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

kpmg
Review of the regime for handling Suspicious Activity Reports
Report of recommendations
KPMG LLP
the precedent for LEAs to focus solely on the money laundering aspects of an individual
case rather than predicate offences if they so wished.
Abacha
3.3.3 A new democratic government in Nigeria was formed in 2000 following the death of
General Sani Abacha. It alleged both that a number of banks in Switzerland and the UK
had established accounts linked to the family and close associates of General Abacha, and
that there had been significant turnover across those accounts. Both the Swiss regulators
and the FSA launched investigations into the due diligence and control procedures in the
banks identified as having opened these accounts. A number of Swiss banks were named
and publicly censured for their account opening failures. The FSA announced that 23
banks in the UK had accounts linked to the family, and that on investigation 15 banks
which it supervised had significant control weaknesses and deficiencies in procedure in
relation to AML.
3.3.4 The risk of public censure and regulatory enforcement because of poor AML controls and
procedures rose significantly following the Abacha case. The FSA’s formal statements
on the case specifically highlighted inadequate senior management oversight of the
account opening process for higher risk customers. They also highlighted the importance
of senior management involvement in and commitment to AML controls.
The aftermath of 11 September 2001
3.3.5 The terrorist attacks on the World Trade Centre and the Pentagon on 11 September 2001
provided further impetus for Governments and LEAs around the world to focus on the
question of terrorist financing. Investigations into the hijackers’ movements and
behaviour prior to the attacks identified both that their activities were financed through
apparently legitimate financial services transactions and that the amounts concerned were
relatively low. The challenges offered to both financial institutions and LEAs in the
identification of terrorist finance, arising as it does from primarily legitimate business and
personal sources of funds, places significant further burdens on all those involved in the
reporting of potential suspicious activity.
The role of the FSA post-N2
3.3.6 The implementation of the Financial Services and Markets Act 2000 (“FSMA”) at N2
(midnight on 30 November 2001) placed a new formal obligation on the FSA in relation
to the regulatory focus on financial crime. Prior to that date, the nine former regulatory
bodies had no explicit statutory requirement to address financial crime issues other than
as they impacted upon their regulatory objectives.
3.3.7 One of the FSA’s four statutory objectives set out in FSMA is the reduction of financial
crime 8 , primarily reducing the extent to which it is possible to use regulated financial
services companies for purposes connected with financial crime. The definition of crime
that has been adopted includes handling the proceeds of crime. FSMA also provides the
FSA with the power both to make and enforce regulatory rules on money laundering and
to prosecute for breaches of the MLRs.
8 Section 6 of FSMA sets out the financial crime objective.
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