FCA Fines Bank for Anti-Money Laundering Failings
On 8 August 2013 the Financial Conduct Authority ("FCA") issued a Final Notice against Guaranty Trust Bank (UK) Limited ("GTBUK"), the fifth in a series of cases arising from the FSA's 2010 thematic review of banks' management of higher money laundering risk situations.
GTBUK was fined £525,000 (after the application of a 30% early settlement discount) in what may be regarded as a classic case of a firm failing to follow and/or document compliance with its own policies and procedures in relation to risk assessment, screening, senior management approval, enhanced due diligence and monitoring of higher risk clients. For more information, please see our fuller briefing here.
The FCA’s financial crime priorities
The Financial Conduct Authority (“FCA”) recently published two documents which provide additional information about its current supervisory and enforcement approach and priorities in relation to financial crime issues. These are the FCA’s Anti-Money Laundering Annual Report 2012/13 (“AML Report”) and the first Financial Crime Newsletter since the transition to the FCA (“Newsletter”). The AML Report is the FCA’s first annual report on financial crime issues, setting out the FCA’s responsibilities, supervisory approach and current and emerging trends. Whilst badged as relating to money laundering, it discusses financial crime risks more broadly.
The Newsletter provides an update on recent publications and enforcement actions, as well as a brief update on activity by the Financial Action Taskforce and the FCA’s role in the ongoing negotiations for the Fourth EU Money Laundering Directive. To read our fuller briefing on the points of interest in these documents, please click here.
FCA mobile banking and payments thematic review
The FCA has published a thematic review into mobile banking and payments – supporting an innovative and secure market. The review highlights the risks associated with this market including the potential for fraud and additional checks and processes that may be needed to to report suspicious transactions and prevent money laundering.
Calculation of "criminal property": Court of Appeal orders confiscation of profit earned by company on corruptly obtained contract
In R v Sale  EWCA Crim 1306 the Court of Appeal considered how the criminal property obtained from a corrupt contract should be quantified when the Court makes a confiscation order. In the circumstances, the Court of Appeal found that a confiscation order should be made in respect of the profit earned by the company on the contract, rather than the total sum paid to the company under the contract. Ordering confiscation of the total turnover of the contract was disproportionate on the facts of the case.
This is a significant issue in many corporate corruption cases where bribes are paid to obtain or extend contracts. The case is also an interesting example of a conviction for the provision of gifts and hospitality to the value of £7,000. To read our fuller briefing on the case, please click here.
High Court finds SFO not barred from giving disclosure of third party documents obtained under compulsory powers
The High Court has held that the Serious Fraud Office (SFO) was not prevented from giving disclosure as a defendant to civil proceedings of documents received from third parties in response to notices issued under section 2 of the Criminal Justice Act 1987 (CJA): Tchenguiz & anor v Rawlinson and Hunter Trustees SA & ors  EWHC 2128 (QB).
The Court found, as a matter of principle, that the CJA does not act as a bar against the SFO giving disclosure of documents obtained under its compulsory powers. The court did not address the question of whether the documents in question might be subject to any other statutory bar to disclosure (for example under the Official Secrets Act) or a claim to privilege.
As a result of this decision, parties who provide documents to the SFO in response to section 2 notices should be aware that such documents may be disclosable by the SFO in the (relatively uncommon) event that the SFO is itself subsequently obliged to give disclosure in subsequent civil proceedings. Please click here for our discussion of the case.
New SFO Joint Head of Bribery and Corruption
Ben Morgan has commenced his new appointment as Joint Head of Bribery and Corruption at the SFO. Ben will be providing strategic direction and operational expertise to a number of complex fraud and corruption cases as well as leading and guiding case managers and their teams. The appointment is a permanent position.
David Green speech to Cambridge Symposium
David Green, Director of the SFO, has delivered a speech to the Cambridge Symposium at Jesus College, Cambridge. The speech covers changes in the institution made in the last 16 months and looks forward to the coming year. Green notes that the SFO has 68 cases on its books at present, including eight Bribery Act "projects". Green also calls for reforms to corporate criminal liability. He suggests changes so that the law in fraud cases is similar to section 7 of the Bribery Act i.e. that there should be a corporate offence of a company failing to prevent crimes of dishonesty or fraud by its servants or agents, subject to a statutory adequate procedures defence.
SFO brings first Bribery Act prosecution
The SFO has charged four individuals under the Bribery Act 2010. These are the first prosecutions the SFO has brought under the Act and include both giving and receiving a financial advantage (section 1 and section 2 of the Act respectively). The specific conduct underlying the bribery-related charges has not yet been disclosed. At least for now, it appears that the investment company with which the individuals were associated (which went into administration in March 2012) will not be prosecuted.
Olympus charged by SFO
The SFO has charged Olympus and its UK subsidiary, Gyrus Group, with making statements to an auditor which were misleading, false or deceptive, contrary to Section 501 of the Companies Act 2006. The alleged offences are said to have taken place between April 2010 and March 2011.
Lloyd's of London invests in City of London Insurance Fraud Enforcement Department
Lloyd's of London has shown commitment to tackling insurance fraud with a £200,000 investment in the City of London Police unit, Insurance Fraud Enforcement Department (IFED). The IFED was created in January 2012 and Lloyd's contribution, together with the Association of British Insurers' financial backing, ensures funding until December 2014 after which support will be reviewed.
Market Abuse update
Last week, the FCA concluded its first successful enforcement action against a high-frequency trader, demonstrating its commitment to tackle market abuse with the same determination as its predecessor. Indeed, in its first business plan, the FCA has promised to continue to treat market abuse as a priority. Firms should be responding to the many developments in the market abuse regime and, where appropriate, making adjustments to policies, procedures, systems and controls. Please click here to read our full briefing.
Updated sanctions notices
HMT has published an updated sanctions notice for certain persons and entities associated with the Al-Qaida network. The notice puts into effect Regulation (EU) No 831/2013 of 29 August 2013 which was published in the European Journal on 31 August 2013. The update amends the list of persons, entities and groups subject to the freezing sanctions contained in the 2002 Regulation. (No 881/2002). HMT has also published a consolidated list of financial sanctions targets in the UK and has a new webpage listing updated counter-financing of terrorism general licences.
Recent Sanctions Developments: EU relaxes certain Syrian sanctions and amends measures relating to North Korea, Iran and Tunisia; US relaxes Myanmar sanctions
The EU has recently published a new Regulation (Regulation 697/2013 of 22 July 2013) which amends Regulation 36/2012, the key piece of legislation setting out the EU’s sanctions against Syria. For our full briefing in which we analyse the new provisions and provide an update on other recent changes to EU and US sanctions please click here.