On 15 May 2018, the UK Parliamentary Treasury Select Committee heard evidence from representatives of Transparency International, Global Witness and the RUSI Centre for Financial Crime and Security Studies as part of its inquiry into the UK’s anti-money laundering (AML), counter-terrorist financing (CTF) and sanctions regimes.
The oral and written evidence submitted contended that the UK remains poorly equipped to deal with the economic crime risks inherent in acting as a global financial centre and proposed a number of robust policy recommendations, four of which are detailed below:
1. Impose restrictions on non-UK company formation agents
Trust or company service providers (TCSPs, i.e. firms that set up UK companies en masse) who do not carry on business in the UK are currently able to incorporate UK companies without complying with UK standards for money laundering checks or oversight from an AML supervisor. It was recommended that TCSPs who are not registered with a UK AML supervisor should be prohibited from setting up companies in the UK.
2. Enforce the UK sanctions regime
The Office of Financial Sanctions Implementation (OFSI), part of HM Treasury, was established in March 2016 to enforce financial sanctions but there is no evidence, in the opinion of those giving evidence to the Committee, that OFSI acts as any sort of deterrent to UK-based sanctions violations. Despite suspected sanctions breaches with an aggregate value of £1.4 billion being reported to OFSI in 2017, the UK has not yet imposed any criminal or civil penalties for sanctions violations. It was recommended that OFSI make use of its civil penalty powers under the Policing and Crime Act 2017 to ensure that sanctions violations are dealt with in an effective, proportionate and dissuasive manner.
3. Consolidate the UK’s AML supervisory regime
The view of those giving evidence to the Committee is that there are currently too many (a total of 25) statutory and professional body AML supervisors responsible for overseeing money laundering checks, which prevents a consistent standard of supervision being applied across sectors. There is also no institutional separation between many AML supervisors’ lobbying and supervisory functions and the newly created Office for Professional Body Anti-Money Laundering Supervision does not have any remit over the statutory AML/ CFT supervisors, i.e. HMRC, the Financial Conduct Authority and the Gambling Commission. It was recommended that the AML supervisory system be consolidated and further reformed to ensure: equality between supervisors in the use of robust and visible sanctions; coordinated intelligence sharing between supervisors; and a coherent and effective system for overseeing AML checks in the private sector.
4. Appoint an Economic Crime Commissioner
There is a lack of individual accountability amongst the wide range of ministers, civil servants, agencies and departments involved in tackling economic crime in the UK, according to those giving evidence to the Committee. It was recommended that an independent Economic Crime Commissioner be appointed who will be directly accountable for the effectiveness of the UK’s economic crime framework.
The Treasury Committee’s economic crime inquiry remains ongoing and it will publish its findings in the coming months. What seems inevitable is that its findings will portend the Financial Action Task Force’s evaluation of the UK’s AML and CTF regime, which is currently being finalised and the results of which will be published before the end of the year.