UK, Global AML Enforcement Trended Upward in 2017

By Koos Couvee and Manju Manglani

U.K. anti-money laundering enforcement plateaued last year in terms of quantity, but spiked in total value as a result of the Financial Conduct Authority’s record £163-million fine against Deutsche Bank.

Excluding the case and penalty against the German lender, the FCA, Gambling Commission and Solicitor’s Disciplinary Tribunal assessed a total of £160,000 in AML-related penalties against four individuals and one firm last year. In 2016, four entities and one individual paid £5.3 million for AML infractions.

Alison Barker, FCA director of specialist supervision, told ACAMS that the case against Deutsche Bank illustrates the importance of conducting adequate due diligence and ensuring that AML risk is properly assessed and managed.

“What it exposed was how money laundering might be perpetrated through the capital markets, and the use of mirror trades, which are quite complex across jurisdictions,” Barker said. “We would see that [the enforcement action] as a major achievement from a regulatory point of view.”

The FCA has become “more intrusive” when examining financial institutions for AML compliance, said Guy Wilkes, former departmental head of enforcement at the agency.

“Previously, it would simply have investigated whether there were breaches of the money laundering regulations, but it is now increasingly looking to see whether those breaches have led to actual money laundering,” said Wilkes, now a regulatory lawyer with Mishcon de Reya in London.

Not to be outdone, the Serious Fraud Office notched its third deferred prosecution agreement and most significant victory to date in January 2017, when Rolls-Royce agreed to forfeit £510 million for bribing officials in Indonesia, China, and five other countries.

The iconic engineering firm also paid $170 million to the Justice Department and $26 million to Brazilian regulators to resolve the global bribery case.

“It’s likely the approach of the SFO will continue under the new director,” Judith Seddon, head of the anticorruption and international risk practice at Ropes & Gray in London, said. “They’re going to continue to focus on prosecution of corporates, and we are likely to see more deferred prosecution agreements, as well as more focus on prosecutions of individuals.”

The SFO’s current director, David Green, plans to step down in April after heading the agency since 2012.

The Solicitor’s Disciplinary Tribunal also appears to have ramped up its supervision of the legal industry last year, having assessed £80,000 in AML-related penalties against three professionals and one against the firm for which they worked, Clyde & Co.

Only one gaming firm, Stan James Online, was fined for AML violations last year after the Gambling Commission fined three firms for compliance-related infractions in 2016.

“Americans go heavy on enforcement and light on regulation, while in the United Kingdom they are heavy on regulation and light on enforcement,” Polly Sprenger, former head of strategic intelligence with the SFO, said. “If you understand that cultural difference, it goes some way to explaining why there are more enforcement actions in the U.S. than in the U.K.”

Around the world

The Reserve Bank of India and Hong Kong Securities and Futures Commission were among the most prolific regulators in 2017, with the former issuing no fewer than eight AML-related enforcement actions and the latter tagging four firms with penalties, as well as barring one individual from the financial services industry.

Last year also saw Western institutions penalized overseas for AML infractions.

In April, the Hong Kong Monetary Authority fined the local affiliate of Swiss private bank Coutts & Co. $891,000 for AML violations possibly stemming from the lender’s role in laundering funds embezzled from 1Malaysia Development Bhd.

The 1MDB scandal also landed the bank a fine back home. In February, the Swiss Financial Market Supervisory Authority ordered Coutts to pay nearly $6.6 million after $2.4 billion of the state fund’s assets moved through the private lender’s accounts in Switzerland.

The Central Bank of Ireland also pursued a foreign financial institution in 2017, levying a €1 million fine in November against Italian insurer Intesa Sanpaolo Life for failures tied to due diligence, risk assessment, suspicious activity reporting and other compliance expectations.

The regulator, which also fined Allied Irish Banks and Bank of Ireland €2.4 million and €3.2 million respectively for a wide range of AML violations, called last year for senior managers to be held accountable for compliance-related breaches.

France claimed the largest AML-related penalty. In November, HSBC agreed to pay €300 million to the French National Financial Prosecutor to resolve allegations that its private banking unit in Switzerland laundered the proceeds of tax evasion.

The case against HSBC concluded with France’s first-ever deferred prosecution agreement.

Colby Adams, Kieran Beer, Larissa Bernardes, Laura Cruz, Silas Bartels and Sonal Bhatnagar contributed to this article.

Topics : Anti-money laundering , Counterterrorist Financing
Source: United Kingdom , United Kingdom: Financial Conduct Authority , India , Hong Kong
Document Date: April 4, 2018