Wednesday, October 28, 2020

UK’s FCA yet to criminally prosecute anybody under 2017 money laundering rules

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The FCA has not brought a single criminal prosecution against a firm or individual for breaching its new Money Laundering Regulations which came into effect in 2017.

For over two years the FCA has had the power under the Money Laundering Regulations 2017 to criminally prosecute a person or organisation it suspects of not putting in place sufficient safeguards against money laundering. Anyone found guilty is liable to receive a fine and up to two years’ imprisonment.

The FCA has repeatedly warned of its criminal prosecution ability. In its 2018/19 Business Plan, the FCA promised to use the “full range of supervision and regulatory enforcement tools” to combat money laundering and financial crime.

In April last year, Mark Steward, the regulator’s director of enforcement, said: “I think it is time that we gave effect to the full intention of the Money Laundering Regulations which provides for criminal prosecutions.”

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However, the FOI request found that the FCA has interviewed just two people under caution in connection with a suspected criminal breach of money laundering regulations.

Additionally, it is not currently investigating any firms on suspicion of a criminal breach of the money laundering regulations but is looking into three individuals.

The FCA says it is currently running four ‘dual-track’ criminal/civil investigations into money laundering – one into an individual and three into firms.

Andrew Katzen, head of regulatory law at Hickman & Rose, commented: “The FCA has made great play of its ability under the MLR 2017 to bring criminal prosecutions for failing to properly guard against money laundering. These figures, however, indicate that so far enforcement by using criminal powers has been slow and quite limited.

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“Of course we cannot know what activity the FCA is currently undertaking in respect of its many cases, but the fact that it has, over 18 months, interviewed just two people under criminal caution – and is not investigating a single firm for alleged criminal money laundering – appears to show that its priorities remain on the regulatory side rather than criminal.

“In fairness to the FCA, its director of enforcement Mark Steward has said that he thought criminal prosecutions would be “exceptional”. But he did also express a desire that the FCA’s new criminal powers not be considered a “white elephant”. Only time will tell what type of creature this becomes for the FCA.”

John Dobson, chief executive of SmartSearch, added: “It’s vital that firms comply with money laundering regulations – not just for compliance reasons but to help stop dangerous criminals in their tracks. But regulators need to show they’ve got teeth and are taking their responsibilities seriously too.

“Where there have been serious breaches, the FCA needs to act fast to make it crystal-clear that this will not be tolerated.

“Further changes to anti-money-laundering rules are due to come into force at the end of the year that will widen the definition of money laundering, and increase jail terms for those found guilty of criminal offences. The FCA needs to up its game or risk lulling firms into a false sense of security.”

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