Reform of the money laundering regime

I am grateful to Stephen Morris for drawing my attention to this paragraph in the Budget Speech:

"In our professional and business services, one of our unsung success stories, we will reform our burdensome money laundering regime, promote the UK as the global centre of legal arbitration, and launch a new trusted business visa service."

In the Plan for Growth published at the same time by HM Treasury, at para 1.33 there is this:

"To minimise regulatory burdens, the Government will:

  • scrap proposals for specific regulations which would have cost business over £350 million a year. This includes not extending the right to request time to train to businesses with less than 250 employees and not bringing forward the dual discrimination rule;
  • introduce an unprecedented moratorium on new domestic regulation for microbusinesses and start-ups for the next three years;
  • launching a public thematic review to reduce the stock of regulation, with the presumption that all regulations identified as burdensome would be removed unless good reasons are given for them to stay;
  • push the EU Commission to deliver a culture change that bears down on the overall impact of EU legislation, including urging the Commission to set a new ambitious target to cut EU regulatory burdens over the life of this Commission; and
  • implement the proposals from Lord Young’s review of health and safety, including bringing in new risk assessment tools, the registration of health and safety consultants, combined inspection programmes and taking action to constrain ‘no-win, no-fee’ legal services."

I have no further information.  We shall have to wait and see what the government does.

David

Comments

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Gerard Murray's picture

Budget Quote of the Day

Gerard Murray | | Permalink

Gerard Murray's pictureBudget Quote of the Day

Stephen Morris posted 'we will reform our burdensome money laundering regime.'

 

The devil is always in the detail  and it might be some time before we see the concrete proposals. Best advice to the Chancellor is to have him sign up to this Discussion Group!He can always remain anonymous with a name like the Bullingdon Bandit 

davidwinch's picture

Some possibilities

davidwinch | | Permalink

What we may see is the government bring forward some sort of enhancement to the present 'passporting' arrangements of Reg 17 MLR 2007.

That could involve, say, HM Revenue & Customs opening up their database of VAT registered businesses to make the VAT numbers, names and addresses of every registered business (and of the partners in a VAT registered partnership) available online to businesses within the regulated sector (banks, building societies, accountants, solicitors, estate agents, etc.)

Then if a bank, an accountant or a solicitor needed to confirm the identity of a new (VAT registered) client it would only need to ask for a note of the business VAT number and then could simply confirm the identity details on the HMRC database.  The bank, accountant or solicitor would not need then to ask for (and retain copies of) the client’s passport etc.

This would also avoid the need for the business to produce its identification documents repeatedly – to its bank, then to its accountant, then to its solicitor . . . .

What I would like to see (but do not expect to see) is an amendment to the definition of ‘money laundering’ so as to limit the offence to circumstances in which someone other than the original offender handled proceeds of a crime.  That would remove the need to report suspicions of, for example, cases of simple tax evasion (where the tax offender retains the benefit of his own evasion).

An added bonus would be adding a ‘purpose’ test to the definition of ‘money laundering’ so that the offence was only committed where the purpose of the transfer, etc of the proceeds of crime was to prevent the authorities from recognising the monies / assets in question had previously been obtained illegitimately; or where it could be proved that the alleged money launderer knew (and not merely suspected) that the monies / assets in question were derived from crime.

Of course, pigs may fly . . . .

David

cymraeg_draig's picture

You may indeed see low flying bacon .......................

cymraeg_draig | | Permalink

 

 

I did tell you that consultations were taking place (you'd be surprised how many accountants and legal professionals are members of the Conservative Party).

I think you will find it is to be ammended to fulfill its original intention - tackling terrorism and serious crime, not tax fiddling sub contractors and shoplifters.

Unless your clients name is Bin Laden or offers you some white powder in leiu of your fees, you may soon be able to worry much less about money laundering reports.

Perhap there is a God, after all!

Stephen Morris | | Permalink

This would be a tremendous improvement if it happened, C_D. The regime is an Orwellian nightmare. Most un-British! Perhaps valuable state resources can then be released to combat real crime where there are identifiable human victims, not  minor crimes against the state.

The whole regime is totally disproportionate. As David has suggested it should not be beyond the wit of humans to design and implement systems that enable someone's identity to be ascertained quickly and efficiently and without putting the unfortunate client through tedious and frequently pointless bureacratic hoops.

 

 

should_be_working's picture

Funnily enough...

should_be_working | | Permalink

Coincidentally (though now it seems not) we had a call yesterday afternoon from a research outfit on behalf of HMRC asking us various questions about HMRC's ML regulation activity e.g. its performance, effectiveness, how onerous it was, etc.

I'd still be pleasently surpirsed if there was any significant reform though - the natural tendency for government is to expand and reinforce tick box regulation as a substitute for proper action.

 

VAT registration

GW | | Permalink

David,

The VAT registration details are already available online via the European commission:

http://ec.europa.eu/taxation_customs/vies/vieshome.do?selectedLanguage=EN

 

 

Gerard Murray's picture

Reform of POCA 2002

Gerard Murray | | Permalink

The starting pojnt on the possibility of reform ogf the present legisaltion is for the present government to reach a decision as to whether the legisaltion should be applied on an all crimes basis, which was the position favoured by its predecessor or should revert to crimes involving what is termed Organised Crime- drugs, human trafficking stc and Terrorism.

As members of this discussion Group are only too aare there has been a cast increase in the number of governmental agancies now using POCA and in particular the confiscaion regime included therein. The last government introduced many of the aditional powers through Statutory Instrumetns rather than have them debate and approved in the House of Commons.

I draw attention to a secondary piece of legislation Proceeds of Crime Act 2002 (References to Financial Investigators)(amendment) Order 2009/2007 introduced as statutory instrument. The Amendment extended a range of powers  of under the Proceeds of Crime Act 2002 to a range of local authorities and civilian investigators including the FSA, the OFT, the Gambling Commission, the Gangmasters Licensing Authority, the Rural Payments Agency, the Vehicle and Operator Services Agency , the Royal Mail and the Medical and Healthcare Products Regulatory Agency, local authorities and Transport for London. All these bodies can now conduct their own financial investigations, doubling their share of any sums recovered under a confiscation order to 37.5%and thus raise any incentive they may have to pursue confiscation orders.

 I suspect that the present government will be cautious to implement a radical and immediate overhaul of the present legisaltion and the most we will see in the short term will be a consultation process.

davidwinch's picture

VAT numbers and initial ID

davidwinch | | Permalink

Yes, the problem is that at present checking the VAT number & registration details is not recognised as a valid ID check for money laundering regulations purposes and doesn't confirm details of partners / beneficial owners which are required for MLR 2007.

David

Money laundering reforms

tricky55 | | Permalink

Hi David (and thanks for a thoroughly interesting discussion group!)

You comment:

"Then if a bank, an accountant or a solicitor needed to confirm the identity of a new (VAT registered) client it would only need to ask for a note of the business VAT number and then could simply confirm the identity details on the HMRC database.  The bank, accountant or solicitor would not need then to ask for (and retain copies of) the client’s passport etc."

So does that mean that I would be able to go along to any friendly accountant and impersonate a director (name obtained from Companies House WebCheck) of a company whose invoice and VAT number I happen to have in the knowledge that no ID check would be done to confirm whether or not I really am that person? Are you saying that would really be an improvement? I'm not so sure.... ID theft is a major threat these days as I'm sure you know.

davidwinch's picture

Reform of PoCA 2002

davidwinch | | Permalink

Gerard

I rather think what the Chancellor has in mind does not extend to reform of the confiscation regime in PoCA 2002 (which is different from the money laundering regime - albeit some of the money laundering offences are relevant to confiscation).

I think he is driving at lessening the regulatory burdens on legimitate businesses - and particularly those within the 'regulated sector' - rather than reducing the harshness of the confiscation regime which applies only to convicted criminals.

There are some steps he could take whilst remaining compliant with the EU Third Money Laundering Directive.

For example, the Third Directive defines Money Laundering in the following way:

"For the purposes of this Directive, the following conduct, when committed intentionally, shall be regarded as money laundering:
(a) the conversion or transfer of property, knowing that such property is derived from criminal activity or from an act of participation in such activity, for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in the commission of such activity to evade the legal consequences of his action;
(b) the concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership of property, knowing that such property is derived from criminal activity or from an act of participation in such activity;
(c) the acquisition, possession or use of property, knowing, at the time of receipt, that such property was derived from criminal activity or from an act of participation in such activity;
(d) participation in, association to commit, attempts to commit and aiding, abetting, facilitating and counselling the commission of any of the actions mentioned in the foregoing points".

In terms of "criminal activity" it here means, broadly speaking, all offences which are punishable by deprivation of liberty or a detention order for a maximum of more than one year.  Which covers a wide range of criminal offences (but is not an 'all crimes' approach).

The UK legislation refers to "knowing or suspecting" rather than "knowing" and has no reference to the "purpose" of the conduct alleged to amount to money laundering.

If we are to make more radical changes to money laundering offences than those falling within the scope of the Directive then we should need to persuade the EU to amend the Third Directive or allow the UK scope to not fully comply with the Directive (both of which are unlikely in my view).

David

davidwinch's picture

@tricky55

davidwinch | | Permalink

At present electronic ID checks (available from commercial suppliers for a fee) are widely used to confirm identity.  As you point out, if I were to call myself David Cameron and give my address as 10 Downing Street I might well pass such an electonic ID check.  But that does not prove that I actually AM the person whose name and address I have provided.

However an accountant or solicitor would (I hope!) then send to the new client by post an engagement letter (or 'client care letter') and request that a copy be signed and returned.  If it is signed and returned that demonstrates that (at least) the new client has access to post sent to that address.  That is normally considered sufficient (i.e. electronic check plus postal confirmation) for the purposes of initial ID in a low or normal risk situation.

Of course it would be necessary for the government (if it were to make such a proposal) to be satisfied that sufficient checks were undertaken by HMRC before a VAT number was issued.

David

cymraeg_draig's picture

Your dreaming David -

cymraeg_draig | | Permalink

Of course it would be necessary for the government (if it were to make such a proposal) to be satisfied that sufficient checks were undertaken by HMRC before a VAT number was issued.

David

 

Posted by davidwinch on Thu, 24/03/2011 - 15:12

 

 

Expecting HMRC to keep accurate records is far too much of a leap of faith for me.

Gerard Murray's picture

Reform of POCA

Gerard Murray | | Permalink

I think you will find it is to be amended to fulfill its original intention - tackling terrorism and serious crime, not tax fiddling sub contractors and shoplifters.

Posted by cymraeg_draig on Thu, 24/03/2011

Alas C-D the Party appears to be letting you down in your hour of need and hope. From the postings to date, it appears that proposed changes in the legisaltion affect only the bureaucratic details and don't go the the core of the issues that you have previously addressed. In other words there will be a tinkering with the legislation that has been in the last few years applied against fishermen, chemists, car park operators and jobbers. This is not radical change.

I am reminded of the comments of a former and innovative Irish Prime Minister, Sean Lemass, who told journalists the home truth that  manifesto promises were obsolete when the polls closed on Election Day. It looks like more of the same with a tinkering at the edges. Welcome to the Brave New World of Blair  now to be implemented ( and possibly consolidated ) by Cameron.  

cymraeg_draig's picture

.

cymraeg_draig | | Permalink

Alas C-D the Party appears to be letting you down in your hour of need and hope. From the postings to date, it appears that proposed changes in the legisaltion affect only the bureaucratic details and don't go the the core of the issues that you have previously addressed. In other words there will be a tinkering with the legislation that has been in the last few years applied against fishermen, chemists, car park operators and jobbers. This is not radical change.

 

Posted by Gerard Murray on Thu, 24/03/2011 - 21:52

 

 

Should that prove to be the case the next conferance will be a very uncomfortable place for Mr Cameron - especially when his personal letter stating the intention to ammend and restrict the legislation to its original intention (terrorism & organised crime) is handed to the press. (I'm sure the Mirror would rip my hand off for it).

 

Shrinking the State

Stephen Morris | | Permalink

I certainly hope the POCA is amended for an "all crimes" basis to a "seriosu and organised crime" basis, as you suggest, Gerard. I would have thought to do so is consistent with the Tory philosophy of minimal state. Although I haven't read the book, I understand that Roads to Serfdom by Von Hayek, posits the thesis that liberties diminish as the state grows larger. I believe Maggie Thatcher was a disciple of Von Hayek. Observation of the last 13 years does seem to confirm the thesis: it is now almost impossible to enter into a transaction (save for retail shopping) that doesn't require individuals to prove their identity in triplicate. "Your papers please" - just like those films set in Nazi Germany.

davidwinch's picture

The Chancellor's speech

davidwinch | | Permalink

I think there are two points to be made.

Firstly it seems clear to me that the thrust of the comment in the Chancellor's speech with regard to the 'burdensome money laundering regime' was to do with cutting unnecessary bureaucracy imposed upon legitimate businesses.  I do not think his reference was directed toward softening the legal consequences of conviction for criminal offences.  (Of course that does not rule out such softening being pursued by the Prime Minister or the government.)

Secondly I think it is instructive to consider how governments and the EU define such expressions as "serious crime" and "serious organised crime".

The EU in the Third Money Laundering Directive have a lengthy definition of "serious crime".  It includes all crime for which the maximum penalty is imprisonment for more than one year.  The maximum penalty for (any) theft is 7 years.  For certain offences under the Hazardous Waste Regulations 2005 there is a maximum penalty of 2 years imprisonment.  The maximum penalty for fraudulent evasion of income tax is 7 years.  So all of these offences are clearly regarded as examples of "serious crime".

The Scottish parliament has recently passed an Act which includes a definition of "serious organised crime".  What that definition boils down to is two or more people working together to get something by crime.  So a couple of people working as a team to pickpocket in a crowd, or shoplift, or carry out a 'distraction' burglary would certainly meet the definition of "serious organised crime".

Famously in the United States there is an Act, the Racketeer Influenced and Corrupt Organizations Act of 1970 (RICO), brought in with the Mafia in mind, which is now in everyday use in US Courts in relation to alleged criminal conduct far removed from Mafia activities.

I rather suspect that even if the Draconian PoCA legislation were amended to relate only to "serious crime" there may not be too much difference in practice.

David

What is 'serious'

davidross | | Permalink

A broken arm is a serious injury, but not life-threatening.

I think officialdom's definition of serious crime will always set the bar pretty low 

cymraeg_draig's picture

Define serious ?

cymraeg_draig | | Permalink

I can demonstrate the stupidity of our current laws from 2 cases which took place yesterday in our local court.

Case 1 - A known toerag went out equiped with housebreaking tools, he broke into a house, climbed through the window, and when confronted by the householder (who was unexpectedly at home) he pushed the householder to the floor and fled, taking with him £2k's worth of jewelery etc. 

He went out with the intention of committing a crime, and he was prepared to use violence.  He got a 120 hour community service order.

 

Case 2 - A motorcyclist with no previous record went out with his friend. His frien overtook a car, and he followed.  He misjudged it and hit a car coming the other way. His injuries are such that he will never walk proprly again, and he suffered some minor brain damage. The passenger in the car was injured (a broken rib). There is no suggestion that either motor cyclist was exceeding the 60 mph speed limit on the road. 

He did not go out to commit a crime, he made a tragic misjudgement in a split second. Some muppet at the CPS charged him with dangerous driving, and the equally stupid Magistrates sentenced him to 6 months.

 

Justice  ????????????

So on this basis who exactly is fit to decide what a "serious crime" is?  Obviously not politicians, nor the Clown Persecution Service (not a mistype) nor the courts.

 

 

ShirleyM's picture

Possible reason

ShirleyM | | Permalink

I wonder if the punishments were aligned with 'risk to persons'?

I am making a few assumnptions here, but the burglar made no attempt to cause serious bodily harm (or death), whereas the actions of the motorcyclist could have caused serious injury or death?

cymraeg_draig's picture

Shirley

cymraeg_draig | | Permalink

My view is that the burglar went out with every intention of vcommitting a crime. His actions were premeditated, and of course, likely to be repeated.

The motorcyclist made a split second decision and got it wrong - a pure accident.  Lets face it no one deliberately rides headfirst into an oncoming car.

I am of the firm opinion that intent is a vital question a court should consider.

Going out intending to commit a crime is criminal, making a misjudgent is an accident that could happen to any of us any day - thats not criminal, its being human.

 

davidwinch's picture

Shirley

davidwinch | | Permalink

Had C_D been on the bench then it would have included at least one ardent motor-cycling fan ;-)

When C_D says the motorcyclist's conduct was "not criminal" he does not (I believe) mean that in the strictly literal sense (he is not intending it to be taken as the legal advice of a barrister) - I think he means not intentionally culpable.

No doubt he will correct me if I am wrong in my belief.

David

cymraeg_draig's picture

Misuse of the word "crime"

cymraeg_draig | | Permalink

 

I'm using "crime" as it relates to a deliberate premeditated act.

Whereas although it can be classed as "a crime" a road accident is usually the product of a lapse in concentration or a misjudgement - not a deliberate act. No one rides a bike into an oncoming car deliberately.

To me, the court should consider that the burglar will re-offend, the biker is very unlikely to ride into another car (unless he has a death wish).

 

davidwinch's picture

Article on barristers' website

davidwinch | | Permalink

I notice this article by barrister Fiona Jackson of 33 Chancery Lane Chambers which makes interesting reading.  She comments in more detail on the Treasury's 'Plan for Growth' document and finds within it a claim that "the Government wants to abolish over two dozen regulatory offences under Money Laundering Regulations and exempt businesses with very low turnovers to reduce compliance burdens".

At para 2.253 the Plan says:

"The Government will shortly consult on detailed proposals for changes to Money Laundering regulations, to further strengthen the risk-based approach. These and other measures will be designed to ensure that the Regulations continue to deliver an effective and proportionate anti-money laundering regime, while minimising the burdens they impose on businesses."

The EU Third Money Laundering Directive says:

"This Directive establishes detailed rules for customer due diligence . . . and certain additional, more detailed requirements, such as the existence of compliance management procedures and policies. All these requirements are to be met by each of the institutions and persons covered by this Directive, while Member States are expected to tailor the detailed implementation of those provisions to the particularities of the various professions and to the differences in scale and size of the institutions and persons covered by this Directive."

Make of that what you will !

David

Subsidiaraty and discretion

Stephen Morris | | Permalink

Each member state has its own national peculariaties. The purpose of the Money Laundering Directive issued by the EU was, I believe, to combat international flows of dirty money to ensure they have no safe haven (such as in City of London financial institutions).

I doubt whether minor tax evaders, eg the local neighbourhood plumber, butcher or candlestick maker, were really the intended targets of the Directive. That the UK has discretion over how the Directive is implemented in UK law is supported by the "all crimes" definition of money laundering adopted almost uniquely by the UK. I don't believe any other EU states have adopted the same definition. It was our very own then government that decided that all crimes should be caught.

In conclusion, I believe this new administration has a fair amount of lattitude in relation to these issues whilst still remaining compliant with the Directive. I would be interested if there is evidence that runs counter to this view.

 

 

davidwinch's picture

Latitude in complying with the Directive

davidwinch | | Permalink

Stephen

The Directive itself explicitly allows a certain latitude.  Most significantly in the paragraph I quoted in my post earlier today.

Article 5 says:

"The Member States may adopt or retain in force stricter provisions in the field covered by this Directive to prevent money laundering and terrorist financing."

Clearly that is what the UK did in adopting an "all crimes" approach rather than the "serious crimes" approach adopted by the Directive (but, as already mentioned, the definition of "serious crimes" in the Directive was broad-based).

There is also an explicit reference in Article 2 of the Directive which reads:

"Member States may decide that legal and natural persons who engage in a financial activity on an occasional or very limited basis and where there is little risk of money laundering or terrorist financing occurring do not fall within the scope of Article 3(1) or (2)".

What this means is that the ML requirements do not apply to such businesses, but this appears to be limited to "financial institutions" and "credit institutions" that meet the criteria (such as banks, bureau de change, money transmitters, insurance companies, etc).

It would not appear to cover very limited activity by "auditors, external accountants and tax advisors" (who are covered by Article 2(1)(3)(a)).

My posting early in this thread headed "Some possibilities" was written with an eye to the sort of changes which might be possible whilst remaining compliant with the Third Directive.

David

Interpretation

Stephen Morris | | Permalink

Yes, auditors, external accountants and tax advisors are caught but the EU Directive does not mandate the surveillance and reporting of all crimes money laundering. The mandate is for surveillance of transactions conforming to a narrow definition of money laundering, not an all crimes definition. I doubt anyone on this site would hesitate to report genuinely serious criminal transactions such as drug or sex trafficking, illegal arms dealing, terrorist financing activities, or obvious cases of narrow sense money laundering.

So, even though we may be caught, there is lattitude for our current government to relax the reporting burden that falls on accountants and tax advisors so that the original intention of the Directive, which is part of a global effort to stop money laundering, is given effect. Excluding minor trangressions against the state, for example, from the MLR and from other legislation would move the ML regime towards proportionality and towards respect for citizens. Under the current regulations every citizen is presumed to be a criminal. This is a paranoid and hysterical presumption.

 

davidwinch's picture

Crime & money laundering

davidwinch | | Permalink

Stephen

We need to keep clearly in mind that money laundering is a crime which concerns some sort of 'involvement' with the proceeds of an earlier crime (sometimes referred to as the 'predicate offence').

So when looking at what we mean by 'money laundering' we need to define the scope of a 'predicate offence' and the scope of what sort of 'involvement' amounts to 'money laundering'.

In terms of the 'predicate offence' in the UK we have regarded any crime as being within the range of appropriate 'predicate offences'.  The EU Directive however refers to "serious crime" but goes on to define "serious crime" to include any crime which carries a maximum sentence of more than one year.  So that includes theft (however small the amount), fraud, tax evasion, etc.

If we were to change the UK law simply to remove the 'all crime' reference and replace that with a reference to 'serious crime' in line with the EU definition then (from that change alone) we may not notice much difference in practice.

But we also differ from the EU Directive in terms of the 'involvement' which we say amounts to 'money laundering'.

In the UK we say that the alleged money launderer must know or suspect that the asset (money or whatever) he is involved with is the proceeds of a crime.  Whereas the EU definition of money laundering refers to someone who knows that the asset is derived from crime.  So that is another difference.

Also, in relation to certain types of involvement (transferring or converting assets derived from crime), the EU definition indicates that the alleged money launderer's involvement with the asset must be for a money laundering purpose.  In the UK we have no mention of purpose in our definition of money laundering.

That is why in the UK a solicitor helping you purchase a house has to be aware of the possibility that he may commit a money laundering offence if he suspects that the money you give him to purchase the house is money which you have derived from crime.  It is (in the UK) irrelevant that the solicitor has no intention of dealing with the conveyancing with the purpose of laundering your money or assisting you to launder your money.

So if we were to limit our UK definition of 'money laundering' in line with the EU definition it would cut out a large number of UK money laundering cases.

But it is not the case that we could remain compliant with the EU Third Directive (or the 40 recommendations of the FATF which underlie them) and confine money laundering to the proceeds of those cases of really serious crime for which a convicted defendant would expect to spend many years in prison (organised drug trafficking, arms dealing, armed bank robbery, etc).

David

Gerard Murray's picture

Parliamentary Reform of Proceeds of Crime Act 2002

Gerard Murray | | Permalink

 

David –As I seem to recall there already has been some movement within Parliament to examine the workings of the proceeds of crime legislation. In the Summer of 2009, a House of Lords European Union Committee- House of Lords Report Money Laundering and Financing of Terrorism produced a report with the following recommendations- 

 

207 ‘Consideration should therefore be given to amending the Proceeds of Crime Act 2002 to include a de minimis exclusion.’

 

212 ‘It is vital that SOCA should make a serious attempt to calculate the cost/benefit of the reporting of suspicious activities by the United Kingdom private regulated sector.’

 

214 ‘One matter to which we expect the Treasury to pay particular attention in their review of the burden on the private sector is whether this burden does, as has been claimed, put the regulated sector at a competitive disadvantage compared to other countries.’

 

As I recall you wrote about the report on your own website and you were not very hopeful that the then government would take on board any of these recommendations.  

 

P.S.-I hope that C-D- is greatly heartened to be informed of the good work of their Lordships in a chamber he has previously called ‘another house of ill-repute.’ 

 

cymraeg_draig's picture

To quote the late Buddy Holly - That'll be the day.

cymraeg_draig | | Permalink

 

 

P.S.-I hope that C-D- is greatly heartened to be informed of the good work of their Lordships in a chamber he has previously called ‘another house of ill-repute.’ 

 

Posted by Gerard Murray on Sun, 27/03/2011 - 17:46

 

I have little respect for people who are unelected, largely unqualified, and following the recent exposure of expenses claims, disreputable.

Of course, David is talking about ammendments allowable whilst still complying with EU legislation - but there is another way.  The majority of people in this country have no wish to remain in the EU, indeed none of them ever voted to go into the EU as it exists today.  The last vote was for a "common market" - nothing more.

In my view it is only a matter of time, and I suspect not much time, before governments are forced to give the population a referendum, and at that point our relationship with the EU will change drastically.

In the mean time we should change our definition of "serious offence".  Imagine if we all reported every single "suspicion" we had. Every client who might have done a cash job. Every trader who didnt give a receipt. They would be burried under reports and the whole process would grind to a halt.

Far better that they only receive 20 reporta a year - and catch 20 terrorists/ drug dealers.

Like everything tha emanates from the EU the money laundering regulations are paperwork and red tape for the sake of red tape. The purpose has been lost.

 

 

davidwinch's picture

To quote the Everly Brothers . . .

davidwinch | | Permalink

C_D

If you think the regime is going to be changed so that only 20 reports (rather than 250,000) are needed each year then you are in Everly Brothers territory!

Dream, dream, dream . . .   ;-)

David

Motorcyclists

The Black Knight | | Permalink

always get rough treatment, the injuries alone are sufficient punishment for a terrible misjudgement.

it's not really justice but the fact that the state does not like motorcycles.

A friend of mine lost his mate on a ride to a sunday lunch drinking car driver on the wrong side of the road and no charges were made.

hear hear C_D

ZX9R rider.

cymraeg_draig's picture

5 years ?

cymraeg_draig | | Permalink

C_D  -  If you think the regime is going to be changed so that only 20 reports (rather than 250,000) are needed each year then you are in Everly Brothers territory!

Dream, dream, dream . . .   ;-)

 

Posted by davidwinch on Mon, 28/03/2011 - 07:47

 

I wasnt being literal with the number, but, my point is that less reports, only relating to really serious crime, would be far better than the current mass of meaningless, groundless reports made by people scared of finding themselves facing action for not reporting the local plumber for doing back-pocket jobs.

In my view perhaps the best way would be to change the "carrying one year in prison" requirement to 5 years.

I also think it's time everyone in the regulated sector said that enough is enough. It is wrong that professional people should have to operated in an atmosphere of fear and distrust.  Indeed, we are now in a position where it's actually best not to askto many questions and to carry out only the absolute minimum checks necessary as its better not to know what clients are doing.

What a daft situation.

 

 

 

davidwinch's picture

"Serious" crime

davidwinch | | Permalink

C_D

The source of the "one year" rule is the 40 recommendations of the FATF.  The EU have simply cut and pasted that into the EU Third Directive.

The UK would not wish to be seen as non-compliant with the FATF 40 recommendations (even if we left the EU) because that would have an adverse effect on the City of London as a global financial centre - we would acquire the status of Uzbekistan in terms of perceived financial probity.

David

Probity and City of London

Stephen Morris | | Permalink

It's not certain that London's reputation for probity is secure or deserved. The Money Laundering regime should have picked up on Mubarack's dirty assets, some of which are located in London (houses etc). A reasonablly vigilant London based agent acting for Mubarack should have suspected that his assets were dirty. An ethical City of London would decline to process Mubarack's dirty assets. It doesn't though. SOCA should have been alerted via SARs. It could then have instructed the informant to decline processing Mubarack's transaction. Did SOCA do this? Did SOCA receive SARs relating to Mubarack? Mubarack is probably not the only despot who has invested assets stolen from his people in London. The Money Laundering regime is a failure and serves, it seems, to oppress ordinary UK citizens rather than to curtail the actiivities of powerful international criminals.

cymraeg_draig's picture

Reputation ?

cymraeg_draig | | Permalink

......... we would acquire the status of Uzbekistan in terms of perceived financial probity.

 

Posted by davidwinch on Mon, 28/03/2011 - 09:38

 

Thanks to Prudence Brown our reputation isnt that high at the moment - unless you happen to be a banker wanting to get your snout into the trough.  

And do you really think that hammering self employed bricklayers for a few back pocket jobs actually enhances our reputation ?  I think it just makes us look like small minded jobsworths scabbling for scraps from the EU table.

The City needs a reputation for honesty and integrity - which it once had - not a reputation for petty beirocracy and red tape where civil serpants and jobsworths make the rules.

 

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Clarification

davidwinch | | Permalink

Just to clarify, the possibilities which I have discussed in my postings in this thread would not (even if the government were to fully implement all of my suggestions!) change the current position in relation to a failure by an accountant / tax adviser / etc to report to his MLRO or to SOCA a suspicion (arising from information received in the course of his work) that someone might be engaged in money laundering.

A failure to report such a suspicion would remain a criminal offence under ss330 - 332 Proceeds of Crime Act 2002.  I do not see the slightest indication that any change to that is being contemplated by the government.

What might perhaps change is the definition of what amounts to a money laundering offence and hence what it is that one might have to suspect in order for that reporting obligation to be triggered.

David

cymraeg_draig's picture

Evidence

cymraeg_draig | | Permalink

What might perhaps change is the definition of what amounts to a money laundering offence and hence what it is that one might have to suspect in order for that reporting obligation to be triggered.

 

Posted by davidwinch on Mon, 28/03/2011 - 19:48

 

Actually I was recently informed by a member of the cabinet that the word "suspicion" is itself under review with proposals being considered to change "suspicion" to something more tangible and provable such as  "evidence" (which would have to be detailed in the report). 

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Suspicion and evidence

davidwinch | | Permalink

C_D

In my view a suspicion arises from evidence.  'Suspicion' without any evidence is not suspicion at all - it is speculation.

So I do not think a requirement that the suspicion be supported by some evidence would change the position at all.  Of course the evidence in question need not be documentary evidence, it could be as little as someone's evasive behaviour when asked a question.  More commonly a bank may have a "suspicion" where a person makes an unusually large deposit in cash (the fact of the unusually large cash deposit being the evidence supporting the suspicion).

The law already requires the report to SOCA to include "the information or other matter" which has triggered the report - s330(5)(c) PoCA 2002 (as amended).

But there is a problem (in fact more than one problem) with changing the word "suspicion" to something else (as distinct from amplifying it without changing the meaning, for example to read "suspicion based on evidence").

The first problem is that Article 22(1)(a) of the EU Third Directive refers to a requirement that persons in the regulated sector should promptly inform the appropriate national authority (in the UK, SOCA) "on their own initiative, where the institution or person covered by this Directive knows, suspects or has reasonable grounds to suspect that money laundering or terrorist financing is being or has been committed or attempted".

The second problem is that Recommendation 13 of the FATF 40 Recommendations is, "If a financial institution suspects or has reasonable grounds to suspect that funds are the proceeds of a criminal activity, or are related to terrorist financing, it should be required, directly by law or regulation, to report promptly its suspicions to the financial intelligence unit (FIU)" (i.e., in the UK to SOCA). (Recommendation 16 extends the coverage of Recommendation 13 to accountants, lawyers, etc.)

So the form of words found in PoCA 2002 is not simply the choice of the UK government, it is the choice of the global financial community.

David

Suspicion and money laundering

Stephen Morris | | Permalink

OK, so you say suspicion is quite a strong requirement; there has to be evidence. But suspicion of what? Theft? Fraud? Tax evasion?

davidwinch's picture

Suspicion of . . .

davidwinch | | Permalink

The only suspicions required to be reported are:

 

 

IN ENGLAND AND WALES

(i) Money laundering

(ii) Terrorist property offences.

 

IN SCOTLAND

(i) and (ii) as above, and

(iii) Serious organised crime (as defined by ss28 - 31 Criminal Justice and Licensing (Scotland) Act 2010).

 

Theft, fraud, tax evasion are NOT required to be reported.  (The problem of course is that 'money laundering' is so widely defined that any acquisitive crime - a crime by which someone obtains a benefit or avoids a liability - necessarily entails a money laundering offence, and that money laundering offence triggers an obligation to report. So as a consequence of any theft, fraud, tax evasion, etc. successfully completed there is a money laundering offence which is reportable.)

David

cymraeg_draig's picture

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cymraeg_draig | | Permalink

So I do not think a requirement that the suspicion be supported by some evidence would change the position at all.  Of course the evidence in question need not be documentary evidence, it could be as little as someone's evasive behaviour when asked a question.  More commonly a bank may have a "suspicion" where a person makes an unusually large deposit in cash (the fact of the unusually large cash deposit being the evidence supporting the suspicion).

 

Posted by davidwinch on Mon, 28/03/2011 - 21:58

 

That is the point - evasive behaviour in itself is not evidence at all. After all, I think that all politicians, and come to that, all salesmen, are evasive - does that mean I should report them?  For what ?  Being evasive is not a crime, indeed it's an absolute right. 

Similarly banking a large amount of cash is not "evidence" of anything. It may raise a suspicion, but it is not evidence, after all I could have had a good day at the races, or my generous excentric Aunt Ermitrude  might have treated me (I did actually once receive a gift of £20k from a relative) so should I be branded and subjected to investigation because of that ?    

The requirements of the EU are irrelevent as we finally have a government which is not willing to lick the boots of the europratts, and I think you actually castly overestimate the financial world.  FATF 40 are simply recommendation - just like not smoking is a "recommendation", but not enforceable.   The financial world and indeed the business world doesnt give a flying fig about money laundering regulations, it cares about profits, & tax regimes allowing it to hang on to profits, not red tape.

However its worded, the effect will be that actual tangible evidence, proof, will be required, not mere suspicion. Failure to report will then be "being in possession of evidence that ...........".

 

davidwinch's picture

Legal terms

davidwinch | | Permalink

C_D

Again I think you are using words to mean something different to their meaning in courts of law.

If a witness giving evidence in court said, "I asked him about the money but he was evasive.  He wouldn't meet my eye and tried to change the subject."  Could you object to that as not being "evidence"?  It is the witness's observation of the subject's behaviour.  It undoubtedly is evidence.

What I think you mean is that is not evidence to which you would attach great weight.  But of course the jury may take a different view.  Whatever may be your view, or theirs, it certainly is evidence.

Similarly the banking of an unusually large amount of cash is an action evidence of which - as you rightly say - may raise a suspicion.

If the accountant etc were required to have "proof" before making a report that would lay the burden of investigation upon the accountant.  An accountant is not an investigator, nor is he in a position to determine whether or not the evidence in his possession amounts to what a criminal court would regard as "proof".

The purpose of the legislation is to require accountants (and others) to report suspicions to the authorities so that they may investigate and gather further evidence - which may ultimately be sufficient to prove an offence.

"Proof" is the result of an investigation by the authorities, not the trigger for one!

As to the FATF Recommendations, the FATF have been hugely influential on governments around the globe.  They regularly monitor compliance with their recommendations (the most recent report on the UK was published in October 2009) and no government has been prepared to withstand being 'blacklisted' by the FATF over the long term.  As a result all of the countries originally blacklisted have amended their laws so as to bring in legislation on money laundering and terrorist financing.

If you believe the UK government are about to risk that then all I can say is, "Don't hold your breath!".

David

Changes to the definition of money laundering?

Stephen Morris | | Permalink

@David

So it is feasible for our government to narrow the definition of money laundering so that it did not include all acqusitive crime? Or to introduce a de minimus? 

 

Evasiveness

Stephen Morris | | Permalink

Evasiveness is subjective evidence. I doubt a prosecution would be able to obtain evidence that a client was evasive with his advisor.

Does a client's hesitation or reluctance to supply documents, when asked, amount to evasiveness? If so, then I suspect an awful lot of SARs are not being submitted by external accountants!!! Usually the hesitation or reluctance to supply is due to the scatterbrain of clients, not evidence that they are crooks. 

davidwinch's picture

Definition of money laundering

davidwinch | | Permalink

Stephen

Yes, there is scope for the UK government to change the current definition of 'money laundering' as our definition is wider than that adopted by the EU Third Money Laundering Directive or the FATF 40 Recommendations.

It could amend the definition so that money laundering only applied to the proceeds of "serious" crimes.  But the definition of a "serious" crime is likely to catch almost all crimes (the present definition of money laundering in the UK does apply to the proceeds of all crimes).  So the practical effect of such a change may not be great (and indeed it could create more confusion than it is worth).

It could also change the definition of money laundering so that a person only committed a money laundering offence if he KNEW that the asset he was dealing with was derived from crime (or from "serious" crime).  At present the UK law applies where the launderer "knows or suspects" that the asset is derived from crime.

If the law were changed in that way an accountant etc would be required to report if he (the accountant) suspected that the subject of his report (the alleged money launderer) KNEW that he was involved with an asset derived from crime.

These changes could be made and the UK would still be compliant with the EU Third Directive and the FATF 40 Recommendations (which is why I regard them as possible).

The changes C_D would like to see would go much further.

Does that clarify the position?

David

davidwinch's picture

Inferences

davidwinch | | Permalink

Stephen

It is common in criminal proceedings for inferences to be drawn from facts.  This is perfectly acceptable.

So, if I wake up tomorrow morning and looking out of the window see lots of puddles on the ground I may say to myself, "It has rained overnight".  In fact I have not seen it raining - I am inferring that it has rained from the evidence of the puddles.  It MIGHT be the case that the fire brigade conducted a drill in my street overnight - so it may not actually have rained at all.  But a jury is required to be "sure" (not certain) before reaching a guilty verdict and they are permitted to draw inferences in arriving at their verdict.

Indeed specifically the EU Third Directive says, "Knowledge, intent or purpose required as an element of the activities mentioned in paragraphs 2 [money laundering] and 4 [terrorist financing] may be inferred from objective factual circumstances".

That does not mean that every time a client hesitates before answering a question I should report him.  But it does mean that I am permitted to infer from his behaviour that he may be hiding something.  Whether I do draw that inference will depend upon all the circumstances and whether I form a suspicion of money laundering will depend on everything I know about the subject and his affairs.

David

cymraeg_draig's picture

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cymraeg_draig | | Permalink

If a witness giving evidence in court said, "I asked him about the money but he was evasive.  He wouldn't meet my eye and tried to change the subject."  Could you object to that as not being "evidence"?  It is the witness's observation of the subject's behaviour.  It undoubtedly is evidence.

 

Posted by davidwinch on Tue, 29/03/2011 - 08:31

 

Actually, yes, I could and indeed would object to that as not constituting evidence.  It is "opinion" not evidence, and as you know only an "expert" witness can give iopinions, and only then on areas of his expertise.

In the above scenario I would certainly cross examine a witness as to his qualification for making assessments of body language.

 

 

davidwinch's picture

Opinion or description

davidwinch | | Permalink

C_D

The one word to which you might object is "evasive".  Is that an opinion or a description?

Of course by the time you objected the words would already have been spoken.  By objecting you would simply reinforce their impact in the minds of the jury - who might be more sympathetic to the witness than to the barrister making the objection!

David

cymraeg_draig's picture

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cymraeg_draig | | Permalink

Of course by the time you objected the words would already have been spoken.  By objecting you would simply reinforce their impact in the minds of the jury - who might be more sympathetic to the witness than to the barrister making the objection!

 

Posted by davidwinch on Tue, 29/03/2011 - 10:26

 

Which is exactly why I dont leap up and yell "objection" - too many people have watched too many TV dramas - but I would make a note, and as I said, address it in cross examination ensuring that a jury had doubts as to the witnesses ability to judge body language.

 

So long as

The Black Knight | | Permalink

I am not required to base my suspicions on body language, or decide whether the explanation I have been given is correct as doing so must be speculation not a suspicion, I hope. Surely if it's plausible then that is enough ?

 

 

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A group for discussing issues relating to suspected money laundering and other crime