U.K. officials received a record number of “defense against money laundering” requests for the third year running, largely as a result of a massive increase in filings from online banks and other financial technology-centric firms, or fintechs, sources told ACAMS moneylaundering.com.
From April 2018 through March 2019, the U.K. Financial Intelligence Unit, or UKFIU, processed more than 35,000 DAML requests, a type of suspicious activity report that institutions file for consent to conduct certain transactions they suspect involve illicit assets, according to a forthcoming annual report. Roughly 22,500 such reports were filed the previous financial year.
Traditional banks still submit around 80 percent of all SARs, Martin Cox, deputy head of UKFIU, told moneylaundering.com. “But what we’re seeing is the newer players are actually overtaking banks in some respects, and with DAML SARs in particular.”
Cox did not name the fintechs most responsible for the surge in DAML requests, but the rise follows reported moves by challenger banks such as Revolut and Monzo and online marketplaces such as Airbnb and Amazon to upgrade their AML compliance programs. Officials anticipate that DAML requests may top 50,000 this financial year, he said.
Those numbers represent a major challenge for UKFIU, which is tasked with receiving the reports and disseminating the financial intelligence they contain to law enforcement.
Gemma Rogers, a London-based director at FINTRAIL, a consultancy that specializes in fintech AML compliance, said the rise in DAML requests reflects the industry’s larger market share, growing ability to pinpoint illicit funds and willingness to sever ties with dubious clients.
“Firms are clearly getting better at spotting suspicious activity by integrating new typologies and having better monitoring rules in place, and they’re taking action to stop funds stemming from fraud cases from leaving accounts,” Rogers said.
To deal with the rise in DAMLs and address criticism by the Financial Action Task Force, an intergovernmental group that sets global AML standards, the National Crime Agency increased UKFIU’s headcount from 80 to 118 in the past year and plans to continue hiring, Cox said.
FATF accused British officials in a mutual evaluation report last year of deliberately limiting UKFIU’s role in identifying high-quality financial intelligence by not providing it adequate resources and better information technology, or IT.
“But it’s safe to say we cannot resource ourselves out of the mountain of DAMLs,” Cox told moneylaundering.com. “These resources are good to keep us going but we desperately need new IT—that’s absolutely key.”
Officials project that the replacement of UKFIU’s portals for filing and databases for storing DAML requests and other SARs will be completed by 2023 as part of a broader overhaul led by the Home Office.
But UKFIU’s IT problems were documented at least as far as back as 2006, when a government-wide review identified serious problems with its database, also known as ELMER.
Tim Wright, UKFIU’s lead on the reform, said that officials are building a new IT system to streamline filing, analysis and dissemination of SARs and bolster the ability of police officers and other investigators to query and review them.
Additional staff and better IT “will allow us to drive up use [of SARs] within law enforcement, but also to do more analysis on how the [reporting] regime is ticking and what’s driving [reporting] behavior,” Wright said. “Our third priority is to have another look at the DAML regime and think about whether there is a better approach.”
UKFIU plans to use the additional manpower and IT capabilities to give individual sectors more regular feedback on their reports, develop and distribute additional studies and advisories on emerging financial-crime risks, and respond more quickly to requests from global partners, including through the Egmont Group of Financial Intelligence Units.
Staff within UKFIU are currently undertaking a joint project with the Philippines and Australia to gain a better understanding of the financial flows tied to child sexual abuse online and developing a typology on the phenomenon for Egmont, Cox said.
But U.K. reporting rules and London’s position as one of the largest financial centers in the world together generate almost 500,000 SARs a year. Receiving and reviewing those reports will continue demanding the lion’s share of UKFIU’s resources going forward, he said.
A spokesperson for the Home Office wrote in an email to moneylaundering.com that officials aim to recruit an additional 20 UKFIU officers this financial year, which would bring the unit’s headcount to 138 full-time staff by the end of March 2020.
The design of the future operating model of the U.K.’s system for filing, analyzing and disseminating SARs, including the DAML regime, should be complete by the end of 2020, she said.
Contact Koos Couvée at firstname.lastname@example.org
|Topics :||Anti-money laundering , Counterterrorist Financing|
|Document Date:||October 17, 2019|