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Estate Agents Fined for Money Laundering Breaches

money launderingThe Office of Fair Trading (OFT) last week fined three separate estate agents, based in London, Northamptonshire and Cardiff respectively, a total of £246,665 for failing to comply with money laundering regulations. It is another example of the increased focus by regulatory authorities on compliance issues.

The Money Laundering Regulations 2007 are designed to prevent businesses from being used for money laundering or terrorist financing purposes and require regulated businesses to, for example, apply risk sensitive policies and procedures on the verification of customer identity, record keeping, training staff and reporting suspicious activity to the National Crime Agency.

In all three cases, says the OFT, the failures were found to be significant and widespread and included:

  • Failures to apply adequate customer due diligence measures when carrying out estate agency work.
  • Failures to conduct ongoing monitoring of business relationships.
  • Failures to establish and maintain appropriate policies and procedures on adequate record-keeping, internal controls or risk assessments.
  • Failures to train relevant employees in how to recognise and deal with transactions and other activities which may be related to money laundering and terrorist financing.

The companies in question have four weeks to appeal against the fines.

If you suspect that your company has committed a regulatory breach or a criminal offence we can help. Our business investigations team is led by Jeffrey Lewis and includes fraud, regulatory, money laundering, bribery and corruption, insider dealing, and tax and VAT specialists who are listed as leading practitioners by all the major legal ranking directories.

Contact Lewis Nedas’ Criminal Lawyers in London

If you have been charged with money laundering offences and require specialist legal advice, please contact our solicitors Jeffrey Lewis or Siobhain Egan on 020 7387 2032 or complete our online enquiry form here.

This blog post is intended as a news item only - no connection between Lewis Nedas and the parties concerned is intended or implied.

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Money Launderer Jailed for Eight & a Half Years

money launderingThe offence of money laundering is often found to have been committed along with other criminal offences. This was evident earlier this month when a Welsh man was sentenced to eight and a half years imprisonment for his involvement in a wide range of criminal activities, including money laundering, carried out across Europe.

Roger Budgen was, according to the National Crime Agency (NCA), a professional money launderer and head of a criminal group involved in money laundering and drugs trafficking.

The NCA's investigation into his activities began in 2010 and led, ultimately, to the arrest of over 50 individuals in a series of operations throughout Europe.

It revealed that Budgen, along with his wife, had banked over £300,000 despite having no declared income for in excess of 10 years. He had managed an international money laundering network enabling the unlawful transfer of criminal proceeds by putting other offenders in touch with each other, says the NCA.

Budgen had earlier pled guilty to the offences with which he was charged and the authorities have, so far, recovered over £1 million in cash and a substantial amount of illegal drugs as well as other criminally derived assets.

In addition to his prison sentence, Budgen also received a Serious Crime Prevention Order, which will restrict his ability to travel and methods of communication after his release.

Money laundering is a fast moving, complex, rapidly expanding area of law which affects individuals, professionals and businesses alike. It can involve prosecuting authorities as varied as the Department of Work and Pensions and the Revenue. Expert advice is essential.

Contact Lewis Nedas’ Criminal Lawyers in London

For specialist criminal defence advice on money laundering please contact our solicitors Jeffrey Lewis or Siobhain Egan on 020 7387 2032 or complete our online enquiry form here.

This blog post is intended as a news item only - no connection between Lewis Nedas and the parties concerned is intended or implied.

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AML-Related Fine for Standard Bank PLC

money launderingIn the first anti-money laundering (AML) case to be brought by the Financial Conduct Authority (FCA) in relation to commercial banking activity, the regulator announced last week that it has fined Standard Bank PLC £7,640,400. It is also the first AML case to use the new penalty regime, which applies to breaches committed from 6th March 2010.

Under the new regime larger fines are expected.

Standard Bank is the UK subsidiary of Standard Bank Group, South Africa’s largest banking group. Standard Bank Group is an international banking group with extensive operations in 18 African countries and operations in 13 other countries outside of Africa.

According to the FCA, the case concerns failings by Standard Bank in connection with its AML policies and procedures over corporate customers connected to politically exposed persons (PEPs). 

Between 15th December 2007 and 20th July 2011, says the FCA, Standard Bank failed to comply with Regulation 20(1) of the Money Laundering Regulations because it failed to take reasonable care to ensure that all aspects of its AML policies were applied appropriately and consistently to its corporate customers connected to PEPs.

Guidance issued by the Joint Money Laundering Steering Group provides that where a corporate customer is known to be linked to a PEP, such as through a directorship or shareholding, it is likely that this will put the customer into a higher risk category, and that enhanced due diligence (EDD) measures should therefore be applied. During the relevant period, Standard Bank had business relationships with 5,339 corporate customers of which 282 were linked to one or more PEPs.

The FCA reviewed Standard Bank’s policies and procedures and a sample of 48 corporate customer files, all of which had a connection with one or more PEPs. The results of this review highlighted serious weaknesses in the application of Standard Bank’s AML policies and procedures.

This meant that it did not consistently:

  • carry out adequate EDD measures before establishing business relationships with corporate customers that had connections with PEPs; and
  • conduct the appropriate level of ongoing monitoring for existing business relationships by keeping customer due diligence up to date.

The weaknesses in Standard Bank’s AML systems and controls resulted in what was considered an unacceptable risk of Standard Bank being used to launder the proceeds of crime.

"Banks are in the front line in the fight against money laundering,” said Tracey McDermott of the FCA. “If they accept business from high risk customers they must have effective systems, controls and practices in place to manage that risk. Standard Bank clearly failed in this respect.”

According to the FCA, Standard Bank and its senior management have co-operated with the FCA investigation and have taken significant steps at significant cost towards remediating the issues identified, including seeking advice and assistance from external consultants.

Standard Bank settled at an early stage of the investigation and qualified for a 30% discount on its fine. Without the discount the fine would have been £10.9 million.

Contact Lewis Nedas’ Criminal Lawyers in London

For advice on anti-money laundering compliance and investigations please contact our solicitors Jeffrey Lewis or Siobhain Egan on 020 7387 2032 or complete our online enquiry form here.

This blog post is intended as a news item only - no connection between Lewis Nedas and the parties concerned is intended or implied.

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Siobhain Egan discusses Anti-Money Laundering in ‘Finance Monthly’

How has the AML landscape changed this year?

2013 has been an extraordinary year for anti-money laundering compliance. The eye-watering fines imposed on banks for AML compliance failures imposed by US regulators, in particular, have led to acute reputational damage for these financial institutions and has been the catalyst for them to take AML compliance seriously.

Doubtless it is going to be a slow process for multinationals, and the cost of this compliance is going to be extraordinarily high. Hedge funds, for example, are spending on average between 5% and 10% of their operating costs on compliance, with the smaller hedge funds bearing a disproportionate burden. The banks are moving towards a more co-operative AML approach and are sharing common service platforms of intelligence etc in order to save costs.

Several of the multinational institutions have realised that a certain type of client base in certain jurisdictions (which are politically volatile, may be subject to sanctions, or are in emerging markets where there is lax AML compliance) are simply too high risk and too expensive to monitor, e.g. Barclays decided to pull out of the money transfers business, which attracted enormous publicity and has led to difficulties in Somalia.

In the UK the FCA highlighted AML in this year's annual report as being of primary importance and the Director of the SFO, David Green QC, has called for the equivalent of section 7 of the Bribery Act 2010 (i.e. the corporate strict liability offence of failing to prevent bribery) to be extended so that it could apply to other corporate offending, e.g. fraud and money laundering. This will require fresh legislation but is likely to have a sympathetic response in government circles. The defence to the corporate offence is that the company would have to prove on the balance of probabilities that they had adequate procedures in place.

The Fourth EU Money Laundering Directive emphasises the risk-based approached to AML compliance which will be nothing new to UK AML specialists. Under the Directive, politically exposed persons now include domestic PEPs, i.e. those who hold prominent public positions in the domestic country, which has been extended to include family and associates.

Another important aspect of the Directive focuses on the increased transparency of information concerning beneficial ownership of companies and trusts. The Directive will be implemented at some stage during 2015 in the UK.

Other developments on the AML landscape this year concern the abuse of digital currencies by money launderers and organised criminals; the application of FATCA; tax evasion/aggressive tax avoidance and the consequential undermining of the Swiss banking secrecy ethos; MTIC frauds (missing trader fraud), primarily fraud operating within the EU and arising because of the various VAT rates within the EU; renewed emphasis by the EU on gambling and the extension of additional money laundering checks in that sector; prepaid cash cards and mobile payments.

What regulations surround money laundering in the UK?

Essentially the primary regulations are found in the Money Laundering Regulations 2007 as amended by the Money Laundering (Amendment) Regulations 2011; principle 3 of the FCA Principles; Proceeds of Crime Act 2002 (as amended by SOPA 2005); the Terrorism Act 2000 (amended by ATCSA 2001); the Terrorism Act 2006; and the aforementioned EU Fourth Money Laundering Directive.

How can a business assess their risk of exposure to money laundering activities?

I would advise that any business assessing exposure to money laundering activities thinks laterally, flexibly, and moves away from the 'tick box' mentality, apply individually tailored systems and procedures which are reviewed regularly, be proactive, take nothing for granted or at face value, complete your customer due diligence (CDD), know your PEPs, know who are the true beneficial owners of the companies with which you are dealing, execute continued enhanced due diligence, and remember that this is an ongoing process throughout the relationship with your client/agent or business partner.

How should a business respond if they discover they have unwittingly become caught up in money laundering?

Immediately institute a full investigation bringing in an independent multidisciplinary team to assist. Note, this does not have to cost the earth. A good forensic accountant and specialist lawyer experienced in both criminal and regulatory work and dealing with the regulatory and prosecuting authorities should be sufficient. The important issues when dealing with the authorities is to report the breach to the regulators as soon as possible, simultaneously assess what remedies need to be applied to deal with that breach so that it does not reoccur, and remember that when considering self-reporting, real care must be taken. It is vital that you must come with 'clean hands' to the relevant authority, make no attempt to hide any information, documentation, or mislead them. We are fast approaching a new era of Deferred Prosecution Agreements which will be in force in February 2014 and will be applied initially by the SFO and the CPS. I fully expect DPAs will also be in the FCA armoury before long.

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Jackson Reforms-A Major Change in Law? by Jasbir Kaur

During a House of Lords debate on 26 February 2013, Lord Beecham was unflinching in his criticism of the proposed implementation date of the Jackson reforms.

He observed:

“My Lords, I always like to be consistent and it certainly would be inconsistent of me not to begin with a complaint about the process here. These regulations come to us some five weeks before they are due to take effect. The Bar Council has drawn attention to this, rightly stressing that a major change in the law, particularly in relation to DBA’s, is being introduced with very little time before they come into effect for people to work out how it is going to be applied”.

The implementation date of 1 April 2013 means there is less than a fortnight for litigants, courts, and practitioners to comprehend what has been described by Lord Beecham, as being a “pretty defective-looking set of regulations”.

So what forms part of the Jackson reforms?

  • Contingency fee agreements (now called "damages-based agreements") will be permissible for all types of litigation;
  • Litigants who have entered into a conditional fee agreement with their lawyer will no longer be able to recover the success fee when they win their case, and similarly after-the event insurance premiums will not be recoverable from the losing side;
  • The disclosure exercise will be tailored to each specific case;
  • There will be a change in respect of a defendant having to pay an additional sum to a claimant where the defendant fails to beat a claimant's Part 36 offer to settle (this reverses Carver v BAA [2008] EWCA Civ 412 in which it was held that where a claimant beat a defendant’s Part 36 offer but only just, the claimant should prima facie pay the costs from the date of this offer);
  • The small claims jurisdiction for cases other than personal injury claims will be increased from £5,000 to £10,000;
  • Claims worth £100,000 or less will no longer be able to be heard in the High Court and so will come before the County Court (the current limit is £25,000);
  • There is more encouragement towards mediation and consideration of schemes for pre-action directions;
  • Judges will be encouraged to use their case management powers more strictly, &
  • Judges will also manage the costs of litigation by approving the parties' budgets for costs.

For those unaware of the implications of the new regulations, they will revoke the 2000 Conditional Fee Agreement Order, which allowed for a means of litigation funding where the solicitor agreed to perform the litigation services for no fee if the litigation is unsuccessful. If, however, the litigation is successful, then the solicitor is entitled to claim an uplift, which is known as a success fee, in addition to their base costs. This uplift is recoverable from the losing defendant.

In his Review of Civil Litigation Costs, Lord Jackson made the point that,

“In some areas of civil litigation costs are disproportionate and impede access to justice. I therefore propose a coherent package of interlocking reforms, designed to control costs and promote access to justice.”

Lord Jackson recommended that the right to recover additional fees from the losing side should be removed, in all cases, and as a result Part 2 Sections 44 – 62 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (“LAPSO”) will be implemented, which restrict the ability of the claimant, or indeed their legal practitioner, to recover more than their base costs.

It is clear that Rupert Jackson is clearly trying to promote justice and access to the courts system for the majority of those who require it. Therefore, given that this is the main focus, it must be assessed if this is actually the case as this will help to establish the success of any legislation. The prime areas for clarification are: how damages-based agreements will be regulated; what changes will be made to Part 36, and the contents of the new rule on disclosure.

There is a justifiable concern within the legal profession at the lack of time which it will have to digest and prepare for the new rules.  The Law Society's president, Lucy Scott-Moncrieff, has written to the Justice Secretary/Lord Chancellor Chris Grayling, recommending that implementation be deferred again.  Her concern - shared by many - is that, even if the current deadline is achievable, rushing to meet it "at breakneck speed" is a "recipe for chaos".

Nevertheless, the main question is will these reforms actually provide the access to justice that Rupert Jackson intends? If he intends to provide access to justice, he must also intend for there to be a greater level of access to the courts, as this is where justice would be achieved. By cutting out success fees and after the fact costs, this could potentially lead to more mediation instead of using the court system, which may benefit all parties as attending court can be an anxious experience and the courts are often overwhelmed by trivial cases.

So are the reforms really a call for practitioners to press the panic button? Or should we welcome a set of changes aimed at extending access to justice to all?

Overall, it is clear that the aim is to make the dispute resolution process quicker, cheaper and easier. As Jackson himself says,

“The idea that justice has no price tag is unacceptable in the modern world. Our civil system must mend its ways and provide every court user, whoever they may be, with a dispute resolution system at a proportionate cost. This provision is my objective. I have sought to deliver it by proposing a structured package of integrated rules applicable to the conduct of proceedings, funding, and costs.”

Therefore, practitioners now need to give serious consideration to costs budgets and look to embrace these changes with careful compliance being at the back of their minds at all times. Failure to observe these changes may result in draconian measures with costs penalties being imposed by the Court. In spite of dire warnings about the effects of the Jackson proposals on access to justice and on the wellbeing and finances of lawyers, the government has decided to press on with implementation of Lord Justice Jackson’s recommendations for the reform of civil costs. How effective these reforms will be on the dispute resolution process is yet to be seen but there is no doubt, the Jackson reforms are here and are here to stay.

If you require further information on this or on any of these changes and how it may affect you, please contact Jeffrey Lewis or Jasbir Kaur, our Litigation Specialist, on 0207-387-2032.

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