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Money laundering matters continue as Covid-19 dominates headlines

Coronavirus has changed our lives this month in ways we couldn’t imagine just a few weeks ago. It has dominated the headlines, and our thoughts and sympathy are with those people that have paid the ultimate price.

Julian Dixon
March 31, 2020

Coronavirus has changed our lives this month in ways we couldn’t imagine just a few weeks ago. It has dominated the headlines, and our thoughts and sympathy are with those people that have paid the ultimate price.

Unfortunately, criminals continue to exploit vulnerabilities created during times of global crisis. While the world grinds to a halt, money laundering and financial crime will always carry on, regardless of how tough times get.

And March was no different, albeit overshadowed by Covid-19. Here’s the round up of March headlines in money laundering that caught our eye.

Near record year for money laundering and sanctions fines

Fenergo has revealed that regulators hit banks with a near $10 billion worth of fines in a 15 month period through 2019. Almost two thirds of the fines arose from banks violating anti-money laundering rules, with nearly all of the rest from sanctions violations.

Fenergo estimates that 60% of the fines are the result of criminals outwitting screening systems, while the remaining 40% can be attributed to employee error and bank corruption in equal portions. Fenergo fully expects fines to continue to grow in coming years, and we certainly agree. Tighter regulations coupled with the absolute need to get a grip on financial crime are driving and validating penalties for non-compliance.

Most EU states fail to provide beneficial ownership transparency

Despite having two years to get the systems in place, a report by Global Witness has revealed that less than 20% of EU Member States are providing public registers of beneficial owners. The deadline, which passed on the 10 January 2020, is part of a wider obligation to comply with the many requirements of the Fifth Money Laundering Directive (5MLD).

Worse still, from paywalls to beneficial owner tipoffs, the report found that several states have even put up barriers to make accessing beneficial ownership data difficult. Anonymous shell companies can be associated with corruption, financial crime and terrorist financing.

Image source: Global Witness

The report follows a statement last month from the European Commission announcing it is contacting eight Member States that failed to notify of any implementation measures for 5MLD. The states included Portugal, Romania, Slovakia and more. Member states that do not provide a satisfactory response may receive a reasoned opinion, which is a formal request to comply.

Crucially, as the Commission concludes: “Legislative gaps occurring in one Member State have an impact on the EU as a whole.”

Those subject to UK money laundering regulations to pay new ‘Economic Crime’ levy

Newly appointed Chancellor Rishi Sunak confirmed in the Budget this month that the UK government plans to introduce a new £100 million levy on firms subject to UK money laundering regulations, including banks, accountants, estate agents and solicitors.

The fee will supplement public sector funding, and could be used for the financing of law enforcement technology, as well as hiring more prosecutors and investigators. It may also be used to strengthen the consistency of supervision by the professional bodies that handle AML compliance and counter-terrorist financing work, such as the Solicitors Regulation Authority.

It seems that those subject to the fee will effectively be helping to fund their own regulation.  

The levy comes at a very difficult time for all sectors. Not surprisingly, the announcement has been received with mixed feedback. This has ranged from support for making all professions contribute financially to fighting economic crime, to questioning why a private sector levy should help fund a public function, such as fighting crime.

Perhaps above all however, the levy reflects how seriously the UK is taking the battle to tackle money laundering and other financial crimes more effectively.

The Treasury said it would consult on the levy later this spring. The intention is for the levy to commence from 2022/23 onwards.

Money laundering breaches wipe over a third off Swedbank’s share value

Sweden’s oldest retail bank, Swedbank, shamefully made the headlines this month for carrying out €37bn (£34bn) of transactions with a high risk of money laundering over a five-year period. After receiving a record fine of 4 billion Swedish crowns (£334m) by Swedish and Estonian financial watchdog, the value of its shares plummeted by over a third.

The news follows a damning report by law firm, Clifford Chance, which showed the bank actively pursued high-risk individuals in the Baltic region, including those who had been rejected by another bank. The report also found Swedbank lacked the proper systems and controls to detect money laundering.

Former chief executive, Birgitte Bonnesen, failed to address deficiencies in the bank’s anti-money laundering controls during her three years of leadership.

Swedbank is yet another high profile bank to pay the ultimate price for leaving AML unchecked – the loss of stakeholder trust. The bank did not dispute the fine.

Julian has more than 20 years of financial services experience gained at major investment banks including Deutsche Bank, JP Morgan and Commerzbank. His roles have ranged from front-office sales leadership to private equity. Julian has extensive knowledge of financial services processes and technology.
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