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JUN
25

Banks, FIFA and Fraud: Who broke the law?

corporate insolvency sports law footballThe past month has seen FIFA feature heavily in the media. Unfortunately, it has been for the wrong reasons. The ruling body for football across the world has been implicated in suspected breaches of anti-money laundering and bribery rules. If the news was not already damning enough, several UK banks including Barclays and HSBC, have now been implicated in the unlawful processing of allegedly corrupt payments made out to FIFA officials. With HSBC already reported to having settled an investigation into its banking practices by the Swiss authorities for £28 million (available here), more and more questions are now being asked about whether or not there is any truth to the allegations against the banks.

The speculation around the practices of banks and their suspected processing of corrupt payments to FIFA officials throws into light a very important question: what are the rules governing money laundering and bribery? As experts in financial crime, we at Lewis Nedas set out here what these rules are, and how they apply.

Precisely what is it that banks need to be concerned with?

The main concern for banks in relation to the situation involving FIFA, is whether they have processed payments to/from corrupt officials and in so doing, breached anti-money laundering rules. Furthermore, if there is any evidence that the banks were aware of the questionable nature of any payments, and had taken payment without question, they could also have violated bribery laws.

How are these areas regulated?

Banks operate on a plane governed by a variety of complex rules and regulations, and the anti-money laundering regulations and bribery legislation are among the most complicated to understand.

Money Laundering

Money laundering involves the exchange of either money or some other kind of asset that was obtained as a result of criminal activity, which is then exchanged for legitimate money or assets. In the UK, this is regulated by a variety of agencies including Her Majesty’s Revenue & Customs (HMRC) and the Financial Conduct Authority (FCA), who monitor the observation of the Money Laundering Regulations 2007 by the relevant businesses.

It is true that the Money Laundering Regulations only apply to certain organisations, but in reality, this applies to a lot of different businesses. This includes, amongst others:

  • Banks;
  • Accountants;
  • Lawyers; and
  • Tax Advisors.

If your organisation is governed by the Money Laundering Regulations, it is obliged to implement a series of processes and procedures that will actively detect potential instances of individuals attempting to launder money. This includes a requirement to:

  • Confirm that an individual is who they say they are by checking official documents e.g. passport;
  • Establish what the nature of the relationship between your organisation and an individual will be, and where money will be coming from/going to;
  • When dealing with individuals that are politically exposed, ensure that senior management approve the organisation engaging with this individual; and
  • Keeping up-to-date with an individual’s business and developing your risk assessment accordingly.

If you are suspicious that finances are the result of criminal activity, you must report this to the National Crime Agency (NCA) at the earliest opportunity. You should only continue with a proposed transaction after the NCA has given you its permission to do so.

Bribery

Bribery, like money laundering, is illegal in the UK. The Bribery Act 2010 is the most important piece of legislation in this area and it outlaws the giving (and taking) of some kind of advantage (financial or otherwise), to require someone not to fulfil their duties as would be expected. Bribery also covers the giving (and taking) of finances or some other kind of reward, to reward improper conduct. It does not matter whether dealings concern an individual or an organisation, both are governed by the Act.

The legislation obliges organisations to take active steps to avoid being implicated in bribery. While it is not unlikely that bribery may be permitted in other countries, if a UK business is caught as having acquiesced in any such activities, it will be vulnerable to a legal charge under the legislation. Organisations must train their staff, and implement systems that are designed to identify the risk of bribery. Furthermore, they must instigate safeguards to prevent any such activity occurring.

Is there are defence to a claim that the rules have been violated?

If it is suspected that your organisation has breached the rules against money laundering or bribery, there will be a detailed investigation into your affairs. However it is possible, where legal proceedings are brought against you, to mount a defence in each case:

Money Laundering

It may sound simple but in order to credibly defend a claim for breaching the Money Laundering Regulations, you must be able to refute this by proving that you did follow them.

This is why it is incredibly important that you understand your obligations under the 2007 Regulations, and implement sophisticated procedures that allow you to satisfy your obligations. Record keeping is of particular importance in this respect.

Bribery

There is a defence to an allegation of having been involved in bribery. You must be able to demonstrate that you and your organisation took the necessary steps expected of you to prevent bribery from occurring. In practice, this involves your training staff to spot bribery, and discouraging them from being involved in, and implication the business in bribery.

What is the penalty for failing to follow the rules?

Depending on the type of regime in question, the implications for an organisation of being found guilty of not honouring their responsibilities can be severe.

Money laundering

There are in fact a variety of penalties available to regulators, if you are found to have violated the Money Laundering Regulations. Depending on the severity of your non-compliance, there could be a significant fine issued against you and your organisation. Alternatively, in severe cases, a criminal prosecution can be launched.

Bribery

If you are deemed to have personally been involved in Bribery, you could be imprisoned for up to 10 years and be given an unlimited fine. For organisations, the penalty for involvement in Bribery will also be an unlimited fine.

Contact our Financial and Regulatory Law Solicitors in London

If you have questions regarding the rules on Money Laundering or Bribery, contact us today. Lewis Nedas are experienced solicitors with particular expertise in financial and regulatory law. Our team is often engaged to assist clients facing investigations into alleged illegal conduct. We take a comprehensive approach to legal services, handling every aspect of your case and dealing with regulators on your behalf. Contact us today and see how we can help you.

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MAY
28

The FCA Get Tough with Keydata Officers – by Rhys Mardon

escape with cashWhat do terminally ill US pensioners, Amazon rainforest carbon credits, the British Virgin Islands, the mysterious death of a Malaysia-based UK fraudster, and the near-collapse of the Norwich & Peterborough Building Society all have in common? The answer is Keydata.

Keydata, founded by Stewart Ford, has been personally fined by the Financial Conduct Authority a record £75million fine, after the collapse of an investment firm left 37,000 investors with losses of up to £475million. The fine is nearly twenty times the previous highest fine against an individual by the FCA. The FCA also fined the firm’s sales director £4million and the company’s compliance officer a further £200,000, and banned the trio from working in financial services again.

Ford founded Keydata and, with this, he created a £2.8billion financial empire selling ‘death bonds’. Through a complex web of companies and trusts in the British Virgin Islands, Ford earned £72.4million in fees out of the £373million invested in Keydata’s ‘Lifemark’ funds. Along with an additional £22.7million paid to Keydata itself, the scale of the fees seriously undermined the chances of investors seeing the returns promised, according to the FCA. As a direct result of this, the level of the fine on Ford is equal to the extraordinary fees and commissions he allegedly took from investors who thought they were buying relatively low-risk bonds that would pay an income in retirement and protect their capital.

As part of the accusations against Ford, the FCA say that he acted “recklessly” and with “clear and acute” conflicts of interest. The investigation began under the FCA’s predecessor body, the Financial Services Authority. It is also alleged that Keydata’s promotions were grossly misleading and its products wholly inadequate, with investors being told their money was in tax-free ISAs, when in fact it was not.

In a press release, the FCA said, “Mr Ford deliberately concealed the problems with the portfolio underlying these products from investors, IFAs and the then FSA.” It continued, “The FCA further considers that the individuals deliberately misled the FCA by making false representations to the FCA in compelled interviews about the performance of the investment products.”

Ford denies the FCA’s allegations, and in a response statement he said, “The FSA set out deliberately to destroy Keydata and did so without any proper reason. In order to close the company down without notice they enlisted the assistance of PwC to report that the company was insolvent which they did without even bothering to speak to Keydata’s management – and which finding was wholly wrong.” He also went on to say, “The FSA and PwC collaborated and conspired to carry out a regulatory hatchet job on Keydata and on me.” He further said the FCA had been “over-aggressive” in its investigations into the firm, as the regulator was, at the time, stung by accusations over its performance during the financial crisis. He added that the FCA had blocked his efforts to put together a financial rescue package for Keydata. In 2011, the Serious Fraud Office closed its investigation into Keydata after it found insufficient evidence to prosecute.

Mr Ford is currently appealing to the High Court against the fine, and countersuing the FCA and auditors PwC for £700million.

It is alleged that savers were given assurances that banking group HSBC oversaw trading in the insurance contracts, which the bank strenuously denies. In reality, £103million from investors ended up in the hands of businessman David Elias.

Elias became a fugitive from justice after eluding a warrant for his arrest in 2001. All of the £103million has since disappeared. Elias died in May 2009, aged 54, in the Malaysian tax haven of Labuan, and was at the time involved in a string of other businesses, including promoting carbon credits in the Amazon. However, investigators have never been able to confirm his death, and there are suspicions he may still be alive and on the run somewhere in the Far East.

Keydata’s collapse also prompted the demise of the 150-year-old Norwich & Peterborough Building Society in 2011. N&P’s advisers had sold Keydata policies to 3,200 customers, and after regulators ordered the Society to pay a fine and compensation totalling £52.4million, it was forced into an emergency merger with the Yorkshire Building Society.

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MAY
13

Crowd Funding: A Novel Approach to Property Ownership – By Richard Greenby

lease enfranchisementCrowd funding over the internet is a popular recent phenomenon involving a group of investors that team up for a financial opportunity and pool their resources together.

Crowd funding has grown in stature over the last few years, with investors providing funds for an increasing array of investment opportunities, typically in return for either equity in the borrower’s company or based on debt repayment plans. The added draw for investors is that they can invest in projects for relatively small sums of money, such as a £500 minimum entry.

In the property context, crowd funders become the shared owner of a property investment or the registered (i.e. secured) charge-holder in exchange for their financial backing. Projects can vary from short-term funding to longer-term matters.

As with all investments, the merits of each project need to be carefully reviewed. Crowd investment is also subject to the general drawback of generating sufficient interest from other potentially likeminded investors.

As with all investments, potential investors should therefore carry out sufficient due diligence in order to form a balanced assessment of their proposed investment. However, some investors may decide to rely on the investment platform organisers’ expertise and knowledge of specific property market areas and opportunities.

Once sufficient interest and funding is generated for a particular project, the conveyancing process commences in the usual fashion, with the added structuring of a Special Purpose Vehicle (‘SPV’) for the post-completion ownership of the property or in relation to the corporate loan arrangement over the property.

A Special Purpose Vehicle is a company set up for the sole purpose of a particular property investment and is, by its nature, intended to be legally separate from the crowd funding organisers.

Following completion, the investor will hold a specific share allotment in the SPV.

If the SPV is for property investment purposes, tenants are sought and lease arrangements are entered into with personnel from the investment platform organisation coordinating with lawyers and managing agents. Rental income is accordingly received and the platform organisers deduct their commission fee.

Furthermore, at the relevant time, it may be decided by crowd funders on a particular project to sell the property acquired. The subsequent pricing of the said property would be a matter for the crowd funders to agree collectively. In addition, investment platform organisers would charge a fee on the capital growth in the value of the property asset.

If you require any assistance with a matter such as the above, please contact Richard Greenby on 020 7387 2032, or complete our online enquiry form here.

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MAY
05

Crown Court Appeals in Motoring Cases – by Martin Lewis (Barrister, Castle Chambers)

motoringAll too often, a defendant wonders if he or she has been treated fairly, and whether an incorrect finding of guilt or a sentence that is just too severe has to be accepted as final, especially in motoring cases when they have experienced the ‘rough justice’ that can be dealt out by a Magistrates’ Court.

In all such instances, provided that a Notice of Appeal (a document briefly setting the claimed errors of the magistrates' findings) has been served on the Magistrates' Court within 21 days from the date of conviction/sentence, a defendant is entitled to take the case further and appeal to the Crown Court to have their case reconsidered. If the 21-day period has been exceeded, then a defendant would have to apply to the Crown Court for permission (or leave) to appeal out of time. This application should set out the reasons why the Notice of Appeal is late. The later the Notice of Appeal, the less likely the Crown Court is to grant leave to appeal out of time.

Whether it is an appeal against conviction or sentence, the case is decided by a Crown Court judge, sitting with two magistrates (no jury is involved). The appeal is essentially a rehearing of the proceedings and, where it is an appeal against conviction, the evidence is heard anew with witnesses required to give testimony for a second time.

Where an appeal fails, the judge may substitute a harsher sentence than was passed by the Magistrates' Court (although this is a rare event) and will almost certainly order the unsuccessful appellant to contribute financially to the costs of the respondent (usually the CPS).

Why appeal?

  • The Crown's case was not convincing or there was no good reason to reject my defence.
  • The verdict has prevented me from keeping my job.
  • The verdict could be used against me should I be summonsed or charged in the future on another allegation.
  • The verdict has caused the price of my motor insurance to rise steeply and/or I cannot get insurance at all.
  • The verdict has led to the revocation of my taxi driver licence.
  • The sentence was too harsh, i.e. I ought not to have been given a driving ban or banned for so long / my driving licence ought not to have been endorsed with so many penalty points / the fine was much too high.
  • A prison sentence should not have been passed (a number of driving offences carry the possibility of imprisonment, notably: drunken driving, dangerous driving, and failing to stop after an accident).

The reality

From my experience, I estimate that over 50% of Crown Court motoring appeals succeed in whole or in part. If the circumstances are right, an appeal to the Crown Court provides a good opportunity to correct the mistakes that are frequently made by magistrates and prosecutors.

Funding the Appeal

If you had legal aid for the Magistrates’ Court proceedings, it is most likely that you would be granted legal aid to cover your representation for the appeal.

However, if you funded the Magistrates’ Court proceedings privately (usually the case), then the Crown Court Appeal will also have to be paid privately. This does not mean that the fees are necessarily exorbitant and in any event, if your job, for example, is dependent upon having a licence, it may be worth the costs of an appeal.

Martin Lewis is a barrister of 18 years call at Castle Chambers and deals with cases covering all aspects of criminal law. This article is for informational purposes only and does not constitute legal advice. If you require any advice please contact Jeffrey Lewis or Siobhain Egan on 020 3553 7443, or complete our online enquiry form here.

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APR
23

Defending Those with Dementia in a Criminal Trial – by Martin Lewis (Barrister, Castle Chambers)

old jailbirdIn the public's psyche, our biggest health fear, cancer, has largely been replaced by a diagnosis of dementia. What can be worse than to suffer the loss memory, control, identity, and the loss of self?

An ever-aging population has meant that dementia is affecting many families, and an appetite to prosecute historic crimes, notably sex crimes, against now elderly defendants, means that dementia has become an increasing feature of our criminal legal system. For some years, the fastest growing sector of UK's prison population has been men in their 60's, 70's , 80's and even 90's with a significant number of these serving lengthy terms for offences committed decades ago.

So how do our criminal courts cope with those defendants who, by the time of trial are suffering, or claiming to be suffering from dementia, severe or otherwise? The answer is, not very well.

Our law on this is still based on the 1836 case of Pritchard and essentially the following criteria apply: can a defendant suffering from a mental disability such as dementia, understand the criminal case that has been brought against him; adequately follow the evidence during the trial procedure; able to provide cogent instructions to his lawyers and is he capable to sufficiently participate in the trial procedure by being able to give evidence on his own behalf, or, archaically, is he able to challenge a juror?

If, supported by the evidence of at least two court approved psychiatrists, the answer to any of these issues is NO, as found by the trial judge, then the defendant is found unfit to plead. Thereafter, a jury is called upon to hear evidence to determine whether "he did the act" e.g., did he or did he not set fire to the building? The jury are not required to enquire into the defendant's mind (or lawyers' speak - mens rea) and consider questions such as intent.

Where a jury finds that the defendant "did the act" then the court's powers are quite limited and are restricted to an absolute discharge or some form of supervision or detention under a hospital order. The judge cannot impose a prison sentence.

This procedure applies to all unfitness to plead cases, but where dementia is the disability, particular difficulties are presented.

Conclusive diagnosis of dementia or the severity of the condition is impossible and physical evidence can only be obtained upon post-mortem.

It is a condition that can easily be feigned and the court misled; notably the infamous case of Earnest Saunders. His case has resulted in the criminal courts approaching cases of claimed dementia with deep suspicion.

The main apparent aspect of dementia is loss of memory and memory loss of the facts surrounding an alleged crime cannot itself amount to a defence or an assertion of unfitness to plead. Therefore, a diagnosis from two psychiatrists that a defendant is mildly affected by his dementia may well not be enough.

Of course there is the current controversy surrounding the high profile case of Lord Janner where according to the DPP there is sufficient evidence to prosecute but, due to his state of dementia (not his age or the age of the alleged crimes) it is thought "not to be in the public interest" to try him.

Undoubtedly, the DPP would not have reached this decision casually and without thorough psychiatric examinations, having taken place and certainly at least one of those psychiatrists would have been appointed by the Crown. Even so, her decision can be criticised. She has deprived the complainants of their chance to give evidence and she has deprived the accused Lord Janner of any chance of testing their evidence in an effort of salvaging what is now a ruined reputation.

Martin Lewis is a barrister of 18 years call at Castle Chambers and deals with cases covering all aspects of criminal law. This article is for informational purposes only and does not constitute legal advice. If you require any advice please contact Jeffrey Lewis or Siobhain Egan on 020 7387 2032, or complete our online enquiry form here.

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