Quarter 2 2016

6th July 2016

Summary of Relevant Output on Money Laundering and Financial Crime

                      Period 1st April 2016 to 30th June 2016


Sites reviewed for this bulletin:

Financial Conduct Authority (FCA)

Transparency International

Out Law.Com- News and guidance from  legal advisors  at Pinsent Masons

The Independent

BBC News

Financial Times  


Tax News

The Guardian

The BriberyAct.Com




Each quarter, CPA Audit looks for the most interesting, relevant and pressing financial crime news, in order to engage your interest and open your eyes 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 give you a picture of financial crime across the second period of 2016 – the cases below demonstrate the vital importance of having systems and controls in place to protect against financial crime potentially impacting your own business.


Under the spotlight: In response to Panama


Following the recent Panama Papers debacle, it has been established that the robust AML financial crime programmes are fatally weakened by jurisdictions and firms that do not take their responsibilities seriously.  In an attempt to correct this, the government has now been in the process of introducing new plans which have been described as “aggressive” and “the most significant changes to AML in over a decade”.



It is yet to be decided whether these new plans will reverse the recent accusations of the UK being hailed as the most corrupt place on earth.  According to Italian Mafia expert Robert Saviano and Transparency International, the perpetrators are none other than the whole financial capital.



  The recent panama papers leak has certainly added fuel to this allegation after the leak revealed details of thousands of offshore funds, including one run by the UK Prime Minister David Cameron’s father. The Financial Conduct Authority has stated that creating an offshore company in and of itself is not illegal and can be helpful to avoid international double taxation. However, if they are used as a vehicle to hide large amounts of money from the public and relevant authorities this could be deemed as money laundering. In particular, if the money is put through a series of conversions or movements to distance it from its original source then this could be tantamount to what is known as “layering”.


It is thought, tens of billions of pounds of corrupt money are also being laundered through the UK each year and Transparency International have  highlighted the fact that professional enablers who face inadequate punishments when found to be involved in wrong doing, are to blame.


 The UK has also been heavily criticised for being the prime location for stashing away illicitly gained wealth due to weak AML procedures. It has been found that London’s property market is a prime spot for criminals after findings have revealed one in ten properties of the borough of Westminster were owned by offshore companies.  Furthermore, since 2004, £180 millions worth of UK property has been brought under criminal investigation due to suspected proceeds of corruption.


It is clear that more needs to be done to create an efficient AML procedure so that criminals cannot circumvent the process. In response, the government has introduced a new action plan including a six week consultation on a range of proposed measures which were published ahead of the Global Anti-Corruption Summit which took place in May. This briefing will outline these proposed actions including Unexplained Wealth Orders, Illicit Enrichment and new transparency measures in regards to foreign property ownership and tax evasion.  However, it is important to note that these haven’t yet been finalised or confirmed and the proof of the pudding is whether they will actually be put into action.



New Unexplained Wealth Orders and Illicit Enrichment

One of the main proposed measures by the government is known as Unexplained Wealth Orders (UWO). This will require those suspected of money laundering to declare their wealth to the court. The proposed orders could be made even when there is no substantial proof that the property in question is connected to crime. The government is also consulting on whether a new forfeiture power should be introduced for when the explanation is not satisfactory or no explanation is provided. According to the consultation, they can “provide critical information on which law enforcement agencies can build their case”.  More importantly, according to Transparency International UK this new power “would allow law enforcement agencies in the UK to start questioning and acting on corrupt assets, without having to wait for a prosecution in the home country”.


UWOs are not an entirely new and innovative concept given they are already used in countries including Ireland and Australia.  However, when UWOs were first introduced in  Australia they were thought to be unpopular and faced some push-back from courts. This highlights the fact that although robust measures are good for tackling corruption, the orders may be regarded by some as overly intrusive on the rights of individuals.  Therefore, it will be interesting to see whether the government will take Transparency International’s suggestions on board to limit UWOs to Politically Exposed Persons (PEPs) only.


The government is also interested in creating an “Illicit Enrichment” offence. This offence would criminalise the possession of assets which “cannot be accounted for by lawful way of income”. Therefore, if a public official has a significant and inexplicable increase in their assets, this will be regarded as suspicious and the individual may be found guilty of Illicit Enrichment.


Strengthening Asset Recovery through UWOs


Other countries which are going to introduce UWOs include India, Afghanistan, Italy and Malta.  It is thought that UWOs will allow them to strengthen their asset recovery regimes for victims. However, legal advisors have suggested that UWOs do not go far enough in assisting victims to pursue fraudsters independently which could mean minimal cost to authorities. For example, it has been suggested that enforcement agents could go further by sharing information with victims so that they can pursue fraudsters and money launderers through civil fraud solicitors rather than law enforcement agencies.  Assets could also be rightly and efficiently secured through the use of freezing orders, disclosure orders and search and seize orders.  Therefore, it is yet to be decided whether UWOs will be a useful preventative measure of financial crime but a weak remedial measure for victims.


Transparency Measures for Property Ownership

To counter the claims that London is a prime spot for criminals investing in property, the government has also proposed new transparency measures which will require foreign companies that own properties in the UK to publicly register who controls them. This is in the hope that no foreign company will be able to buy UK property or bid for central government contracts without joining the register.


  David Cameron has suggested that this will send a clear message to the corrupt; “there is no home for them”.  Furthermore, if it is believed that if property is bought with illicit wealth, the burden of proof could be reversed, with the owner required to show that legitimate funds were used in the purchase or else assets would be seized. 


This proposal has been well received by experts as it is believed that these greater transparency measures can help prevent criminals from benefiting from the proceeds of their crimes. This is because the spotlight would be cast on the true owners of billions of pounds being illegitimately invested through property in the UK. Foreign companies own at least a hundred thousand properties in the UK and Wales and forty four thousand of them are based in London alone. Other countries including France, Nigeria and Netherlands are also reported to join the UK in committing to set up public registers of beneficial ownership. A number of countries are also expected to sign up to an Open Data Partnership which will mean lower costs since the information will be readily available to the public.


Tightening Tax Laws

In what some would regard as a more personal response to critics after the Panama Papers scandal, David Cameron has announced plans to tackle tax evasion by also creating greater transparency measures.  For example, British overseas territories including the British Virgin Islands and the Cayman Islands would now be required to provide British law enforcement and tax agencies full access to information on beneficial ownership of companies. He also mentioned the introduction of legislation to make it a criminal offence for companies that fail to stop employees from instructing clients on ways of evading tax.


Extending to Corporate Failure to Prevent Offence

Cameron has also mentioned extending a corporate failure to prevent clause to fraud and money laundering. This is currently in place for firms in regards to preventing bribery and tax evasion. If this offence was to be added to money laundering legislation, this would mean that when an employee is charged for money laundering, the company could be deemed liable if it could not prove it has put the proper procedures in place to prevent the money laundering and fraud from happening in the first place.



It is clear that the Panama Papers scandal has highlighted the need for tighter AML procedures and the above proposals can be certainly viewed as the UK’s response. They may also be a way of hitting back at the claims that the UK is the most corrupt place in the world.  Rather than being shaken, the government has used these proposals as a newly unleashed weapon hoping to emerge even stronger in the fight against money laundering.

However, it is yet to be seen whether these proposals will be put into action and whether firms will face up to the responsibilities that will ensue with these new requirements.  It has even been speculated as to whether these proposals are at risk given the current political climate. Cameron’s close association with each of these plans has made it somewhat unclear as to what will happen with them, at least in the immediate future, following his resignation.

Nevertheless, there is no doubt that if these proposals are put into action  they will be seen  as a positive step towards  enhancing transparency and ensuring even more robust AML procedures in the bid to end financial crime.



The above is just a brief snapshot of financial crime in the second quarter of 2016- as ever, financial crime is a huge and complex topic and much more could have been brought to your attention.


If you have any concerns about how your own firm is acting to minimise the risk of financial crime, please do not hesitate to talk to any member of the CPA compliance team.





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