21 Apr 2017

FCA hot topic: Money laundering


On 18 April, the Financial Conduct Authority published its 2017/2018 Business Plan (a copy of which can be viewed here). The FCA makes it clear that it may start prosecuting firms or individuals for serious or repeated anti-money laundering failures, marking a departure from its enforcement policy to date. In particular, the Business Plan notes that:

"[w]here firms have poor AML controls, we will use our enforcement powers to impose business restrictions to limit the level of risk, provide deterrence messages to industry, or both. We will generally use our civil powers, but if failings are particularly serious or repeated we may use our criminal powers to prosecute firms or individuals."

The FCA has regularly noted that many firms continue to fail to meet its expectations in relation to their systems and controls in connection with financial crime. The threat to use their criminal powers to prosecute firms or individuals for serious or repeated failings should be taken as a shot across the bows.

The private banking and wealth management sectors have long been tied to a higher standard of behaviour than certain other parts of the financial services industry. Clients in this space should therefore take this opportunity to review their AML policies and procedures to make sure not only that they are fit for purpose, but that they have been properly implemented and are being followed in practice. Firms should also be looking to ensure that they are ready for the new MLD IV requirements expected to come into force this summer.

New offence: a failure to prevent money laundering

The government recently consulted on a proposed new offence making companies, rather than directors or senior managers, criminally liable for a failure to prevent economic crime, including money laundering (the Call for Evidence closed on 24 March 2017, a copy of which can be found here). Failure to prevent will likely be a strict liability offence with the only available defence being that adequate procedures were put in place to prevent the breach from occurring. The new offence will likely be patterned on the “failure to prevent bribery” offence in Section 7 of the Bribery Act 2010. We would expect the new offence to come into force in late 2017.

MLD IV / Money Laundering Regulations 2017

Member States are required to transpose and implement the Fourth Money Laundering Directive (MLD IV) by 26 June 2017. In the UK, this directive is being implemented via the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, currently published in draft only. Although some regulatory technical standards are still in the process of being determined, firms should be reviewing their current systems and controls to ensure that they are ready for implementation in June. Key changes include revised requirements for due diligence on trusts and reliance on due diligence performed by third parties as well as new requirements for trustees to record beneficial owners' entitlements.

The latest version of our money laundering overview for private banking and wealth management can be viewed here.



James Quarmby

James Quarmby

T:  +44 20 7809 2364 M:  +44 7958 776 759 Email James | Vcard Office:  London

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