Financial Crime Summary Q2 2018

14th August 2018

Summary of Relevant Output on Money Laundering and Financial Crime

Period 1st April 2018 to 30st June 2018

 

Sites Reviewed for this bulletin:

Financial Conduct Authority (FCA)

Prudential Regulation Authority (PRA)

British Bankers’ Association (BBA)

European Securities and Markets Authority (ESMA)

Commodities Futures Trading Commission (CFTC)

Financial Action Task Force (FATF)

HM Treasury (HMT)

Joint Money Laundering Steering Group (JMLSG)

National Crime Agency (NCA)

Transparency International (TI)

Deloitte Forensic Centre (DFC)

Credit Industry Fraud Avoidance System (CIFAS)

Financial Fraud Action UK (FFA)

International Compliance Association (ICA)

Emerald: Journal of Financial Crime (JFC)

Financial Fraud Action, Police: The DCPCU

BBC Business

Telegraph Finance

Financial Times

New York Times

Economist

Bloomberg

 

Introduction

Each quarter, CPA Audit looks at the most interesting, relevant and pressing financial crime news, in order to engage your interest and alert you to potential risks your firm might face. Some of these cases you may have heard about on the news, whilst others may be more obscure.

The aim of this summary is to paint a picture of financial crime events and development across the second period of 2018, which brought with it significant new regulations that will toughen the combat against money laundering and terrorist financing.

FCA Financial Crime guide update

Recently the FCA announced the future amendments of the Financial Crime guide (“the Guide”) which include the addition of the chapter “The insider dealing and market manipulation” to the Guide. The aim of this inclusion is to define and clarify the risk of insider dealing and market manipulation in more detail and provide firms with guidance on countering those risks, something which has not previously been done.

The Chapter gives further guidance regarding the requirements set for firms in order to detect and report potential market abuse, and to counter the risk of financial crime occurring within firms. For this reason the Chapter includes clauses devoted to the governance and self-assessment in relation to the risk of insider dealing and market manipulation.

The FCA places the responsibility on senior management to take appropriate measures regarding insider dealing and market manipulation within the firm, as well as be aware and manage potential conflict of interest “which may arise from the firm’s focus on revenue generation versus its obligation to counter the risk of the firm being used to further financial crime.”

Furthermore, firms should have appropriate policies and procedures in place which state how firms identify and monitor employees’ trading activity. Those policies and procedures have to be communicated clearly, so that front office employees are aware of the firm’s obligation to counter the risk of financial crime.”

There are also some other insignificant changes in the Guide, which will not seriously affect firms’ performance.

The deadline for sending comments and proposals terminated on 28 June, 2018, and currently the FCA is in the process of finalising the amendments and has a plan to issue amended guidance in autumn 2018.

The Sanctions and Anti-Money Laundering Act 2018

On the 23rd May, 2018 the Sanction and Anti-Money Laundering Act received Royal Assent, this makes it an Act of Parliament. The Act enables the UK government to impose its own sanctions for various different purposes such as combating terrorism, detection and prevention of money laundering and terrorism financing, assurance of National or International peace, security, and meeting the UK’s foreign obligations.

The Act further builds on the internal sanctions regime and continues to fulfill UK’s obligations as a United Nations member through the implementation of the sanctions passed by resolutions of the UN Security Council after its withdrawal from the EU in March 2019.

Introduction of the Fifth Anti-Money Laundering directive (AMLD 5)

The new  Anti-Money Laundering Directive (EU) 2018/843, which amends the 4th Anti-Money Laundering Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing as of 30 May, 2018 entered into force 09 July, 2018.

The new rules reinforce the fight against terrorist financing and money laundering and improve the regulation of some specific activities.

The key changes of the Directive (EU) 2018/843 include:

  • Increasing the transparency of the company’s ownership structure and disclosing the information about ultimate beneficial owners;
  • Widening customer verification requirements and lowering the threshold for identification of holders of prepaid cards to €150;
  • Strengthening Enhanced Due Diligence for suspicious activities undertaken in high risk countries and ensuring a high level of safeguards for financial flows from such countries;
  • Limiting anonymous payments using the virtual currencies and pre-paid cards.

The Member states have to implement the new rules into local legislation by 10 January 2020, however the effective measures are expected to be introduced as early as possible.

Conclusion

Taking into consideration all measures taken by different authorities in the combat against financial crime, it is clear that this problem cannot be overestimated.

Next steps

CPA Audit’s compliance team is highly experienced and has engaged in extensive correspondence with the FCA concerning authorisations, anti-money laundering frameworks and other compliance-related issues.
Our team are able to assist in a wide variety of ways in relation to the above, including (but by no means limited to):

  • Bespoke Anti-Money Laundering training & audit;
  • FCA Authorisations;
  • Variation of Permission applications;

General advice and assistance on regulated activities and their scope

 

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