Compliance News | May 2022

Posted by

Roberta Buhagiar

on 26 May 2022

This month's key compliance news includes the Financial Services Bill, new sanctions, an HSBC PR nightmare, new Facebook accusations and screen-sharing scams, and more.

Compliance News May 2022

Our pick of key compliance stories this month

UK Government announces Financial Services Bill

The government has announced that a wide-ranging Financial Services and Markets Bill (FSMB) will be introduced to Parliament. The FSMB will implement the Government's Future Regulatory Framework (FRF) reforms and other frameworks and bill amendments that target the financial industry.

While the government is yet to release further details, it has indicated that the FSMB will likely focus on:

  • Providing a clear implementation plan for the Future Regulatory Framework Review, which aims to delegate more power to UK regulators.
  • Updating the Cryptoasset Regulatory Framework to bring crypto assets under a regulatory framework and support their safe adoption.
  • Introducing measures that address risk by outsourcing critical business tasks to third parties, such as cloud service providers. Cryptocurrency AML Risks

Clearview AI Inc fined over £7.5m

The Information Commissioner's Office (ICO) has found Clearview AI Inc, a facial recognition database company, over £7.5m. The company provides a service that allows customers, including law enforcement members, to upload an image of a person on the company's app, which is then cross-checked with Clearview AI Inc's database for potential image matches.

The customer is then provided with links to where the images were taken from, such as social media. This way, customers could trace a person's full name and particulars through the publically available information on social media sites from an image.

Authorities found the company breached the UK General Data Protection Regulation (GDPR) for collecting over 20 billion public images of people's faces. Even though the company collected image data from publicly available sources such as social media, the subjects were not informed that their images were being harvested and used by Clearview AI Inc.

The UK Information Commissioner noted that:

"The company not only enables identification of […] people, but effectively monitors their behaviour and offers it as a commercial service. That is unacceptable. That is why we have acted to protect people in the UK by both fining the company and issuing an enforcement notice."

Key takeaways:

  • Firms should never collect personal or special category data or use it for different purposes without first making sure they comply with the UK GDPR.
  • Publicly available information, such as data found on social media, is still subject to GDPR. Namely, firms or individuals cannot harvest personal data from public sites and use it for commercial purposes.
    Data Sharing Compliance Tips

HSBC's chief of responsible investing suspended

HSBC has suspended a senior banker, Stuart Kirk, after publicly saying that climate crisis warnings are "unsubstantiated" and "shrill" during a conference speech that HSBC's CEO has since denounced.

Kirk, who was appointed as the bank's chief of responsible investing in July 2021, will stay suspended until HSBC completes an internal investigation into the matter.
In a presentation called "Why investors need not worry about climate risk", Kirk included slides which read, "Unsubstantiated, shrill, partisan, self-serving, apocalyptic warnings are ALWAYS wrong."

He also added that "human beings have been fantastic at adapting to change, adapting to climate emergencies, and we will continue to do so. Who cares if Miami is six metres underwater in 100 years? Amsterdam has been six metres underwater for ages, and that's a really nice place."

His comments have sparked a public relations nightmare for HSBC, which has struggled to show off its green credentials despite pledges to achieve net-zero emissions by 2050.

Key takeaways:

  • Be aware of how seriously many clients, partners, and other stakeholders take environmental concerns - failing to address them can have serious consequences for your business
  • Reflect on the potential ESG-related needs and expectations of clients, partners and other stakeholders and how you could help to meet them
  • Comply with all ESG-related laws and regulations, as well as best-practice guidelines
  • Gather appropriate data from your business area to help us fulfil your climate-related disclosure obligations ESG Compliance Roadmap

FCA warns that screen-sharing scams are rising

Screen-sharing has become a regular part of people's routines due to the rise in online meeting programme use and remote teams. In many cases, IT teams around the country use legitimate screen-sharing software to provide IT support to their colleagues.

Now, the FCA is warning people that scammers are taking advantage of this software's popularity to trick people into giving them remote access to their computers. The FCA has received over 2,000 reports of screen-sharing scams since 2020. Since January 2021, the FCA estimates that more than £25m have been stolen by scammers using this tactic.

Scammers often persuade users to download remote controlling software and grant them access to their computers. In many cases, the fraudsters tell their victims that the software is a helpful tool. One anonymous victim said that fraudsters to her the download was an investment tool that would make a sizeable return on her initial funds.

Once the fraudsters have access, they have full reign of the computer's system and can install malware, steal personal data, bank information, etc.

The director of policy and advocacy at consumer watchdog Which?, offers some advice for those who realise they are being scammed:

"If you have shared your screen with a scammer, try to take back control of your device by using the disconnect button, enabling you to end the session. As a precaution, you can turn off wi-fi at the router or unplug the network cable to fully disconnect from any external connection."

Free Fraud Prevention Good Practice Guide

Facebook accused of influencing Australian laws

New reports from whistleblowers claim that Facebook purposely caused havoc in Australia to influence a potential new law that would have made platforms pay publishers for news.

"When Facebook blocked news pages last year to pre-empt Australian legislation that would force it to pay for content, it also took down hospitals, emergency services and charities," the Wall Street Journal has reported. "The company says that was inadvertent; whistleblowers allege it was a negotiating tactic."

In documents and statements submitted to US and Australian authorities, whistleblowers claim that Facebook intentionally built a broad and haphazard mechanism for deleting pages. Consequently, government and health services were affected just as Australia launched its COVID-19 vaccinations.

"The goal, according to the whistleblowers and documents, was to exert maximum negotiating leverage over the Australian Parliament, which was voting on the first law in the world that would require platforms such as Google and Facebook to pay news outlets for content," says the WSJ.

After the Senate amended the legislation, an internal email at Facebook, quoted by the WSJ, read, "We landed exactly where we wanted to - and that was only possible because this team was genius enough to pull it off in zero time."

AML Risk Assessment Tips

MP to pay £434k in damages to his assault victim

A female assault victim has been awarded £434k after repeatedly being harassed and sexually assaulted by former Labour MP Mike Hill.

A London employment tribunal heard how the assailant harassed the claimant over the phone and assaulted her physically in their shared flat and at the Westminster office, where they worked. He also treated her unfairly at work by ignoring her work-related communications and eventually terminating her employment.

The case is the first-ever public compensation payment ordered against an MP specifically for sexual assault and is expected to set a precedent. Other alleged sexual abuse victims will likely initiate similar cases in the future.

Free Sexual Harassment Training Module

Chinese cotton sourced from a forced labour region

Researchers from German universities have stated that they have found traces of Xinjiang cotton in clothes made by German firms Adidas, Puma and Hugo Boss.

The US banned cotton imports from the Xinjiang region after allegations of widespread forced labour in the area's cotton and textile industry. In particular, recent reports suggest that over half a million workers from minority ethnic groups have been coerced into forced labour conditions. The Uyghurs, a persecuted community in the region, are particularly vulnerable.

These findings contradict the firms' continued assertion that their supply chains are free from modern slavery or forced labour conditions and follow all international labour laws and global standards.

Key takeaways:

  • All firms are responsible for ensuring their operations, including supply chains and third-party suppliers, follow international human rights and labour laws.
  • Always conduct due diligence on all clients, suppliers and third parties - make sure that you 'know the chain.'

Free Modern Slavery Statement Template

Additional UK sanctions for Russia and Belarus

In response to the conflict in Ukraine, the UK has announced new sanctions against Russia and Belarus, targeting £1.7bn in trade.

According to the Department of International Trade, platinum and palladium will be subject to new import tariffs. These metals are used to make mobile phones and computer parts.

Chemicals, plastics, rubber, and machinery will all be subject to export restrictions. The total value of products subject to UK sanctions now exceeds £4bn.

The new import tariffs will affect £1.4bn worth of goods, while the planned export bans will affect products worth more than £250m in the Russian economy's most reliant sectors.

Free Sanctions Training Presentation

Human trafficking of Ukrainian refugees on the rise

Experts are warning that the conflict in Russia is giving a significant boost to human traffickers, with women and children disproportionately targeted by sex traffickers.

The full scope of the problem is unknown due to the clandestine nature of sex trafficking and the unprecedented flow of people from Ukraine to places as far away as the USA and Asia.

According to one of the USA's top anti-human trafficking officials, Kari Johnstone, "the international community is starting to see indications that traffickers are preying on or attempting to prey on Ukrainians and others fleeing Russia's war on Ukraine. We are deeply concerned."

Free Modern Slavery Awareness Poster

NCA recovers Abacha's stolen millions

The National Crime Agency has recovered $23.4m that was smuggled out of Nigeria by associates and family members of former Nigerian President General Sani Abacha in the 1990s.

The funds are part of a larger sum of money that the US Department of Justice has identified as misappropriated by Abacha and his associates.

The NCA pursued nearly seven years of protracted litigation and international negotiations on behalf of the USDOJ to obtain the recovery order and enforce the US forfeiture order relating to the recovered funds. The funds have now been transferred to the Home Office for distribution to the US Department of Justice.

The $23.4m will eventually be repatriated for the benefit of the Nigerian people.
Billy Beattie, Asset Denial Senior Manager at the NCA, said: "The NCA is committed to ensuring that the UK is not a haven for criminals to launder their proceeds of crime. The civil recovery of assets is a powerful weapon in this fight. We work closely with the UK and international partners to tackle the threat posed by corruption, which disproportionately impacts society's poorest and most vulnerable members. We are committed to ensuring that those who perpetuate corruption do not benefit from their actions."

6AMLD Training Presentation

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