UK anti-corruption strategy 2017 to 2022 and new Economic Crime Centre
The Government has published a policy paper on its UK anti-corruption strategy 2017 to 2022. The strategy establishes a longer-term framework to guide government efforts to tackle corruption in the UK and abroad. The strategy identifies six priorities which will be the focus of efforts to 2022, including strengthening the integrity of the UK as an international financial centre. Part of the strategy also includes the establishment of a new national Economic Crime Centre which will be given the power to task the Serious Fraud Office ("SFO") to investigate the worst cases of fraud, money laundering and corruption. The national Economic Crime Centre will be based within the National Crime Agency ("NCA") and will oversee the national police response to financial crime, backed by greater intelligence and analytical capabilities. The anti-corruption strategy also includes naming a Home Office minister responsible for tackling economic crime.
FCA comments on cybercrime in the financial services sector
The FCA has published a speech delivered by its executive director of supervision for investment, wholesale and specialists, Megan Butler, at the ICI Global 2017 Capital Markets Conference. In her speech, Ms Butler discussed the open and co-operative response required from firms and regulators in the event of cyber and financial crime in capital markets. Discussing the consequences for liquidity and market confidence if a trading algorithm was compromised by ransomware or malware, or a hacker accessed confidential, market sensitive information and used it to deal, Ms Butler noted it was imperative that firms consider ‘modes of failure’ and are honest about them, informing the FCA of cyber breaches as soon as they are aware something is wrong. Ms Butler also went on to say that the FCA suspected that successful cyberattacks in the financial sector were being under-reported as the number of breaches relayed back to the FCA appeared to be modest when set against the number of attacks on the industry. Ms Butler also looked briefly at the Markets in Financial Instruments Directive ("MiFID II"), Brexit, and how firms can streamline and improve their anti-money-laundering processes.
EU seeking to bring cryptocurrencies under MLD4 In a written parliamentary answer from Stephen Barclay, Economic Secretary to the Treasury, it has been confirmed that the UK government is currently negotiating amendments to the Fourth Money Laundering Directive ("MLD4") that will bring virtual currency exchange platforms and custodian wallet providers into anti-money laundering and counter-terrorist financing ("AML/CTF") regulation, which will result in the activities of these businesses being overseen by national competent authorities for these areas. It is said that the Government is focusing on bitcoin as concerns have grown that cryptocurrencies are being used to facilitate financial crimes and launder money. Plans include rules which will force online traders to reveal their identities in some circumstances, and online platforms where currencies are traded will be required to carry out due diligence on buyers. The government says it supports the intention behind the amendments and expects the negotiations to conclude at EU level in late 2017/early 2018.
MLD4: ESAs final report on draft RTS specifying how credit and financial institutions should manage money laundering and terrorist financing risks at group level The Joint Committee of the European Supervisory Authorities ("ESAs") has published its final report on draft regulatory technical standards ("RTS") on the measures credit institutions and financial institutions shall take to mitigate the risk of money laundering and terrorist financing where a third country’s law does not permit the application of group-wide policies and procedures referred to in Article 45(1) and Article 45(3) of Directive (EU) 2015/849 ("MLD4") at the level of branches or majority-owned subsidiaries that are part of the group and established in the third country. The RTS form part of the ESAs' wider work on fostering a common approach to anti-money laundering/counter terrorist financing ("AML/CTF") and will contribute to creating a level playing field across the EU's financial sector. The ESAs will submit the draft RTS to the European Commission for approval.
Sanctions update: EU adds beer and saké to list of banned exports to North Korea
Further to Council Regulation (EU) 2017/2062 of 13 November 2017, the EU has amended the list of luxury goods which are subject to restrictive measures against the Democratic People's Republic of Korea (North Korea). Aside from the addition of beer and saké to the list, coats exceeding €75 in value and other garments and shoes exceeding €20 each are also prohibited exports. It is noteworthy that the language of the luxury goods list has changed slightly – references to prohibition on "high quality" or "luxury" items have now been removed so that all items in that category, regardless of quality, are caught by the prohibition. Additionally, the financial value limits assigned to some categories of goods have changed; for example all carpets, rugs and tapestries are now banned, whereas previously only those valued higher than €473 were prohibited. The changes to the EU sanctions framework, which already goes above and beyond the minimum sanctions imposed by the UN, are indicative of an increasingly hostile stance towards the North Korean regime in light of reports of continued weapons testing.
FCA speech on using AI to keep criminal funds out of the financial system
The FCA has published a speech delivered by Rob Gruppetta, Head of the Financial Crime Department on the use of artificial intelligence ("AI") to keep criminal funds out of the financial system. In his speech at the FinTech Innovation in AML and Digital ID regional event, Mr Gruppetta discussed the benefits of using AI to fight money laundering, for example, by identifying suspicious activities. He also noted non-technical challenges facing the use of machine learning, such as poor quality data and limitations to the legal scope for banks to share information with each other about a customer, to determine whether a suspicion is truly justified.
Law Society to intervene in ENRC legal privilege case Following on from our previous reports on Serious Fraud Office ("SFO")v Eurasian Natural Resource Corporation ("ENRC") Ltd  EWHC 1017 QB, the Law Society has requested permission to intervene in the controversial privilege case. The case arose following a decision by ENRC to self-report to the SFO potential corruption which was discovered following an internal investigation. The SFO sought to compel production of certain documents internally generated during investigations, whilst ENRC have claimed that the documents are privileged. The Law Society has sought to intervene in proceedings as the case is likely to have profound implications for the law regarding privilege, which may pose difficulties for firms conducting internal investigations and could also discourage self-reporting. The Law Society is seeking permission to put forward arguments on behalf of solicitors. Joe Egan, president of the Law Society has said: "The right for anyone to communicate confidentially with their lawyer is a fundamental part of our legal system and we want to ensure that this right is protected for all of us, including corporations."
The EU publishes a list of non-cooperative tax jurisdictions
On 5 December 2017, the EU published its list of 17 non-cooperative jurisdictions for tax purposes. The list forms part of the EU’s work to clamp down on tax evasion and avoidance, presenting a united front to dealing with non-EU jurisdictions that, in the EU’s view, encourage abusive tax practices. The 17 jurisdictions identified are: American Samoa, Bahrain, Barbados, Grenada, Guam, Korea (Republic of), Macao SAR, Marshall Islands, Mongolia, Namibia, Palau, Panama, Saint Lucia, Samoa, Trinidad and Tobago, Tunisia and United Arab Emirates. Final decisions have not been made in respect of eight jurisdictions in the Caribbean that were badly hit by the hurricanes in the summer, namely Antigua and Barbuda, Anguilla, Bahamas, British Virgin Islands, Dominica, St Kitts and Nevis, Turks and Caicos and the US Virgin Islands. These jurisdictions have been given until early 2018 to respond. Please click here to read the full article.