Compliance News | August 2022

Posted by

David Mangion

on 25 Aug 2022


This month's key compliance news includes a $30m crypto fine, Olympics bribery, Russian sanctions, Caribbean resort fraud, WhatsApp fines, and more.

Compliance News | August 2022

Our pick of key compliance stories this month

Gambling firm could lose its licence after £17m fine

Entain, the gambling company behind Coral and Ladbrokes, may lose its UK licence after it was ordered to pay a £17m fine over its inaction as individual customers gambled away hundreds of thousands of pounds.

The Gambling Commission highlighted several failings in Entain's high street and online businesses, all after the UK government announced a review of gambling law. This led the industry to promise to strengthen controls to prevent money laundering and tackle addiction.

The "completely unacceptable" incidents, which triggered Entain's second regulatory settlement in three years, included a blocked customer being able to create another account with a different Entain brand and deposit £30,000 within a day. Entain had blocked this customer from betting due to concerning betting habits.

Another customer deposited £742,000 in 14 months without suitable affordability checks carried out. While a third customer, who lived in social housing, could deposit £186,000 in six months without appropriate checks.

AML Risk Assessment Tips

Crypto firm Robinhood fined $30m

Robinhood Markets, a crypto smartphone investing app, has been fined $30m (£24.5m) by US regulators. Audits conducted in 2019 show that the company ran an understaffed cybersecurity operation which lacked adequate risk assessment policies and procedures in the trading division.

This led to a failure of adequate monitoring for illegal transactions, such as fraud. Regulators note that the company had a substantial backlog of suspicious activity reports throughout 2020, piling up to over 4,000 by October 2020.

In addition to the fine, Robinhood must engage an independent consultant for the next 18 months to oversee all remediation efforts and compliance practices.

Key takeaways:

  • Always be on the lookout for any red flags of money laundering, such as profiles with inconsistencies in their IP addresses or users who try to hide the source of investor funds
  • Ensure you comply with laws and regulations around the use of crypto and other virtual assets - failure to do so can be financially devastating
  • Report any suspicions of money laundering or terrorist financing involving cryptocurrencies immediately

Cryptocurrency AML Risks

New property register targets oligarchs

A new property register, the Register of Overseas Entities, was launched on August 1st. It aims to root out corrupt elites and oligarchs using UK property to launder their illicit wealth and ill-gotten profits.

The register requires anonymous foreign companies owning or seeking to buy UK land and property to reveal they are true owners. This will help ensure that criminals cannot hide behind secretive chains of shell companies.

Any foreign company wishing to buy UK property must identify its beneficial owner and present verified information to Companies House before applying to the UK's land registries.

Those overseas entities already owning land in the UK that is in scope will have a 6-month transitional period to register their beneficial owners or managing officers, starting on August 1st. The register applies retrospectively to property bought since January 1999 in England and Wales and since December 2014 in Scotland.

Foreign companies that do not comply with the new obligations could face severe criminal sanctions, including fines of up to £2,500 per day or a prison sentence of up to 5 years.

AML Compliance & Training Roadmap

Tokyo Olympics executive arrested for bribery

A Tokyo Olympics board member has been arrested on suspicion of taking bribes, along with three other men connected to the scandal.

According to the prosecutor's office, Haruyuki Takahashi, 78, a former executive at the advertising firm Dentsu, is suspected of accepting bribes from the former CEO of Aoki Holdings Inc. and two other company workers.

The alleged bribes, amounting to 51m yen (£315,800), were deposited into a bank account of Takahashi's firm from October 2017 to March 2022 and are believed to be for sponsorship and products related to the Olympic Games.

Takahashi is credited with landing more than £2.5bn in local sponsorships for the Tokyo Olympics. Dentsu is a major player in many huge Japanese events, including the Olympic Games.

Key takeaways:

  • Never offer or accept cash or anything of monetary value in return for improper performance of any function
  • Conduct initial and ongoing due diligence of third parties, and comply with any other third-party procedures necessary
  • Make sure that gifts, hospitality, donations, sponsorship and expenses are proportionate and in line with agreed policies and thresholds
  • Report any knowledge or suspicion of bribery immediately

Bribery Prevention Training Presentation

US banking giants to be issued $1bn WhatsApp fines 

Leading US banks like Goldman Sachs and Bank of America collectively face over $1bn (£845.7m) in regulatory fines for employees' use of unapproved messaging channels, including unrecorded email accounts and messaging apps such as WhatsApp.

The US Securities and Exchange Commission (SEC) began probing banks' record-keeping practices relating to the use of personal devices back in 2021. The Commodity Futures Trading Commission (CFTC) is also scrutinising the issue.
Here is a list of some of the banks affected, according to recent disclosures:

  • JP Morgan Chase & Co
  • Morgan Stanley
  • Bank of America
  • Goldman Sachs
  • Credit Suisse Group AG
  • Barclays plc
  • UBS Group AG

Free FCA Business Plan Desk Aid

Textile company contaminates water supplies

Saint-Gobain, a French industrial fabric producer, has admitted that its operations released an excess amount of per-and polyfluoroalkyl substances (PFAS) into drinking water.

PFAS are synthetic chemicals used in manufacturing to produce oil and water-resistant items. They are known as "forever chemicals" because they don't break down in the environment.

PFAS leakages into drinking water can be highly toxic to humans. Studies have shown that very small doses of PFAS ingestion could be linked to cancer and other diseases.

While Saint-Gobain has denied wrongdoing in a class action lawsuit, evidence suggests the company used far more PFAS than previously admitted. Officials fear that several thousand residents in the area well outside the contamination zone boundaries may be drinking PFAS-contaminated water. The region has been afflicted with cancer and disease clusters. The case remains ongoing.

Health & Safety Compliance Roadmap

Caribbean resort owner convicted of fraud

The SFO has convicted David Ames. He is responsible for a £226m fraud scheme involving Caribbean luxury resorts.

An investigation revealed how Ames deceived over 8,000 UK investors of Harlequin Group - a hotel and resorts development venture. The fraud victims were told their money was being invested into unbuilt properties that would eventually be constructed, resulting in returns for the investors.

Investors were also fraudulently told that the construction projects would be backed by external funding to ensure completion.

In reality, throughout the entire 8-year investment project, Harlequin sold around 9,000 properties to investors on paper, while it only ever fully constructed 200. Meanwhile, Ames used the funds to enrich his family by over £6m. Ames' scheme defrauded investors of £398m total, with thousands of victims losing pensions and life savings.

Free Fraud Prevention Good Practice Guide

Company fined £3.6m after electricians burned

The owners of Boulby Mine, a mining company, have been fined £3.6m after an investigation by the UK Health and Safety Executive (HSE) revealed deficiencies in the company's risk assessment and planning of works processes.

Poor health and safety practices and safeguards led to the serious injury of two electrical contractors. One victim received serious burns from an 11,000-volt electrical system that electrocuted him after he unknowingly came into contact with a live electrical chamber in 2016. The second victim came in contact with a live conductor on a 415-volt electrical system in 2019.

The HSE noted that the company failed to provide adequate warnings on live electrical systems, resulting in these serious electrical incidents.

"Employers should make sure they properly assess and apply effective control measures to minimise risks when working on electrical systems. Both these incidents were preventable if long-established electrical safety practices been applied."

Paul Bradley, HSE specialist regulatory principal inspector

Key takeaways:

  • Never allow anyone to work on electrical circuits or devices without proving they are dead
  • Make sure that anyone working with electricity has the right skills, experience and competencies to do so
  • Never arrange for electrical work to be done without warning others in the vicinity
  • Only buy equipment that complies with the relevant regulatory standards

Fire Safety in the Workplace

UK & EU add more Russian & Belarusian sanctions

The UK and EU have imposed on Russia and Belarus over their involvement in the invasion of Ukraine. Now, a seventh package has now been added to them. These sanctions include:

  • A ban on Russian petroleum products and crude oil imports
  • An import ban on Russian gold
  • Additional export restrictions
  • Restrictions on the provision of oil transport services
  • The exclusion of further banks from SWIFT
  • Further restrictions on Russian media outlets
  • A ban on the provision of some financial and business services to Russian entities or the Russian government

    As before, UK and EU firms will need to be careful to comply with all of these restrictions or risk strict penalties.

Free Sanctions Training Presentation

Germany to create a new financial crime authority

Germany has announced its plans to set up a new financial crime authority to bundle several fragmented competencies, including sanctions enforcement.

There are over 300 supervisory bodies scattered across the country, a figure the finance ministry is keen to reduce.

The German finance ministry wishes to make it simpler to tackle tricky international money laundering cases, which have long been one of Germany's weaknesses.

"We need to do better in many areas," said a government spokesperson, referring to the country's struggle against money laundering.

The current FIU unit, which tackles suspicious activity reports, will work directly with the new authority. Additionally, they will create a coordination unit to manage the non-financial sector.

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