Money Laundering: Review of the Reporting ... - Dematerialised ID

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kpmg Review of the regime for handling Suspicious Activity Reports Report of recommendations KPMG LLP suspect that funds stem from a criminal activity, they should be required to report promptly their suspicions to the competent authorities”. 3.2.4 The Forty Recommendations were updated in 1996 to reflect changes in money laundering techniques and methodologies and are currently the subject of a further comprehensive review to ensure that they mirror the increasing use by professional money launderers of non-financial businesses and professions. FATF’s role was expanded in October 2001 to include terrorist financing, and it has provided guidance and special recommendations in relation to this subject. Further UK legislation relating to money laundering and confiscation 3.2.5 The provisions of the DTOA in relation to both the offence of money laundering and the requirement to report suspicions were developed by subsequent legislation: Figure 3.1: Money laundering and confiscation legislation prior to 2002 Year Statute Provisions 1986 1987 Drug Trafficking Offences Act (DTOA) Criminal Justice (Scotland) Act Confiscation provisions for drug trafficking offences, first drug money laundering offence and first offence for not reporting suspicions. 1988 Criminal Justice Act (CJA 1988) Confiscation provisions for all non-drug indictable offences and specified summary offences. 1989 Prevention of Terrorism (Temporary Provisions) Act (PTA) 1990 Criminal Justice (International Co-operation) Act New offences for financial assistance for terrorism. Mutual legal assistance, further drug money laundering offences and drug cash seizure on import or export. 1993 Criminal Justice Act (CJA 1993) Other forms of money laundering offences (including terrorism related) and enhancements to all crime confiscation provisions. 1994 Drug Trafficking Act (DTA) Consolidating the drug provisions and removing mandatory confiscation. 1994 Criminal Justice and Public Order Act Bringing forward the date from which CJA 1993 confiscation provisions apply. 1995 1995 1995 Proceeds of Crime Act (PCA) Proceeds of Crime (Scotland) Act Proceeds of Crime (NI) Order Further alignment of all crime confiscation provisions with DTA 1994; notably use of assumptions in criminal lifestyle cases. 1998 Crime and Disorder Act Amendment to CJA 1993 for confiscation orders on committal for sentence. 3.2.6 The scope of potential money laundering offences was therefore widened over the period since 1986 beyond drug trafficking to include all other criminal activity. The scope for jo/fh/519 24
kpmg Review of the regime for handling Suspicious Activity Reports Report of recommendations KPMG LLP confiscation upon criminal conviction was also increased for both drug related and other criminal activity. The Money Laundering Regulations 1993 3.2.7 The Money Laundering Regulations 1993 (“MLRs”) came into force in 1994 and (as updated) are the primary detailed statement regarding the AML requirements on financial sector businesses. They are designed to facilitate the identification and reporting of suspicious transactions by financial sector entities, and to allow an appropriate audit trail for monitoring the progress of suspicious individual transactions or groups of transactions in the event of a formal investigation. The MLRs cover a range of areas but specifically include requirements for the identification and recognition of suspicious transactions (rather than the threshold approach adopted in other countries) and the procedures for reporting these suspicions to the authorities. There are no de minimis thresholds for reporting. 3.2.8 The revisions to the MLRs in 2001 brought bureaux de change within the scope of the Regulations and introduced them into the regulated sector under the responsibility of Her Majesty’s Customs & Excise (“HMC&E”). 3.2.9 The Joint Money Laundering Steering Group (“JMLSG”) was established by a number of trade associations in 1990 to prepare Money Laundering Guidance Notes for the financial sector on the requirements of the legislation. These have been updated on a regular basis to reflect changes to the MLRs and subsequent changing good practice and market circumstances. Compliance with the Guidance Notes is not mandatory but is intended to allow a firm to demonstrate that it meets good industry practice in the interpretation of the MLRs, and would therefore be taken into account in the event of potential prosecution for not reporting suspicions. 3.3 Recent developments El Kurd 3.3.1 A significant success and breakthrough in the legal investigation and prosecution of money laundering offences arose in the El Kurd case, which was brought by HMC&E in 1999. This prosecution of the manager of a London bureau de change depended on the development of an overall picture of money laundering activity through evidence of: • The value and number of transactions passing through the bureau. • Comparison of this with legitimate transactions and behaviour in other bureaux de change. • The criminal background of close known associates of the defendant. • A lack of SAR disclosures by the defendant. 3.3.2 The case relied on proving the money laundering offences on their own; the underlying criminal offences were neither identified nor proven. The convictions, subsequent sentence of the maximum 14 years allowed in the legislation, and a £1m fine all provided jo/fh/519 25
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