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Don’t Look, Don’t Find: Corrupt Money in the UK

Written by Rachel Davies on Monday, 23 November 2015

According to the National Crime Agency, billions of pounds of corrupt funds flow through the UK every year.  A strong anti-money laundering system (AML) should be in place to counter that.

But here lies the problem. The system in place to detect and prevent that flow isn’t working.

According to the Government’s own risk assessment, only a small proportion of the corrupt money entering the UK is being detected and investigated by the authorities.

TI research, launched today, indicated that the current mish-mash approach to supervision of AML rules is at the heart of the problem. The UK has no less than 27 supervisory bodies (more than any other country, 26 more than Spain, which has been internationally praised for it’s robust supervision system) that oversee high-risk sectors such as property, luxury goods and banking.

This has led to the following problems:

Failure to identify where the risks are: Over half of all supervisory bodies told the Government that there was no variation in risk of money laundering for the firms they oversaw, regardless of size, location, commercial interests or level of historic money laundering abuses. That doesn’t add up.

Enforcement of AML failures that is ineffective. The total sum of AML fines handed out last year by the body that supervises the property sector is less than the average price of a house in central London. We need a level of enforcement that is credible and proportionate to the scale of the problem.

Serious conflicts of interest: The Government has identified that the majority of private sector supervisors actually lobby on behalf of the sectors they’re supposed to regulate, and accept funds from firms they are obliged to investigate. Our research shows that 15 out of the 22 bodies we analysed do not meet the recommended standard on avoiding conflicts of interest.

So what should be done?

The good news is that the Government has admitted that the UK’s AML system is flawed. That’s an important first step. The Government’s recent report on money laundering risk backed up the Prime Minister’s words in July that the UK should not be a safe haven for dirty money. Now we need to see the action that follows the words.

The UK is due to launch an Anti-Money Laundering Plan in the next few months, to outline how the Government will tackle the problem. Here’s what we recommend:

  • Consolidate AML supervision in the UK. 27 bodies is too many. We need a more coordinated approach.
  • Ensure that enforcement of AML failures is consistent and an adequate deterrent to those who are complicit in the laundering corrupt money through the UK
  • Increase transparency over who owns companies so that the private sector can conduct adequate checks on their customers. This rule will apply to UK companies in 2016, but companies in the British Overseas Territories and Crown Dependencies have very little – if any – transparency over who owns them. The UK should ensure this loophole is closed soon.

Radical overhaul of the UK’s AML system is needed if the UK is to close the door to the billions of pounds of corrupt money that flows into the country every year. The time to this is now.

Download TI’s new report, Don’t Look, Won’t Find: Weaknesses in the supervision in the UK’s anti-money laundering rules here

Click here to read our press release.


Read 1789 times Last modified on Tuesday, 24 November 2015 15:39

Rachel Davies

Rachel Davies Teka is Head of Advocacy at TI-UK, and co-chair of the Bond Anti-Corruption Group. You can tweet her @rachelcerysd.

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