Lisa Osofsky appointed confirmed as next Director of the SFO The Attorney General, Jeremy Wright QC MP, has announced that Lisa Osofksy has been appointed as the new Director of the Serious Fraud Office ("SFO"). Ms Osofsky's career spans public and private sectors, including 5 years as Deputy General Counsel and Ethics Officer at the FBI, three years as Money Laundering Reporting Officer at Goldman Sachs International and seven years in the Corporate Investigation Division of Control Risks, where she advised on risk and compliance issues. Ms Osofsky's tenure will begin on 3 September 2018 for a renewable term of 5 years.
Passage of new sanctions legislation and publication of updated guidance On 24 May 2018, it was announced that the Sanctions and Anti-Money Laundering Act (the "Act") had received Royal Assent. The Act is the first piece of UK primary legislation governing the post-Brexit legal position and will create a post-Brexit framework for the imposition and enforcement of sanctions and the replication of the pre-Brexit anti-money laundering ("AML") compliance regime.
The Act gives the government broad discretionary powers to impose a wide range of sanctions by way of secondary legislation, including asset freezes and other financial sanctions, travel bans and immigration restrictions, and trade restrictions affecting goods and services. The Act also provides for the creation of exceptions and licences in relation to such sanctions.
The powers conferred by the Act are very broad. On the one hand, this gives the UK government additional flexibility that is not present in the current EU sanctions regime. However, on the downside, there is greater scope for the UK regime to diverge from the EU in time, which could give rise to an increased compliance burden for many businesses.
In other sanctions developments, the Office of Financial Sanctions Implementation ("OFSI") has recently released updates to its monetary penalties guidance, and launched new sector-specific FAQs for importers and exporters, and a new form to comply with UK financial sanctions reporting requirements.
Click here for our full briefing, in which we summarise some of the key aspects of the Act and provide an overview of other recent UK sanctions developments.
House of Lords Select Committee appointed to review Bribery Act 2010
The House of Lords has established an ad hoc Select Committee to consider and report on the Bribery Act 2010 (the “Act“). The Committee, which was formally appointed on 17 May, is due to release a report by the end of March 2019 which will focus on:
- the extent to which the Bribery Act 2010 has led to stricter prosecutions of corrupt conduct, a higher conviction rate and/or a reduction in such conduct; and
- the impact that the Act has upon businesses and in particular small and medium enterprises (“SMEs“).
NCA analysis on serious and organised crime threats
The National Crime Agency ("NCA") has published its National Strategic Assessment 2018 ("NSA") which provides an analysis of serious and organised crime threats in 2018. The NSA draws intelligence from UK law enforcement, government departments, the intelligence community and the private and voluntary sectors, to provide evidence of the scale and complexity of organised crime. In the NSA organised crime is demonstrated to have grown, reinforcing the findings from the National Security Capability Review, recently published. The key observations made by the NCA in the NSA relate to: modern slavery and human trafficking;
- criminal firearms;
- money laundering – with a significant threat being posed by the exploitation of accounting and legal professionals involved with trust and company provision;
- the UK as a prime destination for corrupt foreign Politically Exposed Persons ("PEPs"); and
- the growing complexity of UK cybercrime.
Foreign & Commonwealth Office publishes guidance on sanctions licensing policy after Brexit The Foreign & Commonwealth Office has published guidance detailing the UK Government’s intended approach to sanctions exceptions and licences after Brexit. Although the UK’s approach will largely mirror that adopted in respect of the EU sanctions regimes in force at the moment, paragraph 4 of the guidance indicates that the UK Government’s approach to sanctions licensing will involve more reliance on general licences, which are currently very limited under the EU regime. The effect of a general licence is that multiple parties will be able to undertake specified activities in certain situations in which sanctions would ordinarily apply, without having to apply for a specific licence naming those parties. To read our full briefing, please click here.
SFO to challenge overly ambitious claims to privilege The SFO has published a speech delivered by Camilla de Silva, Joint Head of Bribery and Corruption, at the 12th International Pharmaceutical and Medical Device Compliance Congress in Vienna on 14 May 2018. In her speech, Ms de Silva noted the identification of the pharmaceutical industry as particularly prone within the health sector to corruption and paid reference to the Transparency International June 2016 paper, which reported that over $300 billion of annual global health expenditures is lost to "corruption and errors". Ms de Silva also discussed the use of the Bribery Act in SFO prosecutions, noting that the SFO has yet to encounter a corporation which can persuade the SFO of the adequacy of its compliance programme, and exploring the importance of practical implementation of compliance policies; she also noted one case brought by the Crown Prosecution Service ("CPS") where a section 7 defence was run at trial and was rejected by the jury. Ms de Silva also noted recent changes to the SFO's budget, explored the use of deferred prosecution agreements ("DPAs"), the SFO's sources of intelligence and legal professional privilege ("LPP"). She discussed the SFO's views on privilege pending the outcome of the ENRC appeal, and noted that the SFO is awaiting the outcome of judicial review of its use of section 2 of the Criminal Justice Act 1987 powers to seek to compel the production of documents held abroad - individual consultation of this last point will be welcomed by practitioners.
FCA speech on use of FinTech to detect and disrupt criminal activity The FCA has published a speech delivered by Megan Butler, FCA Executive Director of Supervision - Investment Wholesale and Specialists, on how the use of data and technology by firms can help to detect and disrupt criminal activity.
In her speech, Ms Butler discussed the importance of firms implementing technology to combat evolving financial crime and noted that cybercrime now accounts for nearly 50% of all recorded crime in the UK. She provided some aggregate findings from firms' submissions of the REP CRIM annual financial crime return, and noted that the FCA intend to publish more data later this year. Ms Butler went on to support the application by firms of AI, robotics, natural language processing and machine learning to enable firms to identify suspicious transactions in real time from unstructured accounts and transaction data. Ms Butler also commented on the use of new technology by firms to combat financial crime and the intention between this and the possibility of FCA enforcement. Please click here to read the full speech.
JMLSG updates its anti-money laundering guidance for UK financial services The Joint Money Laundering Steering Group ("JMLSG") has published revised versions of Part II of its guidance on the prevention of money laundering and the financing of terrorism for the UK financial services industry.
The revised sectors are:
- Sector 12 - Asset finance; and
- Sector 17 - Syndicated lending.
The revised guidance was consulted on in March 2018. No changes to the text proposed in the consultation have been made. The revisions do not change the substance of the guidance, but seek to describe in more current terms the way each of the two sectors work, how to assess risks and how to identify who customers are.
Department for Digital, Culture Media and Sport publishes Cyber Security Breaches Survey 2018 The National Cyber Security Strategy 2016-2021 sets the government's approach to tackling and managing cyber threats in the UK and how the UK aims to be one of the most secure places in the world to do business in cyberspace. As part of the review into the implementation of this strategy, the Department for Culture, Media and Sport ("DCMS") has published the Cyber Security Breaches Survey 2018, which for the first time also includes data from charities. The significant findings of the survey include:
- 43% of businesses and 19% of charities experiences a cyber security breach or attack in the last 12 months;
- 74% of businesses and 53% of all charities state that cybersecurity is a high priority for their organisation's senior management;
- 27% of businesses and 21% of charities have a formal cyber security policy/policies; and
- the average cost of cyber breaches is currently £3,100 for businesses and £1.030 for charities, rising to £16,100 for medium-sized businesses and £22,300 for large businesses.
HMT Cryptoassets Taskforce initial meeting
As part of HM Treasury's ("HMT's") FinTech strategy, the newly launched Cryptoassets Taskforce met for the first time on 21 May 2018, in order to agree its objectives, which include exploring the impact of cryptoassets, the potential benefits and challenges of the application of distributed ledger technology in financial services, and assessing what, if any, regulation is required in response. Senior leaders from government and the financial regulators were present, including Katharine Braddick, Director General of Financial Services at HM Treasury, Andrew Bailey, Chief Executive of the FCA, and Dave Ramsden, Deputy Governor of the Bank of England. The Taskforce will host a roundtable in July and publish a report in Q3 2018.
Transparency International publishes correspondence with the SFO on use of DPAs Transparency International UK has published a letter written and responded to by the then Director of the SFO, David Green, providing reflections and recommendations on the use of DPAs in light of recent cases. Transparency International UK noted in its letter its concerns that discounted DPA settlements may perversely encourage corrupt acts if companies begin to calculate such fines as costs of doing business and provided four areas which it felt should be addressed as a priority. They are as follows:
- pursuing individual prosecutions irrespective of a decision to award a DPA;
- viewing victim impact as a core consideration in the decision to award a DPA;
- enhancing transparency and independence in investigative decision making when considering a DPA; and
- increasing transparency in the calculation of DPA fines.
In his response, Mr Green stressed the success of DPAs which have enabled cooperative companies to account for conduct in a transparent way, and he explained that the SFO always considers the impact on victims in any case it investigates.
European Parliament briefing analyses possible indicators of money laundering in banks The European Parliament has published an analysis of recent money laundering cases from an EU banking supervisory perspective. The briefing provides insight into recent cases of breaches or alleged breaches of anti-money laundering ("AML") rules by single supervisory mechanism ("SSM") supervised banks.
This includes the ABLV Bank in Latvia, the Estonian Versobank AS, Pilatus Bank in Malta, and Danske Bank's branch in Estonia. The briefing also discusses which indicators within a bank may point to a potential money laundering problem.
In particular, the European Parliament points out that supervisory indicators, such as gauging a bank's financial soundness and compliance with regulatory requirements have not been very telling in the context of the cases studied in the briefing. Other indicators that may be noted as more telling are a very high ownership concentration, deposits by non-resident clients and deposits made in non-euro currencies.
Additionally, the briefing outlines the respective roles of European and national authorities in applying AML legislation that have further been specified in the 5th AML Directive adopted by the European Parliament Plenary on 19 April 2018.
FATF executive comments on EU efforts to combat terrorist financing The executive secretary of the Financial Action Task Force ("FATF"), David Lewis, has discussed its assessment the compliance of EU Member States with FATF recommendations and strategy on combatting terrorist financing. Speaking at a public hearing before the European Parliament Special Committee on Terrorism, Mr Lewis said that while EU Member States are taking positive action to keep pace with the FATF standards, more could be done to combat terrorist financing across the EU. Please click here for the FATF assessment ratings.
IMF endorses new framework for stepping up engagement on corruption and governance The International Monetary Fund ("IMF") has published a review of its 1997 Guidance Note on Governance, stating that it will investigate whether G7 members (UK, US, Germany, Japan, France, Italy and Canada) together with the Czech Republic have legal systems which criminalise bribery and the correct mechanisms in place to prevent money laundering. This includes looking at those giving bribes and financial centres that have laundered dirty money, as well as improving the existing clampdown on wrongdoing in poor countries.
The IMF has also proposed a Framework for Fund Engagement which amongst other things is designed to strengthen the global fight against corruption by promoting governmental measures that prevent private actors from offering bribes or providing services that enable the proceeds of corrupt acts to be concealed, particularly in transactions.