The post Transaction Monitoring and Money Laundering Risks: Metro Bank PLC case study first appeared on Complyport - Your Trusted Partner in Governance, Risk, Compliance & Technology .
]]>Transaction monitoring is crucial for the prevention of financial crime, and the FCA expects firms to implement robust systems and controls to detect suspicious activity in real time, in alignment with their requirements under the Money Laundering Regulations 2017. Whilst the FCA does not mandate a specific type of transaction monitoring technology, firms are expected to apply a risk-based approach to transaction monitoring, combining automated and manual oversight. Automated tools can be employed to detect unusual patterns and flag suspicious activity in real-time, and manual monitoring can be used to ensure that such alerts are properly investigated.
Firms must tailor their monitoring efforts to the risk profile of their customers and transactions, with ongoing monitoring to detect emerging risks. Any suspicious activity must be reported to the National Crime Agency, and firms are required to keep detailed records of their monitoring processes and suspicious activity reports for at least five years. Non-compliance with these expectations can lead to enforcement actions, underscoring the importance of effective transaction monitoring
Metro Bank PLC was found to have failed to take corrective measures after concerns were raised regarding the disorderly functioning of its monitoring system. The FCA highlighted that these shortcomings left the financial system vulnerable to criminal misuse and reiterated the importance of firms implementing and maintaining robust systems and controls to combat financial crime.
Metro Bank PLC has since implemented a comprehensive Financial Crime Improvement Programme to address the issues identified. Key actions include upgrading the bank’s data architecture and controls, reaching a 99.7% reconciliation rate for transaction records processed into the ATMS since July 2019, strengthening oversight of Bad Data, and allocating more resources to monitor and evaluate the ATMS for improved detection of suspicious activity. These efforts are supervised by the Bank’s Executive Data Governance Working Group.
Financial institutions are obligated to maintain adequate risk-based Anti-Money Laundering (“AML”) controls and comply with the appropriate Money Laundering Regulations and subsequent amendments.
Complyport’s expert Financial Crime Team can assist you maintain the integrity of your financial system and prevent illegal activities like money laundering, terrorist financing and proliferation financing by assisting with putting effective AML policies, procedures and controls in place and create a robust financial crime compliance framework.
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The post Transaction Monitoring and Money Laundering Risks: Metro Bank PLC case study first appeared on Complyport - Your Trusted Partner in Governance, Risk, Compliance & Technology .
]]>The post FCA Reviews Challenger Banks’ Financial Crime Controls first appeared on Complyport - Your Trusted Partner in Governance, Risk, Compliance & Technology .
]]>In order to capture potential customer interest, challenger banks promote their quick and efficient onboarding process. The ability to open accounts easily and within minutes might make procedures of the traditional high street bank seem draconian in comparison. However, is it equally draconian to consider that with increased speed comes increased scope for error? Changing and updating processes in the name of progress is a valid and noble idea, but not when that change leads to wider scope for abuse by the criminal fraternity and increased and unnecessary exposure to risk for the consumer in general—particularly those that are more vulnerable than others.
This raises the question of whether the information that challenger banks gather through this newer, faster process is sufficient, robust, and of the same quality as that obtained via more conventional means by traditional banks; the fable of the Hare and the Tortoise springs to mind. (Having said that, it is not as if the more traditional model has never been found wanting, or that those banks using the traditional model have never found themselves on the wrong side of the regulator.)
In light of the above concerns, the FCA recently reviewed a sample of challenger banks to obtain a clearer picture of how these institutions are exposed to financial crime risk—especially money laundering. Their analysis was focused on (but not limited to) the following financial crime procedures within the firms reviewed:
Through this review, the regulator concluded that, although challenger banks rely on fast customer growth in order to expand, this does not mean that they must sacrifice their compliance with Customer Due Diligence (CDD) obligations as set out within the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 (MLRs) (as amended).
The FCA was clear on the increased scrutiny that they will be placing upon challenger banks, and suggested the following good practices for firms to consider:
Additional good practices documented in the FCA’s review include innovation and monitoring customer accounts. However, the regulator highlighted the importance for all firms to be on the same page when it comes to identifying and mitigating financial crime and money laundering within the financial services sector. It seems that significant improvements need to be made by challenger banks in the foreseeable future as the FCA watches on intently—especially with the noticeable expansion of digital banking and payment systems and solutions.
In the race for efficacy, it would appear that the jury is still out as to who will win—the Hare or the Tortoise. On the one hand, the regulator seems to be acknowledging the success and advantages that the challenger banks provide, whilst on the other hand requiring their financial crime frameworks to mirror the more traditional model. The ideal challenger bank appears to be one that can offer a hybrid model of speed, agility, and tradition.
Our experienced Financial Crime and Forensics team led by Martin Schofield—one of the world’s leading specialists in the field—brings a wealth of experience to every project we are engaged in. Our highly experienced financial crime professionals and forensic experts, in subjects such as anti-money laundering, counter terrorist financing, anti-bribery and corruption and fraud and regularly help our clients navigate the complexities of the financial crime and money laundering environment.
Services offered by Complyport include:
If this article has raised any questions, or you think your firm may require assistance, please contact either Martin Schofield via martin.schofield@complyport.co.uk or Jan Hagen via jan.hagen@complyport.co.uk to book in a free consultation.
Complyport is the City’s market leading consulting firm supporting the UK financial services industry for over 20 years. We specialise in providing Governance, Risk and Compliance services to support the regulated financial services industry to raise standards and thrive.
Complyport advises and assists firms to become authorised and to comply with the rules and requirements of regulators on an ongoing basis. Our vision is to be there for our clients every step of the way, helping them change, grow, and excel through expertise, insight, and innovation, and in so doing to become our clients’ most valued supplier and trusted advisor.
We have successfully assisted over 1000 firms to become authorised with the FCA and EU and are providing regulatory support to over 600 regulated firms on an ongoing basis globally. With presence in the UK and EU, as well as via our Associates Network, Complyport can assist firms across multiple jurisdictions.
Complyport’s multidisciplinary consultants possess deep expertise in their field, having acted in FCA skilled person reviews, as expert witnesses in legal cases and as expert investigators for firms or their legal advisers.
Day to day, we conduct audits and reviews of a firm’s products, processes, policies, and procedures to identify scope for business, to determine the impact of regulatory developments and to verify compliance with local regulations. Our clients tell us we live our values; we are driven, agile and collaborative.
The post FCA Reviews Challenger Banks’ Financial Crime Controls first appeared on Complyport - Your Trusted Partner in Governance, Risk, Compliance & Technology .
]]>The post FATF Plenary Meeting Summary first appeared on Complyport - Your Trusted Partner in Governance, Risk, Compliance & Technology .
]]>Although France has an advanced and robust Anti-Money Laundering (AML) and Counter Terrorist Financing (CTF) framework, the FATF have identified further work required in certain areas particularly with respect to legal persons and the real estate sector. A report on these findings will be published in May 2022.
Following improvements and progress in their previously identified AML/CFT deficiencies, Zimbabwe are no longer under increased monitoring by the FATF. However, it will still continue to work with FATF’s regional partner, the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) to continue strengthening its AML/CTF programme.
The United Arab Emirates is the latest jurisdiction to be added to the list of countries under increased monitoring and review.
Countries should use this reshuffle as a reminder to continue to review and, where necessary, strengthen their AML and CTF regimes to swiftly resolve any identified deficiencies in their frameworks.
The Strategic Review, a work in progress since 2019, has now officially been completed. The aim of the review is to improve the efficiency of the FATF’s framework to make the next cycle of mutual evaluations more suitable, effective, and structured. There will be a few changes to the FATF’s processes, including a greater focus on risk in the fifth round of mutual evaluations. Member countries are therefore encouraged to prepare and prioritise their efforts in areas where risks are highest in their respective countries as they will be under close scrutiny.
The FATF have agreed on a new set of tougher beneficial ownership rules in a bid to tackle money laundering. Countries are now required to ensure firms’ beneficial ownership data is held by a competent authority which can be easily accessed by them. The full Public Statement can be accessed here.
Furthermore, the FATF has also agreed to revise Recommendation 24 and its Interpretative Note so that competent authorities in all countries have adequate and current data on the natural owners of companies. There will be a course of public consultations to follow.
The FATF concluded research on the money laundering and terrorist financing risks associated with migrant smuggling. The report highlights that multiple countries do not consider this a high-risk crime for money laundering despite the recent expansion of the criminal business. The FATF aims to publish the report on the findings on the 22nd of March 2022. This will further spotlight the need for countries to recognise the associated money laundering and terrorist financing risks they become exposed to from migrant smuggling and the need to monitor the money linked to this criminal activity.
The FATF have identified the real estate sector as a popular investment choice for criminals. This is due to the ease of exploitation stemming from a general poor understanding of risks pertaining to the sector. As such, the FATF has developed risk-based implementation draft guidance on AML and CTF measures targeted towards the real estate sector. The FATF have published a report which can be accessed here and are welcoming further comments and input from fellow real estate industry participants.
The full list of outcomes from the 2022 Plenary Meeting is accessible here.
Our experienced Financial Crime and Forensics team led by Martin Schofield—one of the world’s leading specialists in the field—brings a wealth of experience to every project we are engaged in. Our highly experienced financial crime professionals and forensic experts, in subjects such as anti-money laundering, counter terrorist financing, anti-bribery and corruption and fraud and regularly help our clients navigate the complexities of the financial crime and money laundering environment. Services offered by Complyport include:
If this article has raised any questions, or you think your firm may require assistance, please contact either Martin Schofield via martin.schofield@complyport.co.uk or Jan Hagen via jan.hagen@complyport.co.uk to book in a free consultation.
Complyport is the City’s market leading consulting firm supporting the UK financial services industry for over 20 years. We specialise in providing Governance, Risk and Compliance services to support the regulated financial services industry to raise standards and thrive.
Complyport advises and assists firms to become authorised and to comply with the rules and requirements of regulators on an ongoing basis. Our vision is to be there for our clients every step of the way, helping them change, grow, and excel through expertise, insight, and innovation, and in so doing to become our clients’ most valued supplier and trusted advisor.
We have successfully assisted over 1000 firms to become authorised with the FCA and EU and are providing regulatory support to over 600 regulated firms on an ongoing basis globally. With presence in the UK and EU, as well as via our Associates Network, Complyport can assist firms across multiple jurisdictions.
Complyport’s multidisciplinary consultants possess deep expertise in their field, having acted in FCA skilled person reviews, as expert witnesses in legal cases and as expert investigators for firms or their legal advisers.
Day to day, we conduct audits and reviews of a firm’s products, processes, policies, and procedures to identify scope for business, to determine the impact of regulatory developments and to verify compliance with local regulations. Our clients tell us we live our values; we are driven, agile and collaborative.
The post FATF Plenary Meeting Summary first appeared on Complyport - Your Trusted Partner in Governance, Risk, Compliance & Technology .
]]>The post Complyport’s Response to NatWest Money Laundering Fine first appeared on Complyport - Your Trusted Partner in Governance, Risk, Compliance & Technology .
]]>On Monday 13 December, NatWest plead guilty to three offences of failing to comply with Money Laundering Regulations (2007) and was fined 264.8 million pounds. The compliance failures surround the monitoring and handling of jewellery business Fowler Oldfield, which deposited approximately 365 million pounds with the bank over four years (of which roughly 264 million was in cash). Bank staff were found not to have taken appropriate action over ‘red flags’ including suspicious behaviour when depositing money in-branch and high numbers of Scottish bank notes being deposited in branches throughout England, and there were also failures in internal monitoring processes.
Mark Steward, Executive Director of Enforcement and Market Oversight at the Financial Conduct Authority (FCA), explained why this was the first case of the FCA seeking criminal charges for money laundering offences:
“NatWest is responsible for a catalogue of failures in the way it monitored and scrutinised transactions that were self-evidently suspicious. Combined with serious systems failures, like the treatment of cash deposits as cheques, these failures created an open door for money laundering. Anti-money laundering controls are a vital part of the fight against serious crime, like drug trafficking, and such failures are intolerable ones that let down the whole community”.
You can find the full sentencing remarks here.
Martin Schofield, Director of the Financial Crime & Forensics Unit at Complyport, said:
“Whilst cash remains legal tender, every regulated firm is required to identify knowledge, suspicion, or reasonable grounds to suspect money laundering. For banks, the responsibility lies both with frontline staff at branch-level and with senior managers who in this case were supposed to be overseeing all 50 branches caught up in these wrongdoings. Given the large number of staff involved, it is hard to imagine how, if required to do so, they could all demonstrate that they have satisfactorily met this threshold.
“We cannot predict when and how criminals will take advantage of our systems, but regulated firms have plenty of tools at their disposal to help identify financial crime before it reaches such extreme levels. The systemic failures that must have occurred in this case should be a warning to firms to review and, if necessary, tighten up their procedures; invest in proper training and support for compliance staff; and embed a culture of compliance from the top down so that such widespread failures are not repeated.”
Our experienced Financial Crime and Forensics team led by Martin Schofield—one of the world’s leading specialists in the field—brings a wealth of experience to every project we are engaged in. Our highly experienced financial crime professionals and forensic experts, in subjects such as anti-money laundering, counter terrorist financing, anti-bribery and corruption and fraud and regularly help our clients navigate the complexities of the financial crime and money laundering environment. Services offered by Complyport include:
If this article has raised any questions, or you think your firm may require assistance, please contact either Martin Schofield via martin.schofield@complyport.co.uk or Jan Hagen via jan.hagen@complyport.co.uk to book in a free consultation.
Complyport is the City’s market leading consulting firm supporting the UK financial services industry for over 20 years. We specialise in providing Governance, Risk and Compliance services to support the regulated financial services industry to raise standards and thrive.
Complyport advises and assists firms to become authorised and to comply with the rules and requirements of regulators on an ongoing basis. Our vision is to be there for our clients every step of the way, helping them change, grow, and excel through expertise, insight, and innovation, and in so doing to become our clients’ most valued supplier and trusted advisor.
We have successfully assisted over 1000 firms to become authorised with the FCA and EU and are providing regulatory support to over 600 regulated firms on an ongoing basis globally. With presence in the UK and EU, as well as via our Associates Network, Complyport can assist firms across multiple jurisdictions.
Complyport’s multidisciplinary consultants possess deep expertise in their field, having acted in FCA skilled person reviews, as expert witnesses in legal cases and as expert investigators for firms or their legal advisers.
Day to day, we conduct audits and reviews of a firm’s products, processes, policies, and procedures to identify scope for business, to determine the impact of regulatory developments and to verify compliance with local regulations. Our clients tell us we live our values; we are driven, agile and collaborative.
The post Complyport’s Response to NatWest Money Laundering Fine first appeared on Complyport - Your Trusted Partner in Governance, Risk, Compliance & Technology .
]]>The post Money Laundering: Further Updates to Guidance first appeared on Complyport - Your Trusted Partner in Governance, Risk, Compliance & Technology .
]]>In addition to proposed changes (see Regulatory Roundup 86) to Part I of the Guidance issued by the Joint Money Laundering Steering Group (“JMLSG”) there are now changes to Part II (Sectoral Guidance) and Part III (Specialist Guidance) up for consultation.
As might be surmised, the changes are brought about by the publication by HM Treasury of the proposed new “Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations” (see Regulatory Roundup 86) which in turn implement the relevant Fourth Money Laundering Directive and accompanying Fund Transfer Regulations (“FTR”) (although the latter is a Regulation, and hence binding upon all Member States, Article 17 of the FTR requires Member States to set out rules on administrative sanctions and measures for breaches).
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]]>The post Money Laundering: Changes to Guidance first appeared on Complyport - Your Trusted Partner in Governance, Risk, Compliance & Technology .
]]>The Joint Money Laundering Steering Group (“JMLSG”) is consulting on changes to Part I of the Guidance – the current version was last amended in November 2014. The proposed revisions reflect the draft Money Laundering and Transfer of Funds (Information on the Payer) Regulations 2017 published on 15 March 2017 (see the “Money Laundering: Politically Exposed Persons” article in this Regulatory Roundup).
Although there are changes throughout the Guidance, the JMLSG advises that there are ‘relatively extensive changes’ to Chapter 5 (‘Customer Due Diligence’).
The JMLSG invites comments on the proposed changes by 28 April 2017.
Access to both the consultative version and to a marked up copy (split into four segments) can be accessed via the link provided.
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]]>The post Money Laundering – Politically Exposed Persons first appeared on Complyport - Your Trusted Partner in Governance, Risk, Compliance & Technology .
]]>Draft UK Regulations transposing 4MLD into national law were published on 15 March 2017.
The concept of Politically Exposed Persons (“PEPs”) and the need to apply Enhanced Due Diligence continues under the Fourth Money Laundering Directive (“4MLD”), although the distinction between a domestic PEP and a foreign PEP will be removed – see Regulatory Roundup 80.
The FCA has published consultative Guidance GC17/02 on the treatment of Politically Exposed Persons under 4MLD.
GC17/02 reminds us that Money Laundering and Transfer of Funds (Information on the Payer) Regulations 2017 (“UK Regulations”) Regulation 35 requires ‘relevant persons’ (a term which will capture firms authorised under FSMA) to have in place appropriate risk-management systems and procedures to determine whether a customer (or the beneficial owner of a customer) is a PEP or a ‘family member’ or a ‘known close associate’ of a PEP (please see Regulation 35(12) for definitions). This is in addition to the obligation under UK Regulation 18 for firms to identify and assess the risks of money laundering and terrorist financing to which it may be subject (and which must be made available to its supervisory authorities on request).
Paragraph 2.17 of the consultative Guidance provides the FCA’s view on indicators that a PEP poses a lower risk e.g. a PEP operating in the UK (higher risk indicators are addressed in paragraph 2.18). It ends with suggested measures that firms may take in lower-risk and higher-risk situations.
The consultation ends 18 April 2017.
As a reminder 4MLD must be applied in Member States by 26 June 2017.
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]]>The post Fourth Money Laundering Directive: Proposed Amendments first appeared on Complyport - Your Trusted Partner in Governance, Risk, Compliance & Technology .
]]>A press release advises that the European Commission is:
This rethink arises from an ‘Action Plan’ (the – separate – Annex of which summarises the proposals in tabular form) to strengthen the fight against terrorist financing which, at least in part, has been fuelled by recent terrorist attacks in the EU and beyond.
Proposed amendments to 4MLD include (but are not limited to):
The Commission will present a legislative proposal in respect of all of the amendments at the latest by Q2 2016.
Elsewhere the Commission will:
The post Fourth Money Laundering Directive: Proposed Amendments first appeared on Complyport - Your Trusted Partner in Governance, Risk, Compliance & Technology .
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