ICT Views

“Let’s make it a hostile place for criminals”

by: (Course Director (AML)) on

The words of Tracey McDermott, Director of Enforcement and Financial Crime, FCA at the Financial Crime Conference in London on Monday.

A comment from the panel Q & A session too – “We [the regulators and the financial services industry] have the attention of senior politicians.”

But a number of times the speakers also made reference to the fact that that some firms in the UK still have a lot to do to make it a ‘hostile place’ for money launderers and terrorist financiers.

We also heard earlier in the day from Martin Wheatley, CEO of the FCA, on

  • A focus on Individual accountability (attestations) particularly from senior management
  • FCA actions focussing on an individual’s judgement and ethical based decisions
  • Systems and controls are imperative. No excuses, and continual progress expected
  • Cost of implementation is not a matter for debate
  • Whilst most organisations have sound AML and CTF policies and procedures in place we could “all do a bit more”

Most of the speeches and presentations from the conference are available on the FCA website. This blog will give a snapshot of the key highlights I picked out from the day but, to quote from Tracey again, this list is not exhaustive.

Take note particularly of the good and bad practices contained in the FCA’s new Financial Crime Guides for Firms

  • Actions against at least three more major financial institutions will be published shortly
  • Over £300m in penalties last year
    • 67 licences withdrawn (2010 – 2012)
    • 23 insider trading cases prosecuted
    • Habib Bank MLRO fined £17,500

Mikael Down(Deputy Director of Sanctions & Counter Illicit Finance, HMT) spoke on the three T’s:
Tax, Trade and Transparency

  • Corporate transparency – The UK and 5 other countries have already published action plans following the recent G8 meeting. Jersey and Guernsey have also published action plans.
  • This issue will feature in UK’s National Risk Assessment which should be completed prior to the UK’s 4th round FATF Mutual Evaluation in 2016

He also provided an update on sanctions:

  • Busy schedule with updates on North Korea and Syria
  • Other sanctions lifted – e.g. Burma
  • HMT welcome feedback in order to minimise the impact to organisations and particularly for de-listed individuals and entities

Stephanie Jeavons (Deputy Director of the Economic Crime Command (ECC), National Crime Agency)
Provided an informative update on the aims of the NCA as they prepare to go live in October:

  • Pursue criminals and organised crime and responsible for both prosecution and asset recovery
  • Protect the public through education and prevention
  • Prepare for when crime happens – promote the penalties
  • Prevent professional enablers being drawn into criminal activities

Clive Adamson (Director of Supervision, FCA) and
Rob Gruppetta, (Manager of Financial Crime Operations, FCA)
Both spoke about supervision and financial crime

  • We [FCA] consider the reputational impact of getting it [supervision] wrong – we look to engage with industry and get it right!
  • Thematic review on Trade Based Finance published on same day as the conference
  • We will see thematic reviews on Asset Management and then Mobile Financial services scheduled before the end of 2013

Systematic AML Programmes (SAMLP)

  • AML Compliance remains a cause for concern – trade finance report, 2011 FSA report on High ML Risk situations remains pertinent
  • Enhanced Due Diligence – not assessed properly and poor judgements
  • Source of Funds / Wealth – too much weight on relying purely on what the client tells you (particularly PEPs)
  • Processes followed but poor assessment of the information
  • 3 more cases with major financial firms to be made public shortly

FCA Threat Reduction Actions were presented by
Felicity Johnson, (Manager of Intelligence Interface, FCA) and
Oliver Shaw, (Chief Superintendent, City of London Police)

  • What does your firm offer in the fight against financial crime?
  • City of London Police provide the muscle to the FCA
  • Caring for victims – You (FI’s) see money going from an account and need to take action
  • Forget the rule book, how do we protect the consumer?
  • Ethics – salaries and bonuses still are a big motivator – the mind-set needs changing
  • With limited resources there is a need to disrupt the criminals (e.g. use of covert investigation techniques such as police on the trading floors!)
  • The future of policing financial crime urgently needs
    • Leadership from industry and regulators
    • Effecting cultural change
    • Instilling values

And finally we had an update from Europe on the progress of the Fourth EU MLD and Financial Crime from Martin Frohn (Deputy Head of Corporate Governance & Social Responsibility, European Commission)

The aim is to protect but also allow business to function.

The concept is to have evidence based assessment measures at three levels:

  • Member states – Identification, understanding and mitigation of risks
  • Institutions – Identification, understanding and mitigation of risks
  • Risk-based supervision

Q What is his definition of a risk-based approach?
A Common sense!

And on some of the recommendations in the 4MLD

  • An EU register of ownership? Only as good as the input and updating. Not an easy solution and information must be accessible to as many as possible
  • Data protection – Concerns expressed from some Member States on group wide policies. There is a need to strike a balance between Data Protection and AML/CTF of a country and the transparency / fighting financial crime issue – probably the most difficult conversations in the European Parliament will be on this subject

And when will the 4MLD be adopted? – Negotiations between member states aimed at being completed by end 2013 (may be challenging) and adoption then mid 2014

Q What can individuals or firms do in the meantime?
A 1. Prepare
   2. Contribute – still not too late. Consider use of your Euro MP as a communication channel

My Summary

Great conference thanks you FCA and I fully support the key “takeaways” from the conference chairman’s summary:

  1. Accountability and the personal attestation regime is the way to go
  2. “Compliance” Not just because the regulator requires it but because it is the right and ethical thing to do
  3. Use of a common sense approach
  4. Maybe we can all do a bit more

Challenging times for the banks but the bar is also raised in terms of expectations from the regulator on meeting AML and CTF requirements.  However the feeling I got was that the FCA are not there to scare us but to work with the industry to make the environment hostile (for the criminals!).


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