United Kingdom, EU and International
A series of important and extensive changes have been made to the UK, EU and other sanctions regimes in respect of Russia. For more information, please refer to the 'Sanctions Tracker' updates available on either our Sanctions Notes Blog or our FSR and Corporate Crime Notes Blog. [Mar 2022]
Economic Crime Act expands UK sanctions and unexplained wealth order powers
The Economic Crime (Transparency and Enforcement) Act 2022 (the Act) came into force on 15 March 2022, introducing a range of measures intended to tackle economic crime.
The Act makes a number of changes to the Sanctions and Anti-Money Laundering Act 2018 (SAMLA), which are intended to facilitate rapid alignment of UK sanctions with those imposed by international partners, and greater flexibility when enacting autonomous sanctions. They also enable civil monetary penalties for financial sanctions breaches to be imposed on a strict liability standard (these changes expected to be brought into force in approximately 3 months). The Act also contains amendments to the 'unexplained wealth order' regime. Further information on these changes can be found in our briefing.
The Act's other significant change is the long-awaited introduction of a new Register of Overseas Entities, discussing in this briefing by our Real Estate colleagues. [31 Mar 2022]
SI: Money Laundering and Terrorist Financing (High-Risk Countries) (Amendment) Regulations 2022
The Money Laundering and Terrorist Financing (High-Risk Countries) (Amendment) Regulations 2022 have been published (along with an explanatory memorandum). The Regulations amend the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs) by substituting the list of high-risk third countries (in respect of which extra customer due diligence measures must be taken by relevant persons under the MLRs) in Schedule 3ZA for a new list.
The Regulations came into force on 29 March 2022. [29 Mar 2022]
Reform of Companies House and ban on corporate directors
The Government has published a White Paper on the reform of Companies House. Under the reforms, Companies House will be given greater powers in relation to information on the register, identity-verification requirements will be introduced for all new and existing company directors, and the ban on corporate directors will be implemented.
The response follows an initial consultation in 2019, and three follow-up consultations in 2020 (see our Corporate team's previous blog post here).
The changes include new identity verification requirements for all new and existing company directors (and equivalents for other entities), people with significant control (PSCs) and those filing information with Companies House. UK company formation agents that register with Companies House can conduct the checks. There is also a proposed extension to the scope of 'discrepancy reporting' for AML-regulated firms. An easy reference snapshot of the proposals can be found here. [28 Feb 2022]
SFO: Statement of facts in relation to AFWEL published
The Serious Fraud Office has published the statement of facts in relation to Amec Foster Wheeler Energy Limited (AFWEL).
The SFO entered into a DPA with AFWEL in June 2021, which was approved on 1 July 2021. This concludes the SFO's four-year investigation of the legacy Foster Wheeler and Amec Foster Wheeler businesses. [7 Feb 2022]
TSC: Economic Crime - 11th Report of Session 2021-22
The Treasury Select Committee (TSC) has published its Economic Crime Report. The Report follows up on the two reports covering different aspects of economic crime published in 2019 by the predecessor TSC. It looks at the effectiveness of measures taken to address economic crime since 2019 and at HM Government’s (HMG) Economic Crime Plan.
The Report makes a number of recommendations, of which the following five have been highlighted as key by the TSC:
- for HMG to make economic crime a priority for law enforcement. In this context, the Report notes that the number of agencies responsible for fighting economic crime and fraud is "bewildering" and recommends that HMG consider whether there should be a single law enforcement agency with clear responsibilities and objectives to fight economic crime;
- that the Online Safety Bill be amended to include fraud offences in the list of 'relevant offences' and that fraud be treated as 'priority illegal content';
- that the Payment Systems Regulator be given the powers to make it mandatory for payment service providers to reimburse victims of authorised push payment fraud;
- that consumer protection regulation be introduced for the cryptoasset industry; and
- that Companies House reforms be introduced as soon as possible rather than waiting for the full transformation of Companies House. [2 Feb 2022]
OFSI: Guidance on monetary penalties for breaches of financial sanctions
The Office of Financial Sanctions Implementation (OFSI) has published updates to its guidance on monetary penalties for breaches of financial sanctions. The guidance describes OFSI's processes and considerations in relation to its issuing of monetary penalties and sets out:
- OFSI's compliance and enforcement approach;
- OFSI's assessment on whether to apply a monetary penalty and the factors which are taken into account;
- the process which determines the level of penalty; and
- an explanation of how penalties are imposed, including timescales at each stage and rights of review and appeal.
The new version makes only limited changes, to the previous version of the guidance, principally in relation to OFSI's consideration of the public interest in its case assessment process. The new guidance entered into force on 28 January 2022 and it replaces the previous version of the guidance for all cases where OFSI becomes aware of a potential breach after 28 January 2022. [31 Jan 2022]
HoC: Letter on reform of EU money laundering rules - implications for the UK
The House of Commons (HoC) European Scrutiny Committee has published a letter to HM Treasury (HMT) on the reform of EU money laundering and terrorist financing (ML/TF) rules and the implications for the UK. The letter asks HMT to inform the HoC of any changes to retained EU law on ML/TF which result from HMT’s review of the UK’s anti-money laundering (AML) regime or from HMG’s wider review of retained EU law. [27 Jan 2022]
TSC: Letters from FCA following December oral evidence session and in respect of Natwest case
In December 2021, the TSC published a letter received from Nikhil Rathi responding to questions about decisions made in the FCA's case against NatWest plc under the MLRs 2007. Mr Rathi explains the investigation into NatWest was complex and challenging, requiring an extensive analysis of its AML systems and controls over a period of nearly six years. He also indicates that NatWest had challenges recovering and producing material from its digital records, which is a common issue in regulatory misconduct investigations.
In late January 2022, the TSC published a letter from Nikhil Rathi, Chief Executive of the FCA, in which the FCA provides further information following its oral evidence session of 8 December 2021. In the letter, the FCA responds to a number of questions posed by the TSC, including on the topic of prosecution for AML offences. [25 Jan 2022, 14 Dec 2021]
FCDO: UK sanctions annual report
The FCDO has published its sanctions annual report for 2021, which details for the first time the full extent of the UK's autonomous sanctions regime since exiting the EU. The report follows the establishment of two new autonomous regimes in the UK, the Global Human Rights sanctions regime holding to account those involved in serious human rights violations or abuses and the Global Anti-Corruption sanctions regime, enabling the UK to combat serious corruption around the world and prevent funds from being used to fund conflict, terrorism or organised crime.
The report shows that in 2021 the UK designated 160 individuals and entities across 13 regimes and imposed a significant package of economic sanctions on Belarus.
For more detail please see our blog post here. [13 Jan 2022]
Draft Money Laundering and Terrorist Financing (Amendment) Regulations 2022
The Money Laundering and Terrorist Financing (Amendment) Regulations 2022 came into force on 9 March 2022. These relate to the expansion to the scope of express trusts which will fall within the obligation to provide beneficial ownership information to the Trusts Registration Service (TRS) maintained by HMRC, as a result of the implementation in the UK of the Fifth Money Laundering Directive. The 2022 Regulations amend the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (SI 2017/692) by changing the time limits for registration of trusts which fall into the scope of these requirements for the first time, and adding further exclusions to the type of trusts which are required to register.
The date for AML-regulated firms to commence discrepancy reporting (i.e. to report differences between CDD information and information on the trust beneficial ownership register, when onboarding trusts as customers) has also been extended to September 2022. [11 Jan 2022]
FCA commences criminal proceedings for fraud and converting criminal property
The FCA has commenced criminal proceedings against two individuals. The charges faced by the individuals include fraud by false representation (contrary to sections 1 and 2 of the Fraud Act 2006), fraud by abuse of position (contrary to sections 1 and 4 of the Fraud Act 2006) and converting criminal property (contrary to section 329 of the Proceeds of Crime Act 2000).
The FCA alleges that the individuals dishonestly represented to investors that their firm was authorised and regulated by the FCA to operate as a peer-to-peer lender knowing that this was untrue. It is further alleged that shortly after the FCA asked the firm to cease conduct of all regulated activities in January 2018, and shortly before it ceased trading, the individuals dishonestly abused their positions by transferring funds to a separate company and, in addition, transferred further sums that they knew or suspected were the proceeds of crime into one of their personal bank accounts.
The individuals appeared at Westminster Magistrates Court on 26 January 2022. [7 Jan 2022]
FCA: Individual charged for failing to provide key passwords for seized devices
The FCA has published a statement confirming that an individual has appeared in court following an action it brought for his failing to provide passwords for various laptops and phones. The individual has been charged with failing to comply with a Statutory Notice issued under Section 49 of the Regulation of Investigatory Powers Act 2000. This is the first prosecution by the FCA in relation to this offence.
The individual has indicated a plea of not guilty and elected for trial in the Crown Court; he has been granted conditional bail. [22 Dec 2021]
FCA fines bank for AML failings
The FCA has published a decision notice, dated 14 December 2021, that it has issued to a bank, fining it £63,946,800 for failings in its AML processes. The FCA found that, between March 2010 and March 2018, three key parts of the bank's transaction monitoring systems showed serious weaknesses and thus were not compliant with the Money Laundering Regulations 2007 (MLRs 2007). The bank has agreed to settle and has undertaken a large-scale remediation programme, which was supervised by the FCA. [17 Dec 2021]
JMLSG: Revisions to guidance
The Joint Money Laundering Steering Group (JMLSG) has published proposed revisions to its syndicated lending guidance in Part II of its AML and counter-terrorist financing (CTF) guidance for the financial services sector. The JMLSG has inserted of a new paragraph 17.29A, which deals with completion of customer due diligence (CDD) by lenders.
The JMLSG has also published amendments to Part I Chapter 5.7 (Monitoring customer activity) of its guidance, together with a clarificatory amendment to Part II Sector 16.
Finally, in March 2022 the JMLSG confirmed that Ministerial approval had been received for the following updates:
- Part I Chapter 5.7 (Monitoring customer activity) – updated Chapter;
- Part II Sector 15 (Trade Finance) – updated sectorial piece;
- Part II Sector 16 (Correspondent Relationships) – revised first page;
- Part II Sector 17 (Syndicated Lending) – new paragraph 17.29A.
SFO secures confiscation against former Petrofac executive
The SFO has secured a confiscation order worth over £140,000 against Petrofac’s former Head of Sales, David Lufkin. In October 2021, David Lufkin was handed a two-year suspended sentence, for making corrupt payments and offers to influence the awarding of oil and gas contracts for Petrofac in Iraq, Saudi Arabia and the United Arab Emirates. [15 Dec 2021]
Home Office: Consultation on revised CHIS code of practice
The Home Office has published a consultation on the revised Covert Human Intelligence Source (CHIS) code of practice. The revised code reflects the new provisions relating to the authorisation of criminal conduct by CHIS brought in by the Covert Human Intelligence Sources (Criminal Conduct) Act 2021. The updates are needed to reflect changes in the 2021 Act, as well as a number of minor updates and clarifications intended to ensure that public authorities apply best practice in the use of the powers. The consultation proposes the implementation of a number of additional safeguards as to how the powers already in primary legislation should be exercised. The finalised guidance is intended to guide law enforcement agencies, the UK Intelligence Community (UKIC) and public authorities who exercise CHIS powers. [13 Dec 2021]
EBA launches EuReCA
The European Banking Authority (EBA) has launched its central database for AML/CTF. This European reporting system for material AML/CTF weaknesses (EuReCA) will co-ordinate the efforts of competent authorities and the EBA to prevent and counter ML/TF risks in the EU. EuReCA will contain information on material weaknesses in individual financial institutions in the EU that competent authorities have identified. Competent authorities will also report the measures they have imposed on financial institutions to rectify those material weaknesses.
The EBA will use the information from EuReCA to inform its view of AML and CTF risks affecting the EU financial sector. It will also share information from EuReCA with competent authorities, including if specific AML/CTF risks or trends emerge.
EuReCA will not start to collect personal data until the European Commission (EC) approves the draft regulatory technical standards (RTS), which the EBA submitted in December 2021. The draft RTS clarify how EuReCA reporting obligations will interact with other notifications such as those under Article 62 of the Fourth Money Laundering Directive (4MLD). [31 Jan 2022]
EC: Commission Delegated Regulation on third countries
A Commission Delegated Regulation amending Delegated Regulation (EU) 2016/1675 and supplementing 4MLD has been adopted by the EC. The Delegated Regulation adds Burkina Faso, Cayman Islands, Haiti, Jordan, Mali, Morocco, the Philippines, Senegal, and South Sudan to the list of third countries with strategic deficiencies in their AML/CTF regimes in the Annex to Delegated Regulation (EU) 2016/1675 and deletes the Bahamas, Botswana, Ghana, Iraq and Mauritius from this list. [11 Jan 2022]
EBA: Guidelines on risk-based supervision under 4MLD
The EBA has published its final report setting out revised guidelines on risk-based supervision under Article 48(10) of 4MLD. The revised guidelines build on the existing four-step approach to risk-based AML and CTF supervision, and provide additional guidance on ML and TF risk assessments, including the sectoral risk assessment. The revised guidelines also seek to help supervisors choose the most effective tools to meet their supervisory objectives, including in situations when they have identified breaches and weaknesses in firms' systems and controls framework.
The revised guidelines will be translated into the official EU languages and published on the EBA website. National authorities will then have two months to report on whether they comply. The revised guidelines will apply three months after publication of the official language versions, when they will repeal and replace the original 2016 version of the guidelines. [16 Dec 2021]
EBA consults on draft remote customer onboarding guidelines under 4MLD
The EBA has published a consultation on draft guidelines on the use of remote customer onboarding solutions under Article 13(1) of 4MLD. The draft guidelines set out common standards for competent authorities on the steps that financial sector operators should take to ensure development and implementation of sound, risk-sensitive initial customer due diligence (CDD) processes in the remote customer onboarding context. The need for guidelines in this area was identified following the growing demand for remote customer onboarding solutions, which was exacerbated by restrictions on movement caused by Covid-19.
Feedback is requested by 10 March 2022. [10 Dec 2021]
EPC: 2021 Payment Threats and Fraud Trends Report
The European Payments Council has published its 2021 report on payment threats and fraud trends. The report provides an overview of the current threats in the payments space, aims to create awareness amongst stakeholders, and discusses possible mitigating measures to prevent fraud. [6 Dec 2021]
OECD data on enforcement of Anti-Bribery Convention
The Organisation for Economic Co-operation and Development (OECD) has published data on compliance with its Anti-Bribery Convention of 15 February 1999. The data reflects the position up to 31 December 2020 and highlights include:
- twenty-five parties to the convention having convicted or sanctioned, collectively, at least 684 natural and 245 legal persons for foreign bribery through criminal proceedings; and
- Colombia, Latvia and the Russian Federation imposing sanctions for the first time in respect of foreign bribery. [5 Jan 2022]
IMF/WB: Report on draft framework for ML/TF risk assessment of a remittance corridor
The International Monetary Fund (IMF) and the World Bank (WB) have published a report setting out a draft framework for ML/TF risk assessment of a remittance corridor. The draft framework aims to promote safe payment corridors, and can be applied jointly or separately by the sender and the recipient corridor countries. [13 Dec 2021]