for mining asset sales in the DRC, requiring some multinational companies to go through Gertler to do business with the Congolese state."
In addition, Katanga understated its mining costs and overstated its copper production. A number of executives have stepped down.
Facebook woes continue
The Italian regulator has fined Facebook €10m for misleading users about how their data was being used on the platform. Hmm, that makes the UK's £500k fine seem paltry by comparison.
'Tis the season of good will
Regulators are urging examiners to soften their approach and take a less aggressive tone when flagging up risky practices. The Federal Reserve's Randal Quarles has signalled a move away from some of the contentious exchanges of the past and says, "The banks should feel that their supervisor is going to be firm but fair."
However, critics say that, if anything, rolling back the stricter regime only encourages more risk-taking. You decide…
Are you still here? While our always-on culture frequently admires and celebrates those who work excessive hours, burnouts and meltdowns are real.
So go grab a beer, kick back, binge a box set, climb a mountain, whatever… It will all be waiting when you get back. It is possible to be great at your job and take timeout.
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