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CPA Audit

Summary of relevant output on money laundering and financial crime

Period 1st July 2011 to 30th September 2011

  

Sites Reviewed 

British Bankers’ Association (BBA) http://www.bba.org.uk/

European Securities and Markets Authority  http://www.esma.europa.eu/

Commodities Futures Trading Commission (CFTC) http://www.cftc.gov/index.htm

Financial Action Task Force (FATF) http://www.fatf-gafi.org/pages/0,2987,en_32250379_32235720_1_1_1_1_1,00.html

Financial Services Authority (FSA) www.fsa.gov.uk
HM Treasury (HMT) www.hm-treasury.gov.uk

Joint Money Laundering Steering Group (JMLSG) www.jmlsg.org.uk

National Criminal Intelligence Service (NCIS) www.ncis.co.uk

Serious Organised Crime Agency (SOCA) www.soca.gov.uk

Transparency International (TI) www.transparency.org.uk

Deloitte Forensic Centre  http://www.deloitte.com/forensiccenter

CIFAS  http://www.cifas.org.uk/

Financial Fraud Action UK . http://goo.gl/dEC9t

  

 

FSA on Financial Crime:

"Financial crime includes any offence involving money laundering, fraud or dishonesty, or market abuse. The objective interacts with our three other objectives – protecting consumers; market confidence; and public awareness. Fraud can take a variety of forms including phishing, skimming, carousel fraud, identity theft and advance fee fraud. It falls within the FSA's statutory objective of reducing the risk of financial crime and also impacts on our consumer protection objectives."

  

 

Issues from this quarter.

The Financial Action Task Force (FATF)  has prepared a study of the links between corruption and money laundering. This typology report differs from other such typologies previously produced by the FATF because it draws from publicly available work undertaken by experts.  The goal of the project was to better understand corruption, its mechanisms and vulnerabilities, through an AML/CFT lens.

The report identifies key vulnerabilities within the current AML/CFT framework and discusses some of the obstacles to the recovery of corruption.  In addition to providing the basis for further examination of related issues, the report will serve as the catalyst for future FATF work in developing guidance or best practices on AML/CFT measures relevant to combating corruption. The FATF will continue to work on issues related to the use of AML/CFT tools in the fight against corruption.

This report can be found here.

 

H M Treasury.

Anti-money laundering & counter terrorist finance

The Government’s overriding goal in the fight against money laundering and terrorist finance is to protect its citizens and reduce the harm caused by crime and terrorism. Money laundering refers to money or other assets that are obtained through criminal means and exchanged for clean money or assets.

Whilst finance is the lifeblood of criminal and terrorist networks, it is also one of their greatest vulnerabilities. The anti-money laundering regime helps detect, deter and disrupt crime, by reducing the likelihood of legitimate businesses being used for money laundering and providing information useful to law enforcement.

Criminals operate across jurisdictions and without regard to national borders. To be successful, anti-money laundering measures need to be global. As such the UK is an active participant in the development of global standards agreed by countries of the Financial Action Task Force (FATF). These standards are implemented in Europe through the 3rd EU Money Laundering Directive and in the UK through the Money Laundering Regulations 2007, the Proceeds of Crime Act 2002 and the Terrorism Act 2000. The Treasury shares responsibility for the anti-money laundering regime in the UK with the Home Office. Working collaboratively across government and the private sector, and on an international scale, is vital to tackling money laundering and terrorist finance.

The Treasury is responsible for:

The Treasury is also responsible for implementing financial sanctions agreed by the United Nations and European Union.

The Home Office is responsible for policy and legislation relating to the investigation and prosecution of money laundering, financial crime and fraud, and the obligations on businesses to report suspicious activity to SOCA under the Proceeds of Crime Act 2002.

 

 

The Insurance Fraud Bureau. (IFB) 

On the 30th August this year the IFB released their Quarter 2 figures for "Crash for Cash" fraud. This report pinpoints the top twenty areas of the UK affected by this activity. For the sixth consecutive quarter the number one hotspot is Birmingham. Sheffield, Manchester and Nottingham follow on whilst Guildford and Portsmouth produce the lowest levels of this type of fraud. Operations to date have resulted in over 486 arrests, 119 criminal convictions and sentences including over 91 years imprisonment for trials that have concluded so far. Asset liquidation of insurance fraudsters is also taking place.

 

The IFB has a website that lists most of the links to other organisations involved in fighting financial crime and it can be found here.

 

It is estimated that undetected insurance fraud costs the industry up to £2billion a year, adding, on average, an extra £44 a year to the insurance bill for every UK policyholder.

  

 

CIFAS

CIFAS is a not-for-profit membership association representing the private and public sectors.  CIFAS is dedicated to the prevention of fraud, including staff fraud, and the identification of financial and related crime. CIFAS operates two databases:

CIFAS has over 250 Member organisations spread across various business sectors. These include financial services, retail, telecommunications, customer service and call centres and the public sector. Although at present CIFAS Members are predominantly private sector organisations, public sector bodies may also share fraud data reciprocally through CIFAS to prevent fraud.

 

 

National Fraud Strategy for England and Wales

This is a new organisation set up by the Attorney General and details of its intentions can be found here.

 

 

Report from the Serious Fraud Office. (SFO) August 2011

Director jailed over £30m “ponzi” scheme.

17 August 2011 | By Chris Salih  Courtesy of Fund Web

Richard Gunter, the director of Vintage Hallmark, has been jailed for four-and-a-half years for his role in a £30m investment fraud.

In the final case in a series of frauds, including wine investments, the firm Vintage Hallmark was accused of running a £30m ‘ponzi’ investment scam.

In September 2008 four defendants, including Gunter, were convicted at Southwark Crown Court for their involvement in a similar fraudulent investment business, Vintage Wines of St Albans. Reporting restrictions have been applied to Gunter until now.

The jury have been unable to reach an agreement on the role of fellow Hallmark Vintage director Robin Grove following a six-week trial. The Crown court is not seeking a re-trial.

In the Vintage Hallmark case, Gunter admitted he dishonestly obtained money from individuals mainly based in the US and Canada using investment programmes based on various alcohol products.

The investments were sold through a UK based partnership known as the Hallmark Partnership and later through a number of UK based companies controlled by the directors, including Vintage Hallmark plc (based in Peterborough initially and later in Luton). This investment scheme was similar in nature to that of a “ponzi” scheme wherein investors are promised high returns and are lured into investing money.

Nearly £30m of investors’ monies was obtained. Had it been a genuine business and had it delivered to investors – over 300 of them – what it claimed could be achieved, the £30m was projected to have become £100m. Gunter alone withdrew in excess of a million pounds from the business for his own benefit throughout the lifespan of the schemes. He spent this money to buy and lease luxury cars, personalised car registration plates and invest in shares.

Richard Alderman, the director at the Serious Fraud Office (SFO), says: “I am pleased with the outcome of the three linked cases. Over the past few years the SFO has successfully prosecuted a number of individuals connected with these frauds. This brings a close to past wrong-doing. But the SFO is keen to prevent the public from further criminal acts and this is why we apply for serious crime prevention orders wherever appropriate.”

 

 

Financial Services Authority (FSA)

The FSA working on the assumption that "if it sounds too good to be true it probably is" have introduced an interesting section to their website headed Scams and Swindles. This covers such fascinating topics as Boiler Room Scams right down to the latest in fraudulent e mails allegedly sent to firms in the sector by the FSA. All of this can be found here.

22 August 2011. Following prosecution by the FSA three men were sentenced to a total of 19 years in jail for boiler room fraud. This followed a long investigation by the FSA, the City of London Police and Eurojust. Tomas Wilmot, the ringleader, was sentenced to nine years in prison whilst his sons, Kevin and Christopher were each given five years. The three were convicted on four offences of conspiracy that resulted in a £14m fraud. The three controlled a syndicate of boiler rooms that defrauded an estimated 1700 investors of £27.5 million in total. Most of the victims were elderly or otherwise vulnerable people. The court found that the Wilmots conspired to acquire, transfer and sell millions of low value, worthless and sometimes non existent shares to UK victims.

 

 

The FSA offers the following advice to consumers:

If you are contacted out of the blue by somebody trying to sell you shares, you should:

  • Hang up the telephone if you receive an out-of-the-blue call offering shares; 
  • Check the FSA Register to see if the person selling shares is authorised to do so;
  • Call the company back using the details on the FSA Register to verify its identity; and
  • Report any company that cold calls you to buy or sell shares to the FSA or the Action Fraud.

The FSA maintains a list of known unauthorised businesses on its website. The list is updated regularly with details of businesses that are believed to be are involved in boiler room activities and could be dangerous to investors.

The FSA have just (9 September) their Financial Crime Newsletter. This is their 15th issue and contains information on the following:

  • A pilot being developed by the FSA for their Core Financial Crime Programme.
  • FSA concerns about the AML thematic report findings. Primarily about banks' relationships with Politically Exposed persons (PEPs). Many senior managers apparently do not know what these are.
  • The fining of Willis Ltd £6.895m. for failings in its anti bribery and corruption systems and controls
  • A report on mortgage fraud that basically says "must do better".
  • FSA and the Bribery Act. Whilst there is consistency the FSA's responsibilities do not include enforcing this Act so this is an explanation of responsibilities. The expectations of the FSA of firms is clearly set out in chapter 7 of their proposed "Financial Crime: a Guide for Firms". This consultation closed on Wednesday 21st September. See our previous bulletin on this document here.

 

 

The Financial Action Task Force (FATF)

Speaking in Australia in July this year the President of FATF had this to say:

1. FATF's mandate has grown in two decades to cover not only drugs related financial streams, bnut as a consequence of 9/11 also terrorist financing and more recently proliferation financing.

2. FATF is the only standard setter in its field of expertise in the world, but on top of that it also globally monitors compliance with those standards. Furthermore it maintains those standards through public action, including, if need be, countermeasures.

3. FATF has grown enormously in its geographical coverage so that now more than 180 jurisdictions are working to achieve the shared objectives against money laundering and terrorist financing.

 

 

HM Treasury

On the 24th August 2011 The Government made an historic agreement with Switzerland to tackle offshore tax evasion. The agreement will resolve the long-standing abuse of Swiss banking secrecy by those who seek to conceal the proceeds of tax evasion and is expected to secure billions of pounds of unpaid tax for the UK exchequer from 2013.  Under the terms of the agreement, existing funds held by UK taxpayers in Switzerland will be subject to a significant one-off deduction of between 19% and 34% to settle past tax liabilities, leaving those who have already paid their taxes unaffected.  As a gesture of good faith Swiss banks will make an up-front payment from Switzerland to Britain of CHF 500m.

From 2013, a new withholding tax of 48% on investment income and 27% on gains will ensure the effective future taxation of UK residents with funds in Swiss bank accounts. This will be accompanied by a new information sharing provision which will make it easier for HM Revenue and Customs to find out about Swiss accounts held by UK taxpayers.  The new charges will not apply if the taxpayer authorises a full disclosure of their affairs to HMRC.

The agreement with Switzerland is the latest step in HMRC’s crackdown on offshore tax evasion, which includes the agreement of the Liechtenstein Disclosure Facility, the creation of a new dedicated team of investigators to catch those hiding money offshore and ongoing work to put in place information sharing arrangements with other countries.

 

 

Transparency International UK

Transparency International UK has launched the major findings from a series of studies which examine corruption in the UK. The reports – which represent the most comprehensive research ever undertaken in this area – examine the levels of corruption in 23 UK sectors and institutions.

The research represents a ‘corruption health-check’ for the UK. Although corruption is not endemic in the UK, it is correct to say that in some areas of UK society and institutions, corruption is a much greater problem than recognised and that there is an inadequate response to its growing threat.

See the reports here.

 

 

Financial Fraud Action UK

This is a new website, supported by a range of financial organisations and focusing very much on card fraud and money laundering. The current site raises an interesting money laundering issue that of the “employer” offering work over the net which involves people taking money into their accounts and “passing it on” minus a commission. This last link in the chain is the easiest one to break as a number of people have found to their cost.

 



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© CPA Audit LLP. 5 October 2011.