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What are some of the key takeaways from HM Treasury’s latest AML Supervision Report?

Posted by: Gherson White-Collar Crime

What is the report?

The ninth edition of the Report provides information about the performance of AML/CTF supervisors between 6 April 2019 – 5 April 2020. The Report fulfils HM Treasury’s obligation in the Money Laundering Regulations (“MLR”s) to provide supervisory information and a review of this information.

What are some of the key takeaways in the report?

Key findings include an increase in cash-based money laundering

The Report’s key findings and actions include the following:

  • According to supervisor returns, approximately 12% of the supervised population are classified as high-risk.
  • High-risk areas remain the same.
  • There has been an increase in cash-based money laundering characterised by use of cash-intensive businesses, or smuggling large amounts into the UK.
  • Recent regulatory changes have recognised the expanding and changing cryptoasset ecosystem and art market participants are newly regulated entities.
  • Professional services remain attractive to criminals as a means of money laundering.
  • Both the FCA and HMRC should consider how to ensure appropriate intensity of supervision for all the different categories of its supervisory population.
  • To progress plans to extend AML/CTF requirements and related supervision to virtual currency exchange providers.

Whilst some of the Report’s findings are perhaps to be expected (e.g. the high-risk areas remain the same and professional services remain attractive for criminals), it is interesting to read that there has been an increase in old-fashioned cash-based money laundering.

No, or inadequate, firm-wide risk assessments are a common problem

Both the FCA and HMRC identified breaches and non-compliance arising where there were no, or inadequate, firm-wide risk assessments. More specifically, for the FCA frequent breaches include inadequate customer due diligence and enhanced due diligence leading to poor identification and monitoring of high-risk customers, no or inadequate firm wide-risk assessment and inadequate screening of employees through record retention and electronic checks. For HMRC the most common non-compliance was lack of appropriate AML policies, control and procedures, inadequate risk assessment and no or inadequate firm-wide risk assessment.

There has been a change in cooperation, coordination and information-sharing following COVID

The Report observes that lockdown measures have meant a movement of information-sharing forums to online, resulting in a change to the way supervisors interacted.

Enforcement action has decreased

Enforcement action has slightly decreased since 2018-2019. However, although HMRC’s overall enforcement action has reduced, the average fine has doubled. More generally, HMRC made two referrals to law enforcement, compared to 13 in the previous period. The FCA currently has 46 AML investigations open and made three referrals in 2019-2020.

A significant number of crypto firms are not meeting the required AML standards

The Report notes that from 10 January 2020, businesses carrying on cryptoasset activities in the UK have needed to be compliant with the MLRs. The Report confirms that a significant number of firms which have submitted applications for FCA supervision are not meeting the required standards under the MLRs, resulting in the withdrawal and refusal of applications.

How can Gherson assist you?

Gherson’s white-collar crime and regulatory team are able to provide advice and assistance with AML compliance.  Additionally, the team has recently started a series on the regulation of crypto, with the aim of advising those who work in the compliance of this sector. In addition, for those who would like advice on relevant issues, including those who have had issues with the FCA registration process, our specialist regulatory and compliance team can guide individuals and companies through the process.

Please do not hesitate to contact us for advice, send us an e-mail, or alternatively, follow us on TwitterFacebook, or LinkedIn to stay-up-to-date.

 

The information in this blog is for general information purposes only and does not purport to be comprehensive or to provide legal advice. Whilst every effort is made to ensure the information and law is current as of the date of publication it should be stressed that, due to the passage of time, this does not necessarily reflect the present legal position. Gherson accepts no responsibility for loss which may arise from accessing or reliance on information contained in this blog. For formal advice on the current law please don’t hesitate to contact Gherson. Legal advice is only provided pursuant to a written agreement, identified as such, and signed by the client and by or on behalf of Gherson.

©Gherson 2021

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