The UK Government has published its third National Risk Assessment of money laundering and terrorist financing (NRA).
This should be of great interest to anti-money laundering (AML) teams across the UK’s regulated sector and will be valuable reading for firms that have only this year become subject to the UK’s money laundering regulations, such as art dealers. A national risk assessment such as this can form a key part of any firm’s internal AML risk assessment.
The report leads with the headline figure that serious and organised crime is estimated to cost the UK economy £37 billion per year. This stands in contrast to the report by the National Crime Agency in May 2019 that money laundering costs the UK more than £100 billion a year, which is a surprising difference – probably to be explained more by different metrics being used, rather than a collapse in the value of money laundering in the UK. Indeed, the NRA observes that "It remains difficult to quantify the scale of the money laundering threat to the UK, but it is likely there has been an increase in the amount of money being laundered since 2017. This is due to an increase in crime across a range of predicate offences."
The key findings from the reports include that:
- the impact of Covid-19 has been significant, but it has not resulted in an overall increase in the risk of money laundering or terrorist financing. There has been a “shift” rather than an increase as a result of the pandemic as criminal have had to adapt to changing circumstances;
- new businesses and emerging sectors, such as financial technology firms, represent new opportunities that criminals are already seeking to abuse;
- cash intensive businesses still remain a prominent area for money laundering and there has been an increase in the abuse of cash-related services, such as the use of cash couriers;
- cryptoassets represent an increasing money laundering risk, notwithstanding the changes brought in by the Fifth Money Laundering Directive, which brought cryptoasset exchange providers within the scope of the UK’s money laundering regulations;
- art market participants are also now subject to the UK’s money laundering regulations but "there is still a lack of complete understanding of the mitigations and vulnerabilities in the art market" and it remains and attractive destination for money laundering; and
- the UK Government‘s knowledge of money laundering and terrorist financing has improved significantly since 2017, but there has not yet been a reduction of risk in any particular sector and many mitigation strategies are still in their infancy. It is hoped that strategies such as the ongoing reform of the Suspicious Activity Report regime and reform of Companies House will deliver reductions in risk in due course.
The NRA contains dedicated sections for the various different sectors subject to the UK money laundering regulations. Anyone operating in this area, from an art dealer to a financial services provider, would be well advised to review the NRA, especially to note what findings are relevant to their business. It is important that AML risk assessments, policies and procedures constantly evolve to keep up-to-date with the changing money laundering and terrorist financing landscape.
“To further strengthen our regime and prevent money laundering and terrorist financing we must continue to update our understanding of where our ML and TF risks lie. This needs to be embedded into the work at the centre of government, through our supervision and law enforcement work, and to be well understood by the regulated sectors. This assessment sets out our latest understanding of these risks, including how they have changed since the 2017 NRA. It will inform all of our continuing work to prevent terrorists and criminals moving money through the UK.”