Compliance News | Feb 2022

Posted by

David Mangion

on 24 Feb 2022


This month's key compliance stories include Suisse Secrets, Russian sanctions, Storm Eunice, workplace romances, the 'Azerbaijani laundromat', and more.

Compliance News Feb 2022

Our pick of key compliance stories this month

Suisse Secrets expose Credit Suisse's worst clients

A massive leak has unearthed the hidden wealth of Credit Suisse's clients, who range from drug traffickers and torturers to corrupt politicians and various shades of money launderers.

The leak unmasks the beneficiaries of more than 100bn Swiss francs (£80bn) held at Credit Suisse and contains details of accounts linked to 30,000 Credit Suisse clients worldwide.

This leak points to widespread Credit Suisse due diligence failures despite repeated promises to weed out dubious clients and illicit funds over decades.

When questioned, the bank said that Switzerland's strict banking secrecy laws did not allow it to comment on allegations about individual clients.

However, it said in a statement that it "strongly rejects the allegations and inferences about the bank's purported business practices" and that the reports are based on "selective information taken out of context, resulting in tendentious interpretations of the bank's business conduct."

Key takeaways:

  • Recognise the level of due diligence required for the given type of client - simplified, standard or enhanced
  • Treat politically-exposed persons (PEPs) as high risk, and conduct enhanced due diligence on them
  • Recognise and report any red flags in the due diligence process
  • Never waive any due diligence checks or assist a customer to bypass them, no matter who they are or how much money they have.

Free COCON Breaches Desk Aid

US, UK & EU Russian sanctions could take a toll

Following Russia's actions against Ukraine, the EU is imposing sanctions that are aimed at strategic sectors of the Russian economy. The planned measures aim to freeze Russian assets in the EU and put an end to Russian banks accessing European financial markets. The UK has also promised an "unprecedented level of sanctions". These sanctions will inflict pain on the country's citizens, from billionaires to government officials to middle-class families.

However, these tactics don't come without a degree of risk since no country has ever tried to impose such a wide range of sanctions against such massive financial institutions and on an economy as large as Russia's. Furthermore, the "swift and severe" response vowed by the US could disrupt major economies, in particular those in Europe, and could even threaten the global financial system's stability.

Free Sanctions Training Presentation

Storm Eunice damage could cost UK £360m

The Association of British Insurers (ABI) has warned that the havoc caused by Storm Eunice could cost the UK around £360m to clean up.

Hundreds of thousands of people were left without electricity, with many major railways suspending operations as record-breaking gales struck Britain.

At least four people died during the horrific storm, including a woman killed when a falling tree struck her car in Highgate.

Storm Eunice has also disproportionately affected some of the UK's poorest and most vulnerable persons. According to Monique Collins from the charity DISC Newquay, the freak storm caused one of their busiest days ever. "Some of the people we help live in tents or sleep in vans and cars. It was horrendous for them," she said, adding that "Hunger doesn't go away just because there is a storm on."

Key takeaways:

  • Be aware of the effect that climate change is having and how it can affect your business at very short notice.
  • Comply with any external laws and regulations related to ESG, and implement strong internal best-practice guidelines.
  • Have robust risk policies and procedures in place to help your company deal with any unexpected events, such as natural disasters.
  • Regularly perform risk assessments to help identify and remedy any vulnerabilities – this will prevent you from being taken by surprise should an unforeseeable event occur.

Free Risk Management Training Presentation

Cryptocurrency threatens global financial stability

A global watchdog has warned that the booming crypto-asset market could pose a serious threat to financial stability if regulators do nothing.

The Financial Stability Board (FSB), which keeps a close eye on financial authorities in 24 countries, has expressed serious concerns that crypto markets' scale and structural vulnerabilities could potentially cause significant disturbance to the global economy. Additionally, the FSB says these concerns escalate with the increasing interconnectedness of crypto markets and traditional financial systems.

"Although the extent and nature of use of crypto assets vary somewhat across jurisdictions, financial stability risks could rapidly escalate, underscoring the need for timely and pre-emptive evaluation of possible policy responses," the Swiss-based body has reported.

The FSB's report estimates that crypto asset market capitalisation grew 3.5 times in 2021 to a value of $2.6tn (£1.9tn). It also pointed out that crypto assets remain a relatively minor part of the overall financial system. Finally, the report compared the risk to the sub-prime mortgage exposure that fuelled the 2008 financial crisis.

Cryptocurrency AML Risks

Banker wins £2m for sexual discrimination

A City banker has been awarded more than £2m in compensation for sexual discrimination. The compensation included a witch's hat left on her desk by drunken male colleagues.

Stacey Macken, 50, filed a lawsuit against French bank BNP Paribas after being dismissed by her boss, who repeatedly told her, "Not now, Stacey" – a phrase that he used so often that colleagues copied it.

The £120,000-a-year finance specialist claimed that she was paid hundreds of thousands of pounds less in salary and bonuses than her male counterparts over four years and that after she complained, managers treated her unfairly.

After suing the international bank, Macken received £2,081,449, reportedly one of the largest awards ever made by a British tribunal.

Employment judge, Emma Burns, chastised Macken's bosses for acting "spitefully and vindictively". Due to the bank's failure to even apologise, Burns increased Macken's compensation.

Key takeaways:

  • Be self-aware and sensitive to the feelings of others - watch how they respond to what you do and say, and take corrective steps to avoid offending or intimidating them
  • Refrain from acting or speaking in a particular way if you're asked specifically to do so
  • Report any incident of harassment that you witness, even if the victim does not report it
  • Be supportive of others who report harassment and do not victimise them

Free Workplace Harassment Training Presentation

Azerbaijani 'laundromat' family to hand over £5.6m

A multimillionaire Azerbaijani politician and his relatives have to turn over millions in suspicious funds brought into the UK through a complex money-laundering scheme known as the "Azerbaijani laundromat."

After ruling that the funds "arise from criminal conduct" and "money laundering," a judge ordered Javanshir Feyziyev and his family to forfeit £5.63 million held in various bank accounts.

This grand scheme was exposed in 2017 when the Danish newspaper Berlingske and numerous other media partners received leaked secret bank records. The data showed that the Azerbaijani leadership had made over 16,000 secret transactions between 2012 and 2014. These transactions were worth approximately $3m a day.

Andy Lewis, head of civil recovery at the National Crime Agency (NCA), said, "This is a substantial forfeiture of money laundered through the Azerbaijan laundromat, and our success highlights the risk to anyone who uses these schemes. We could recover these millions without proving the exact nature of the original criminal activity. We will continue to use civil powers to target money entering the UK via illegitimate means."

UK AML & CTF E-learning

CNN executive fired over workplace romance

Out of all the potential hazards of a workplace romance, experts warn that the most common source of danger is allowing it to remain hidden.

The recent dismissal of long-time CNN CEO Jeff Zucker was a case in point. He said he was "wrong" in not being upfront with the network about a consensual relationship with another executive.

Zucker finally acknowledged his relationship when questioned directly about it during an investigation into now-fired anchor Chris Cuomo. The executive shuffle comes at a critical time for CNN, and top executives have expressed disappointment that things weren't handled more carefully.

"He should have known better," said David Lewis, CEO of HR consulting firm, Operations Inc. "He decided to avoid what was a clearly stated policy by his employer. The problem with that is there was no good outcome once he decided not to tell."

Free Non-financial Misconduct Desk Aid

End of self-isolation puts vulnerable people at risk

England has officially announced that they will lift all Covid-19 restrictions shortly. Boris Johnson informed MPs of his intention to abolish the remaining restrictions, including the legal necessity for those infected with Covid-19 to self-isolate. Instead of legislation, voluntary guidance will "advise" people with Covid-19 to avoid going to work.

Each of the devolved nations looks to follow suit. However, this movement towards ending self-isolation comes with reservation. Scotland still requires Covid-positive individuals to self-isolate for up to 10 days. Wales and Northern Ireland also have this guidance, with Wales reviewing these guidelines on 10 March.

Experts from various fields are concerned that the lack of official restrictions in England may lead to a rise in presenteeism, which occurs when people go to their workplaces despite being unwell. With the end of self-isolation payments, experts are convinced that this will mean that many sick workers will choose not to stay at home to safeguard their finances.

Key takeaways:

  • Think about how you can create a policy that protects vulnerable employees and clients
  • Consider ways to make your policy as fair as possible to avoid Covid-positive employees from coming to work in person
  • If possible, allow employees to work remotely should they have any Covid-19 symptoms
  • Be aware of the negative effects that presenteeism can bring to your business, including potential reputational damage

GDPR & Vulnerable Adults

The funeral plans sector set to be regulated

The FCA announced in November 2021 that it would start regulating the pre-paid funeral plans sector from 29 July 2022. This regulation ensures that the products provided meet consumer needs and offer fair value.

Regulations will apply to both providers and intermediaries. Firms that fall into either category will need to apply for the FCA's direct authorisation or become an appointed representative of a principal firm.

Firms that apply for authorisation after February 2022 are unlikely to be authorised by the time regulations come into force. Without authorisation, funeral plan providers and intermediaries will have to stop trading from 29 July 2022.

NatWest face £2m after dismissing cancer employee

NatWest Group currently faces a £2m-plus compensation claim. A London tribunal found that the company discriminated against Adeline Willis, who worked for NatWest for over six years. The 44-year-old risk and compliance officer was unfairly dismissed two days after her cancer surgery.

The central London employment tribunal rejected the bank's allegations that Willis' £160,000-a-year job was redundant, ruling that her dismissal had been "tainted with discrimination".

Cancer is listed as a disability under the UK Equality Act 2010, protecting individuals with cancer from discrimination.

Promoting Equality in the Workplace

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