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National Risk Assessment: Commendable, yet Issues Remain

Written by Kevin Bridgewater on Friday, 16 October 2015

The Home Office and the Treasury have published the long awaited UK national risk assessment of money laundering and terrorist financing. This is the first time such an assessment has been produced in the UK and the Government should be commended for clearly recognising the risks posed by money laundering and the weaknesses in the UK’s system for detecting illicit and corrupt money. The Government has also recognised that the laundering of proceeds of overseas corruption into or through the UK fuels political instability in key partner countries.

Anti-money laundering (AML) supervisory weaknesses

The report puts beyond any doubt that funds linked to cases of international corruption flow through UK major professional sectors, in very large sums, and that the UK’s supervisory regime intended to detect and prevent corrupt and illicit funds simply is not good enough.

An effective AML regime for corrupt capital should prevent the proceeds of corruption from entering the UK and, if and when they do, it should lead to assets acquired via corruption being identified, recovered and returned. We now know that this is not happening effectively. The report identifies the UK’s current system of AML supervision is not fit for purpose for tackling the proceeds of corruption.

In particular we agree with the Government that there are big problems with consistency, reporting and enforcement standards of the current AML supervisors. Reporting of money laundering suspicions and awareness of reporting responsibilities is inadequate in almost all sectors. The current system of having 27 overlapping AML supervisors, far more than any country in the world, is a mess and is at the root of the problem.

Many of the private sector supervisors responsible for AML are not transparent about their activity and, from what we do know, the enforcement record is generally weak. In a clear conflict of interest, almost all of the private sector supervisors are, in reality, lobby groups for the sectors that they are meant to supervise and they are funded by the firms that they are meant to investigate. This needs to stop.

Law enforcement response

The report also confirms ‘millions’ of pounds of corrupt money are currently being investigated by law enforcement in the UK, although this is pales in comparison to the ‘billions’ of corrupt money the National Crime Agency assesses as being laundered through the UK each year. The lack of investigations and enforcement may be due to the scale of the ‘intelligence gaps’ identified in the report, particularly in relation to high-end money laundering.

Mixed messages from Government

It is particularly concerning to understand that HM Treasury will be removing the Financial Conduct Authority’s proposals for greater personal responsibility for money laundering failings from the Government’s legislative proposals. Personal responsibility for failings is key to good compliance. The Government needs to bring consistency to its messaging, as it is currently saying that the risk is high, but at the same time, watering down proposals to tackle the risk.

TI-UK will be will publishing a range of studies during the autumn on this subject, covering the following sectors:

  • Financial services
  • Legal services
  • Accountancy
  • Property
  • Luxury Goods
  • Art and auction houses
  • Trust and company service providers


Read 873 times Last modified on Tuesday, 24 November 2015 15:43

Kevin Bridgewater

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