Approval of UK’s fifth DPA concludes SFO investigation into Serco companies
On 4 July 2019, Mr Justice William Davis approved a Deferred Prosecution Agreement (DPA) agreed between the Serious Fraud Office (SFO) and Serco Geografix Ltd (SGL), a wholly-owned subsidiary of outsourcing company Serco Group plc (Serco Group). SGL has agreed to pay £22.9 million, comprising a financial penalty of £19.2m and the full amount of the SFO’s investigative costs of £3.7m. This is in addition to the £12.8m in compensation Serco paid to the Ministry of Justice as part of a £70m civil settlement in 2013. Following the introduction of DPAs in the UK in 2014 and the conclusion of the first DPA with the SFO in November 2015, the Serco DPA is the fifth and latest in a growing body of DPA case-law and confirms the importance placed by the SFO on the use of DPAs in tackling financial crime. Please click here to read our full briefing which provides some background on DPAs generally, an overview of the Serco DPA and discusses some of the emerging themes relating to DPAs and the SFO’s approach to enforcement. You can also access our podcast episode on the Serco DPA here.
Three individuals acquitted following SFO DPA with Sarclad
The SFO has announced that three individuals have been acquitted of conspiracy to corrupt and conspiracy to bribe. The jury found the three men not guilty of conspiring with various agents to agree bribes in relation to 27 separate overseas contracts for their company, Sarclad Ltd. These acquittals follow the DPA reached between the SFO and Sarclad Ltd in July 2016. Sarclad accepted the charges of corruption and failure to prevent bribery in relation to the systematic use of bribes to secure contracts for the company between June 2004 and June 2012. The contracts that were the subject of the DPA had a total value of over £17m. Reflecting the different tests and procedural considations in a DPA and a prosecution, interestingly there are now two cases where companies have entered DPAs but individuals have been acquitted (Sarclad and Tesco), and two where individuals have not been charged in the UK (Rolls Royce and ICBC Standard Bank).
SFO Corporate Co-operation Guidance
On 6 August 2019 the SFO published its Corporate Co-operation Guidance which forms part of the SFO’s internal Operational Handbook. The Guidance is designed to assist SFO staff with assessing the co-operation of organisations when considering charging decisions and the possibility of DPAs. Please click here to read our full briefing.
Permission to appeal granted in case on the extraterritorial reach of the SFO
The Supreme Court has granted permission to appeal in R (on the application of KBR, Inc) (Appellant) v Director of the Serious Fraud Office (Respondent) UKSC 2018/0215 a case where the Court had been asked to determine the extraterritorial extent of powers granted to the SFO by s.2(3) of the Criminal Justice Act 1987. The High Court had found in favour of the SFO, holding that s.2(3) must have an element of extraterritorial application otherwise UK companies could resist an otherwise lawful notice on the ground that the documents sought were held on a server out of the jurisdiction. This is an important decision and the appeal is keenly awaited.
Former company director prosecuted for failure to produce documents
The SFO has announced that the former director of ALM Services UK Ltd has been charged for failure to comply with a s.2 notice, in the context of an ongoing corruption investigation into Eurasian Natural Resources Corporation (ENRC) and related companies. The SFO alleges that in January 2019 the former director failed to supply documents required by the SFO, contrary to s.2 of the Criminal Justice Act 1987. The former director has reportedly entered a not guilty plea. The SFO’s investigation into ENRC is ongoing, as are civil proceedings brought by ENRC against the SFO.
Bank trader acquitted in EURIBOR trial
The SFO has announced that a bank trader has been acquitted of conspiracy to defraud over the rigging of the Euro Interbank Offered Rate (EURIBOR). The former trader was found not guilty of manipulating EURIBOR at the height of the financial crisis.
FH Bertling sentenced for $20m Angolan bribery scheme
FH Bertling Ltd has been fined £850,000 for a bribery scheme created to secure $20m worth of shipping contracts in Angola, paying bribes to a local state oil company amounting to $350,000. The 4 year investigation and prosecution by the SFO resulted in 7 convictions against the company and its employees.
SFO charges former director of Global Forestry Investments
The SFO has charged an individual in relation to the Global Forestry Investments investigation with conspiracy to defraud, forgery, and misconduct in the course of winding up. The charges relate to alleged frauds between August 2010 and December 2015. The investigation is ongoing.
SFO appoints new Non-Executive Directors
The SFO has appointed Emir Feisal and Martin Spencer to join its Board as Non-Executive Directors. Both were appointed following an open competition and join existing Non-Executive Directors Ruth Evans and Tony Osbaldiston.
Commercial Court considers contractual discretion of bank to close customer account without notice where there is suspicion of money laundering
In a recent decision, the Commercial Court has upheld a financial institution’s decision to exercise its contractual right to close a customer’s accounts and terminate its relationship without notice, where the financial institution had a suspicion that its customer’s accounts were being used for money laundering purposes: N v The Royal Bank of Scotland plc  EWHC 1770. The decision will be welcomed by financial institutions seeking to take action to prevent financial crime occurring through use of accounts provided to customers, under tight time pressure and notwithstanding that the consequences of the bank’s action for the business in question could be severe. Please click here to read our full briefing.
Accounts worth £100m frozen by NCA
The National Crime Agency (NCA) has announced that it has been granted its largest ever account freezing orders (AFOs) on eight bank accounts that contain over £100m suspected to have been obtained from bribery and corruption in an overseas nation. The AFOs will allow the NCA to investigate the funds in more depth, as well as recover the money if it is found to be derived from, or intended for, unlawful conduct. This will be the largest amount of money frozen from the use of AFOs since they were introduced under the Criminal Finances Act 2017.
NCA announces UWO issued against businessman linked to serious organised crime
The NCA has announced that the High Court has issued a businessman with suspected links to serious organised criminals with an unexplained wealth order (UWO) instructing him to reveal the source of funds used to start his £10m property empire. The order was issued as part of the NCA investigation into eight properties bought by the businessman across the UK on suspicion that the property purchases had been funded by drug trafficking, armed robberies and supplying firearms. Interim freezing orders were also obtained to bar the selling, transferring or dissipating of the properties pending the investigation.
Operation Tabernula: FCA announces sentencing of Richard Baldwin
The Financial Conduct Authority (FCA) has announced that, following its joint investigation with the NCA, Richard Baldwin has been sentenced to a total of 5 years and 8 months' imprisonment after he absconded from justice during his trial for money laundering in July 2017. The criminal property was laundered between October 2007 and November 2008 and represented the proceeds of a conspiracy to insider deal. The sentence also includes punishment for separate contempts of court that he admitted in November 2015 and breach of a restraint order made in June 2011. Confiscation proceedings will be pursued. Mr Baldwin remains at large.
FCA AML annual report 2018/19
The FCA has published its annual anti-money laundering (AML) report for 2018/2019, in which it sets out how it has attempted to make the UK financial sector ‘a difficult target for criminals’. The report highlights the FCA's contributions to developing and promoting domestic and international standards on AML including through its role as a founding partner of the National Economic Crime Centre (NECC); its role in the Joint Money Laundering Intelligence Taskforce (JMLIT); and input into developing the Economic Crime Strategic Board (ECSB)’s joint public and private sector threat update and economic crime plan, including the proposed reform of the UK’s suspicious activity reporting regime, led by the Home Office. The report also highlights the FCA's:
- thematic review to further understand the emerging risks cited in the UK’s latest National Risk Assessment of Money Laundering and Terrorism Financing (NRA);
- thematic review of risks in the e-money sector;
- first year results of its annual financial crime data return; and
- international anti-money laundering and financial crime TechSprint held in July 2019.
FCA reviews ML risks in the capital markets
- the ML risks identified are mitigated to an extent by the nature of the firms in the market, however there remain some risks particular to the capital markets;
- some firms the FCA visited needed to be more aware of the ML risks in the capital markets and many needed to do more to fully understand their exposure;
- effective customer risk assessment and customer due diligence are key to reducing opportunities for ML, particularly in the capital markets due to the nature of the transactions;
- there were a wide range of approaches to anti-ML transaction monitoring and TR19/4 highlights some specific challenges and risks relating to this;
- some participants were not clear on their obligations to make Suspicious Activity Reports (SARs);
- accountability and ownership of ML risk in the first line of defence needs to increase, rather than being viewed as a compliance or back-office responsibility.
The Annex to TR19/4 contains a non-exhaustive set of typologies which the FCA suggest may help inform risk assessments, transaction monitoring and training.
FCA and Practitioner Panel survey report: FCA’s targeting of financial crime and market abuse is important to firms
The FCA has published the findings of its 2019 joint survey of FCA-regulated firms. In the survey, firms were asked to provide feedback on how well the FCA is achieving its operational objectives. The findings suggest that the FCA's work on effectively targeting financial crime and market abuse is increasingly important to firms. This is currently an area where firms score the FCA fairly highly.
FCA holds 2019 AML TechSprint
The FCA has announced the participating firms, data providers and user cases for the 2019 global AML and financial crime TechSprint, which ran from 29 July to 2 August 2019. The FCA worked with international colleagues from the US, Europe, Africa, Asia and the Pacific, at the FCA offices in London, with a satellite office in Washington. The aim was to develop solutions at the TechSprint that will go on to be tested in the real world through the Sandbox and GFIN network.
FCA speech on the challenges of regulating financial innovation
The FCA has published a speech delivered by Christopher Woolard, FCA Executive Director of Strategy and Competition, on regulating financial innovation. In his speech, Mr Woolard discussed regulatory issues such as protecting against money laundering, posed by financial innovation (particularly cryptoassets).
Treasury Committee calls for FCA and NCA to investigate allegations of banks forging signatures
The former chair of the Treasury Committee, Nicky Morgan MP, wrote to the FCA and the NCA regarding allegations of potential criminal activity occurring at banks, whereby home repossessions and other similar documents are not being signed by the authorised signatory. In her letters to FCA chief executive Andrew Bailey and the NCA’s director general Lynne Owens, Ms Morgan requested that they engage with the Bank Signature Forgery Campaign to review their evidence and investigate as appropriate.
UK Government publishes economic crime plan 2019 to 2022
The Home Office and HM Treasury (HMT) have published the joint Economic Crime Plan 2019 to 2022 and Asset Recovery Action Plan. The Economic Crime Plan has been prepared in conjunction with the private sector, including major financial institutions, and sets out a number of actions to overhaul the approach to tackling economic crime, including reforming the SARs, increasing funding for the NCA and establishing a new cryptoassets regime with the FCA. The plan sets out seven priority areas that were agreed in January 2019 by the Economic Crime Strategic Board (ECSB):
- develop a better understanding of the threat posed by economic crime and their performance in combatting economic crime;
- pursue better sharing and usage of information to combat economic crime within and between the public and private sectors across all participants;
- ensure the powers, procedures and tools of law enforcement, the justice system and the private sector are as effective as possible;
- strengthen the capabilities of law enforcement, the justice system and private sector to detect, deter and disrupt economic crime;
- build greater resilience to economic crime by enhancing the management of economic crime risk in the private sector and the risk-based approach to supervision;
- improve our systems for transparency of ownership of legal entities and legal arrangements; and
- deliver an ambitious international strategy to enhance security, prosperity and the UK’s global influence.
UK Government to launch new modern slavery research centre
The UK Government has published its response to the Independent Review of the Modern Slavery Act which praised the “ground-breaking” Modern Slavery Act and made a number of recommendations to enhance the effectiveness of the act. The Government is also consulting on proposals to strengthen and improve transparency in supply chains legislation. The proposals include to require businesses to publish a statement setting out what they are doing to tackle modern slavery and forced labour in their supply chains here in the UK and overseas and proposals to expand the law to cover the public sector and its vast purchasing power. The Government also announced an investment of £10 million to create the Policy and Evidence Centre for Modern Slavery and Human Rights.
HMT AML/CTF supervision report 2017-18
HM Treasury (HMT) has published an updated version of its annual report on AML and counter-terrorist financing (CTF) supervision for 2017/18. The report sets out the supervisory and enforcement activities of the AML/CTF supervisors, including the FCA, and confirms that HMT will be asking the FCA to evidence improvements in response to the Financial Action Task Force's (FATF) December 2018 Mutual Evaluation Report of the UK.
MPs call for urgent action on UK’s 'unclear' sanctions policy
The Foreign Affairs Committee has published a report on the future of the UK sanctions policy which suggests that the government’s position on sanctions post-Brexit remains unclear, fragmented and incoherent, and could affect national security. In the report, members of the committee expressed concern that little high-level thought appears to have gone into considering the future of UK sanctions policy, despite the fact that most UK economic and financial sanctions are agreed and implemented by the EU.
Law Commission Anti-money laundering: the SARs regime report
The Law Commission has published its report on anti-money laundering and the suspicious activity reports (SARs) regime. The report notes that money laundering, in particular, is estimated to cost every household in the UK £255 a year and allows criminals to profit from their crimes. The recommendations laid out in the report include:
- the creation of an advisory board;
- a standardised form for the submission of SARs; and
- guidance on key concepts underpinning the regime
UK FAP calls for more investment in tackling domestic bribery
The UK's fraud advisory panel (FAP) has published a report which suggests that although plenty of attention is being given to corruption and bribery that is being carried out abroad, the issue of tackling domestic bribery is not being given the time and resources it deserves.
OFSI publish guidance, FAQs and information on monetary penalties relating to financial sanctions
HM Treasury's Office of Financial Sanctions Implementation (OFSI) has published revised guidance, FAQs and information on the approach OFSI takes to financial sanctions and monetary penalties for breaches in financial sanctions, including:
- ‘Financial sanctions: general guidance’;
- ‘Monetary penalties for breaches of financial sanctions: guidance’;
- ‘FAQ guidance for the charity sector’;
- ‘Financial sanctions in the UK: a quick guide’; and
- ‘FAQ guidance for the import and export sector’.
OFSI publish Russia post EU-Exit financial sanctions guidance
OFSI has published specific guidance in respect of the financial and investment restrictions in the Russia sanctions regime should the UK leave the EU without a deal. This guidance does not currently apply and would only come into effect if the UK leaves the EU without a deal and when the Russia (Sanctions) (EU Exit) Regulations 2019 come into force.
OFSI cyber-attack financial sanctions guidance
OFSI has published guidance on the framework for persons, entities and bodies subject to financial sanctions for their involvement with cyber-attacks threatening the EU or its member states. The framework allows the EU to impose sanctions on persons or entities that are responsible for cyber-attacks or attempted cyber-attacks, who provide financial, technical or material support for such attacks or who are involved in other ways. Sanctions may also be imposed on persons or entities associated with them.
OFSI extends its international financial sanctions engagement programme
OFSI has announced that it has ‘substantially increased the scope and ambition’ of its international engagement. Reflecting on its 3 years in operation, OFSI says it has ‘built up a wealth of experience’ with partners and ally corporations across the globe to promote robust financial sanctions implementation. The OFSI has also confirmed that it will be extending its initiative to include not just bilateral and multilateral meetings, but to provide technical assistance to other governments.
OFSI Financial Sanctions Notices
OFSI has published the following financial sanctions notices:
- removing 17 entries so that they are no longer subject to an asset freeze relating to sanctions against Iraq;
- removing entries relating to Iraq;
- issuing a correction of an earlier listing relating to sanctions against Iran;
- amending entries relating to Venezuela;
- removing individuals relating to Libya who are no longer subject to an asset freeze; and
- a general notice of renewal of final designations, renewing 5 designations in relation to terrorism and terrorist financing.
OFSI has also published an updated consolidated list of financial sanctions targets.
US DOJ applauds work with UK financial regulators
Matt Miner, Deputy Assistant Attorney General at the US Department of Justice (DOJ), speaking at the Criminal Justice Section Third Global White Collar Crime Institute Conference, highlighted the department’s ‘close working relationship’ with the SFO, and the importance of the FCA’s on-going secondment program with the department, for enhancing international cooperation.
Council of the EU adopts Directive allowing access to financial information for preventing financial crime
The Council of the EU has adopted a Directive laying down rules facilitating the use of financial and other information for the prevention, detection, investigation or prosecution of certain criminal offences. The measures agreed are designed to strengthen the security of the union and complement the fourth Money Laundering Directive (MLD4) by allowing timely access to financial information, improving co-operation between national authorities and safeguarding data protection. Amongst other matters, the Directive addresses competent authorities' access to the central registries of bank account information that are to be established under the fifth Money Laundering Directive (MLD5). The Directive is due to be implemented by relevant member states by 1 August 2021.
Council of the EU adopts mandates aiming to facilitate access to e-evidence in collaboration with the US
The Council of the EU has announced that it has adopted two mandates authorising the European Commission to negotiate on behalf of the EU an agreement with the US facilitating access to e-evidence for the purpose of judicial cooperation in criminal matters and to participate in the negotiations in the Council of Europe on a second additional protocol to the Cybercrime Convention. Both mandates would aim to facilitate the access to e-evidence, such as e-mails or documents located on the Cloud, to be used in criminal proceedings. If later concluded, they will complement the EU framework on access to e-evidence currently being discussed by the EU institutions and on which the Council adopted a position in December 2018 and March 2019.
European Parliament briefing on the use of financial data for preventing and combating serious crime
The European Parliament has published a briefing on the use of financial data for preventing and combating serious crime. In particular, the briefing looks at the proposal for a directive intended to facilitate law enforcement authorities' access to and use of financial information held in other jurisdictions within the EU for investigations related to terrorism and other serious crime which was signed into law in July. Member States have until 1 August 2021 to transpose its provisions into national law.
FMLC report on US Sanctions and the EU Blocking Regulation
The Financial Markets Law Committee (FMLC) has published a report on US sanctions and the EU Blocking Regulation. The report looks at the US’s withdrawal from the Joint Comprehensive Plan of Action (the JCPOA) and re-imposition of the sanctions on Iran that had been lifted or waived under the JCPOA, and the EU’s expansion of the Blocking Regulation to cover the re-imposed US measures on Iran. The report also examines the issues of legal uncertainty which arise under English law as a result of the amendment to the Blocking Regulation to cover the re-imposed US sanctions, with a focus on the financial markets. The FMLC notes that the broad nature of the re-imposed US sanctions and their extra-territorial application has raised some new issues and increased the prominence of existing issues of legal uncertainty.
OECD very concerned that active bribery is no longer a felony in Greece
The Organisation for Economic Co-operation and Development’s (OECD) Working Group on Bribery has announced its intention to conduct a review of amendments to Greece's Criminal and Criminal Procedures Codes which entered into force in July 2019 and converted the main active bribery offence from a felony to a misdemeanour. The OECD expressed its concern that active bribery is no longer a felony in Greece, which in turn breaches the OECD’s Anti-Bribery Convention. The OECD’s Working Group is worried that the amendment may lead to the closure of ongoing corruption-related investigations and hinder international co-operation in the future.
Europol calls for further international cooperation against money laundering
At the annual general meeting of the AML operational network (AMON) Europol announced that experts from around the world met in Sofia on 5 and 6 June 2019 and discussed that law enforcement agencies should 'find all available opportunities and instruments to disrupt money laundering, including strong cooperation with the financial sector'.
Europol and New Zealand sign MoU to increase collaboration against international crime
Europol and the New Zealand Police have signed a working arrangement and memorandum of understanding (MoU) to widen collaboration and guarantee that the interests of both law enforcement agencies in EU member states and non-EU partners, such as New Zealand are given representation at Europol by sending a permanent liaison officer to Europol’s headquarters. The MoU will also provide the New Zealand Police with access to Europol’s Secure Information Exchange Network Application, which enables daily and effective collaboration between almost 1,200 national authorities from nearly 50 countries in the pursuit of combating organised international crime.
FATF report to G20 Leaders' Summit
The Financial Action Task Force (FATF) has published its report to the Osaka G20 Leaders' Summit. The report sets out FATF's ongoing work to fight money laundering and terrorist financing in the following areas:
- strengthening the institutional basis, governance and capacity of FATF;
- FATF’s Work Programme on Virtual Assets;
- countering the financing of terrorism;
- countering the financing of proliferation of weapons of mass destruction;
- improving transparency and the availability of beneficial ownership information;
- financial technologies, regulatory technologies: digital identity; and
- de-risking by banks.
G20 Finance Ministers Affirm Amended FATF Guidelines for “Crypto Assets”
At the most recent G20 meeting, finance Ministers from the world’s 20 most powerful economies have “…reaffirm(ed) (their) commitment to applying the recently amended FATF Standards to virtual assets and related providers for AML and CFT”.
FSB report on work underway to address crypto-asset risks
The Financial Stability Board (FSB) has published a report on crypto-assets, which considers work underway, regulatory approaches and potential gaps. The report focuses on issues relating to investor protection, market integrity, AML, bank exposures and financial stability monitoring posed by crypto-assets. The report notes that gaps may arise where crypto-assets are outside the perimeter of market regulators and payment system oversight. Gaps may also arise from the absence of international standards or recommendations. The report concludes with a recommendation that the G20 keep the topic of regulatory approaches and potential gaps, including the question of whether more coordination is needed, under review.
FAFT releases guidance on its risk-based AML approach
The FATF has published three new pieces of guidance on its risk-based approach to AML. The guidance sets out the approach for legal professionals, accountings professionals, and trust and company service providers. The guidance published is:
- risk-based approach for legal professionals;
- guidance for a risk-based approach for the accounting profession; and
- risk-based approach for trust and company service providers.
FATF Terrorist Financing Risk Assessment Guidance
The FATF has published its Terrorist Financing Risk Assessment Guidance setting out good approaches, relevant information sources and practical examples for practitioners to consider when assessing terrorist financing risk at the jurisdiction level including sector-specific risk information for the banking and Money or Value Transfer Services (MVTS) sectors.
FATF Plenary: 16-21 June 2019
The FATF has published a summary of the outcomes from the FATF Plenary held during 16-21 June 2019. The topics discussed at the Plenary meeting included FATF's plans to mitigate the risks from virtual asset activities and the launch of a strategic review to analyse the progress made on effective implementation of AML/CFT measures. FATF has also published the following documents alongside the outcomes:
- Public Statement - June 2019;
- Improving Global AML/CFT Compliance: On-going Process;
- Guidance For A Risk-Based Approach: Virtual Assets And Virtual Asset Service Providers; and
- FATF Statement on Brazil.
FATF mutual evaluation reports and updated consolidated assessment ratings
The FATF has published mutual evaluation reports on measures to combat money laundering and the financing of terrorism and proliferation in: Morocco, Burkina Faso, Haiti, Senegal, Myanmar, Fiji, Bangladesh, Cambodia, and Botswana. The FATF has also published updated consolidated assessment ratings.
FATF 30 years
The FATF has published a report entitled 'FATF 30 Years (1989-2019)' which retraces the progress that the FATF has made during the past three decades, and the work that lies ahead for the members of the FATF Global Network.
New FATF President
The FATF has announced that Xiangmin Liu of the People's Republic of China assumed the position of President of the FATF on July 1 2019. He succeeded Marshall Billingslea of the United States.