Today the government released a new plan for how it intends to tackle money laundering and terrorist financing. It’s a good document and includes a number of helpful proposals. However, it captures only part of the picture. As the Panama Papers demonstrated, the UK tax havens are one of the key routes for corrupt officials and other money launderers to hide their money. The UK’s commendable efforts outlined in this paper will be drastically undermined if the UK tax havens don’t open up. Next month’s corruption summit, which will be hosted in London by David Cameron, is a perfect opportunity to make this happen.
Here’s my quick analysis of what’s in the document.
- There is a welcome
emphasis on sharing information. The plan includes concrete proposals to
ease the exchange of information between banks and various government agencies,
including law enforcement, and the sharing of information between banks themselves.
This is important because at the moment it’s easy for criminals to hop from one
bank to another, evading scrutiny. More collaboration will hopefully make this
harder and banks can do a better job of targeting their efforts on the highest
- Reform of the suspicious
activity reporting (SAR) regime is on the table. At the moment just under
400,000 SARs are filed each year by banks and other professionals when they
suspect that a customer might be involved in money laundering. However, law
enforcement can only act on a fraction of those reports, and banks complain –
reasonably in my opinion – that they get next to no feedback on the reports
- The government is
planning to step up its efforts to recover stolen assets. A powerful new
tool will be introduced: the “unexplained wealth order”. This would allow law
enforcement to seize assets where wealth can’t be explained, subject to
judicial oversight. This is a real success story for our allies at Transparency
International-UK, who have been campaigning for such orders. This new tool
will be particularly important where the crime has been committed overseas, but
the money stashed in the UK, and it’s difficult to get cooperation with foreign
governments. This is a particular problem when it comes to going after the
assets of corrupt officials who are still in power, where cooperation is
- The system of
supervising banks, lawyers and other professionals who are key gatekeepers to
the financial system will be reviewed. In the plan, the government acknowledges
that the current supervisory system “is not working as well as it could”. This
is an understatement. Outside of a few fines issued by the Financial Conduct
Authority to banks, there has been pretty minimal enforcement of the anti-money
laundering system. The supervision system in the UK is disjointed and spread
across 27 different regulators, including the Archbishop of Canterbury, who
regulates notaries. The government has promised to review how the system works
and is calling for evidence.
- The plan includes clear timelines and lead agencies. It also promises more metrics on money laundering prosecutions and asset recovery. This can only help to hold the government to account.
- There is nothing in
the document about the need to hold senior managers to account when things go
wrong. Global Witness’ Banks
and Dirty Money report laid bare how the current impunity for senior bank
managers is allowing corrupt money into the UK. The UK government has recently
introduced a new “senior managers regime” to try and deal with the problem, but
still to be seen whether this will be properly implemented.
- Getting the
regulatory architecture right is obviously important, but this will only work
with proper implementation and resourcing. The document makes no mention of
extra resources to fund the proposed changes.
- The report states
that “investor visa regimes around the world… have been criticised as
representing a quick money laundering route for corrupt foreign individuals”.
It’s great this is now recognised as a corruption and security risk for the UK,
and the government has taken steps to plug some of the gaping holes in the
system. That said, it doesn’t mention
what it plans to do about the almost 3000 people who entered the UK under this
scheme between 2008 and 2015, when minimal checks were in place to ensure funds
- Earlier this month, Transparency
International-UK raised serious concerns about plans to undermine the
independence of the Serious Fraud Office, which prosecutes significant
financial crimes. According to TI-UK this would be a step back, with their
Executive Director, Robert Barrington saying: “Industry experts are agreed that
with proper funding, the SFO has the attributes to do the job: including
combined teams of investigators and prosecutors, having corruption as a
priority and independence from political interference.” These concerns aren’t
addressed in the plan.
- The UK tax havens have
agreed that they will have closed registers of the real owners of companies with
UK law enforcement having access. But what about other countries accessing
this information? Why won’t the tax havens match what the UK is doing and have
fully public registers?
- Finally, the report
claims that charity funds can be diverted to finance terrorist organisations
and that the Charity Commission will be looking at the problem. However,
groups such as the Charity
and Security Network have argued that there’s little evidence that the
charity sector poses a particular threat and that Counter Terrorist Financing
Laws can hinder the ability of charities to operate in fragile countries that
most need support. The new plan contains little on how the government will help
charities keep money flowing to these areas.