Financial Crime Summary Q4 2018

22nd January 2019

Summary of Relevant Output on Money Laundering and Financial Crime

Period 1st October 2018 to 31st December 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





Each quarter, CPA Audit looks for the most interesting, relevant and pressing financial crime news in order to engage your interest and give a bigger picture of what happened. As a whole, this should bring to light any impact these events potentially can have for you and your company. Some of these cases you may have heard about on the news, whilst others may be more obscure.

AML innovations

The rise of laundered money circulating high-risk countries and/or countries with high levels of corruption filtering into EU member states due to poor AML supervision has given criminals the anonymity they’ve sought for. It is estimated by the National Crime Agency (NCA) that around £90 billion worth of illicit funds have been laundered in the U.K collectively, as well as over 2,100 terrorism-related suspicious activity reports (SARs) being made to the authorities by firms the FCA regulates. The FCA found that electronic-money firms or institutions (EMIs) are adhering to conducting customer due diligence checks for the detection and prevention of money laundering. Despite the popularity of electronic verification, solely relying on technology itself may prove to be unsuccessful due to system faults and the like. Adopting alternative methods that are more manual may prove better as time goes on.

Danske Bank was involved into £179.2billion money laundering scandal due to lack of sufficient controls; UBS Financial Services Inc. was fined for £11.7million primarily due to lack of anti-money laundering compliance resource as a result of lack of staff and Tesco Bank breached Principle 2 (FCA handbook), which highlights the importance of a firm exercising the concept of displaying customer/client care, skill and due-diligence. Together, these main events have largely demonstrated poor Anti-Money Laundering (AML) measures amongst the European Member States.

The European Commission reinforced rules in October 2018 to control illicit cash flows coming in and out of the EU. The measures included targeting individuals entering or leaving the EU that have possession of €10,000 or more in cash, this does not; however, stop authorities from acting on amounts that are lower than this threshold if prompted by suspicion. These rules were also seen extended into further customs and border controls (within the EU) by screening parcels sent for money and precious commodities such as gold.

Ideas of having electronic measures put in place have been brought to light by the European Commission as of the fall of 2018, due to bribery, corruption and money laundering reaching an all-time high as a result of more and more criminals successfully surpassing the system. An electronic measure, as noted in the Fifth Anti-Money Laundering Directive (5AMLD), is a form of online identification in order to verify one’s identity. Real-time identity verification software was found to combat persons with suspicious intent by sifting through documents and detecting those that appear illegitimate. As time goes on, such bespoke software may have to be enhanced and modified, due to falsified documents becoming even more sophisticated in bypassing measures put in place. The refined directive, namely the Sixth Anti-Money Laundering Directive (6AMLD), will be transposed by the 3rd December 2020; this will be touched on below.

UK publishes new AML strategy and National Economic Crime Centre (NECC) launched

On the end of October 2018 the National Economic Crime Centre began operating. It is based within the NCA headquarters and is staffed primarily by some original NCA members, as well as the Serious Fraud Office (SFO), HM Revenue & Customs (HMRC), the City of London Police, the Financial Conduct Authority, the Crown Prosecution Service and the Home Office. The NECC breeds from the UK’s five year Anti-Corruption strategy which has the aim to make the UK one of the ‘cleanest’ places to do business. The NECC has a breadth of financial sector knowledge given the range of employees working for it. Bound together this should ultimately lead to more superiority in their actions as opposed to one sector working alone; the NECC working together also will allow good communication and exchange of ideas. NCA Director General Lynne Owens said: “Only together will we bring to justice the most harmful criminals and prevent them using or benefiting from their illicit finances. And only together will we protect the UK from economic crime”.

Above all, the United Kingdom published a strategy in November 2018 to tackle money laundering and other serious crimes which involves the Government injecting £48million worth of funds in the timeframe of 18 months; these funds will go towards enhancing its capabilities to prevent money laundering. The Home Office also aims to tackle the Accountancy and Law sector as they’ve been seen to have been less active in notifying relevant sources of any suspicion against money laundering.

FCA announcing permanent ban on retail CFD’s and binary options

In December of 2018, the FCA proposed permanent ban on retail CFD’s (contracts for difference) and binary options. Likened to the European Securities and Markets Authority (ESMA), the new regulations imposed should bind together to ultimately lessen consumer risk, due to strengthened regulation on these forms of investment trading. Theoretically, clients will have a clearer understanding of binary trading websites’ consumer base, due to firms and/or websites needing to provide the percentage of losses of any of their retail clients’ investment activity linked to the firm.  This has introduced a stricter approach on how proceeds punishable by criminal offence and sanction are managed, the maximum term of imprisonment now being at least four years for money laundering and activities related to it, with fines included if deemed applicable.

Firms must tighten the level of protection for CFD client funds, as well as assessing whether clients that are being marketed and sold these products are competent in their knowledge of the risks entering into CFD trade may impose to their CFD account. Client fund protection may include balance protection and segregated accounts, where the client trades within a separate CFD fund in order to protect their funds in the case of insolvency. Limiting a customer to a maximum of 50% of their fund margin will also be beneficial in reducing risk of falling below their open margin of trade.

These additional measures will reduce the amount of unauthorised entities that are operating within the investment trading market, and ultimately reduce the rate of fraudulent activity. Intervention from the FCA on the ban of binary options could save the retail consumer up to £17m a year.

6AMLD (Sixth Anti-Money Laundering Directive)

The existing Anti-Money Laundering measures are to be replaced in 2020 with the view to strengthening the current Money Laundering Directive. Pitfalls in the existing police force cooperation with Money Laundering laws allowed criminals a smoother entry into the negligent state that it is. New and improved measures put in place will be introduced as the ‘6AMLD’.

We are currently awaiting the European Commission to send its proposals to both the Council and Parliament, so that they can come to a unified decision. All three will work together to draft a copy of legislation, which will be brought forward once all views are tied in a document as one. Once this is complete, it will be a new EU law (excluding Denmark and possibly the U.K. depending on the route of Brexit).

The 6AMLD will provide 22 components of offences that will include tax crimes (minimum sentence being 6 months imprisonment), cyber-crime and even environmental crime. Upon awaiting for the confirmation of the 6AMLD, staff must be trained in order to spot any indicators of these predicators. Firms will also have to adapt in the form of implementing monitoring functions that will help detect any proceeds that may be linked to any offences. Having knowledge of illicit activities and failing to report them to the necessary source/s (self-laundering) will also be an offence under the new 6th AMLD, this includes failing to check for employees that may be considered-high risk such as being related to PEPs (Politically Exposed Person/s).

FCA’s fraud analysis of firms

According to the FCA’s financial crime summary of firms’ data published in November 2018, it was observed that pension liberation fraud is thought to be the most successful form of financial crime that fraudsters engage in and to which consumers fall victim to. Analysis shows that account takeover fraud comes a close second, with debit card fraud coming third on firms’ checklists.

Pension liberation fraud involves misleading persons when attempting to transfer pension benefits to an unregulated scheme before the age of 55. Usually, these are seen as unauthorised payments by HMRC, and can lead as loss of up to 70% of ones pension if HMRC wish to reclaim it. Pension liberation is classed as fraud if claimants are not made aware of the risks.

Account takeover fraud appears to correlate with poor Know Your Client (KYC) measures put in place allowing money launderers to make way with roughly £856.9 million stolen through cryptocurrency in 2018 according to CCN. Account takeover is a type of online fraud, whereby the criminal uses falsified documents in order to pose as a genuine customer and ties in with the use of phishing, spyware and/or malware scams. This can be dangerous due to banks with online banking services such as Barclays, RBS and Nationwide being a probable target.

Debit/credit card fraud includes stealing personal information from a bank card, or the theft of a card itself, after which one can use the information obtained to commit fraudulent activities. Larger banks such as Lloyds and HSBC have a fraud team that monitors customer accounts for anything that appears suspicious. Smaller amounts of money below the contactless payment threshold of £30 per transaction are becoming increasingly popular are said to be beating the amount of cheque fraud. Statistics brought forward by the BBC claim that, despite only accounting for a total of 1.1% in card fraud, £7million worth of money was stolen via contactless fraud towards the end of 2017 with it slowly rising. Unfortunately, fraudsters are able to find methods in processing a transaction as a contactless payment through methods of manufactured cards or placing a transaction via the internet.


Unfortunately, money transfers are becoming more difficult due to tougher money laundering checks, it appears as though banks are carrying out these heightened checks against remittances, as money is directly going into accounts from sources that may be unknown. For regulators this can prove a big difficulty due to attempting to crack down the source of funds.

2018’s final quarter saw a rise in money-laundering related activity, but this is equally outweighed by the new procedures, rules and directives that have been/will be put in place. As fraudsters learn how to outsmart compliance measures, it is necessary that we move at an even faster rate and stay up-to-date with new rules, regulations and software’s to avert any risk to our businesses.

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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