Podcasting off

I am a creature of the written word: there is nothing I like better than reading, unless it’s writing.  I can spell almost anything (although I always have to think carefully about fuchsia – until I remember that it’s from the name of German botanist Leonhart Fuchs) and am a whizz at indices/indexes (both acceptable: the first is Latin, the second later English).  And – thanks in no small part to a ferocious teacher for O-level comprehension – I can pick the salient points out of any article, diatribe, commentary, essay, study, report or assessment in a matter of moments.  What I am not very good at is listening.  My hearing is perfectly fine, thank you, but I do drift off when I am expected to sit still and listen for long periods without doing something else.  I can manage an episode of “Desert Island Discs” while I am cooking, or a drama on Radio 4 while I am knitting, but something for work, while I am expected to just sit and listen without being distracted – that’s hard.

It’s particularly hard because the world – or at least the world of AML – has gone podcast-mad.  Just this week I have had three podcast-alerts drop into my email box, each linking me to something lasting an hour.  A whole hour!  I’m almost certainly not consuming podcasts in the right way: they’re meant for thrusting young things commuting by train into the City, listening via wireless earbuds (I may be making this up) to one of their three smartphones.  I work from home, and have a steam-driven smartphone and no earbuds, which means that I try to play podcasts on my laptop, speakers turned on – a bit like the radio.  And of course, after about ten minutes, I start to look around my desk for something else to do – with a podcast, unlike a written article, you can’t just flick forward to the bit that interests you.  And it’s not like face-to-face training, when you can gaze at the speaker and at other people: it’s just me alone in the office, watching the podcast time marker creeping along the bar to the hour.  And before I know it, I’m halfway through my tax return and I’ve missed almost all of the podcast.

Is it possible for this (fast-reading, slow-listening) dinosaur to make a little plea to podcasters?  I really do want the information that you are sharing – the topics sound fascinating, and I’d like to hear the latest thinking from experts.  But is it possible for you to make a written transcript of your podcast and send that instead…?

Posted in AML, General thoughts, Training | Tagged , , , , | 13 Comments

Copyright or copy wrong?

As an author, I am rather keen on the concept of copyright – the noun first being used in, we are told, 1729 to mean “the exclusive right to make and sell copies of an intellectual production”.  But I will admit that I had never thought about it in the context of due diligence – until, that is, a Guernsey client contacted me with this intriguing question: “We have been advised by one of our managers that to continue to print/save articles published about clients for AML/risk assessment purposes we should be paying for a NLA Media Access International Media Monitoring Agencies Licence as if we do not we would be falling foul of the Copyright, Designs and Patents Act 1998.  I disagree with them as we are not republishing the articles: we are using them for research, to verify information provided by clients or to monitor for AML/CFT purposes.  Which side of the fence do you think is the correct one?”

Now this is an interesting little legal conundrum *rubs hands with glee*.  To be honest I had never heard of that licence, so I had a look and I think what the NLA website is saying is that such a licence is intended for “UK and International media monitoring agencies which supply content in paper and digital format to clients”.  Now this is obviously not what my Guernsey client is seeking to do – they are simply performing the AML and risk assessment checks on their clients that the law requires of them.  But is there a copyright concern anyway, which could be addressed by the acquisition of a different licence/permission?  So off I toddled to the Copyright, Designs and Patents Act 1998.  Scanning it I came across section 29(A), which says this: “The making of a copy of a work by a person who has lawful access to the work does not infringe copyright in the work provided that—(a) the copy is made in order that a person who has lawful access to the work may carry out a computational analysis of anything recorded in the work for the sole purpose of research for a non-commercial purpose, and (b) the copy is accompanied by a sufficient acknowledgement (unless this would be impossible for reasons of practicality or otherwise).”  (B) is easy to achieve: you simply make sure that the author and source publication and/or URL are visible on the document.  But what about (a)?  Does AML checking and risk assessment count as “computational analysis” – or is that something more numerical (rather than the subjective view that AML checks tend to take)?  And am I looking at the right bit of the Act anyway?

Not much further forward, I sent my query to a greater power – a QC friend of mine who is Big in Financial Crime.  And he said this: “I should have thought there is a distinction to be drawn: collecting articles about clients is one thing, whereas using AML articles for commercial purposes to train clients is another.”  Indeed: but that was never the intention of my Guernsey client.  They are simply doing CDD checks and putting evidence on their files to show the source of their information.

So now I put it to the collective wisdom and experience of you, my lovely readers.  Have you ever worried that filling your client files with information found in publications is a potential infringement of copyright?  And if so, what have you done about it?

Posted in AML, Due diligence, General thoughts | Tagged , , , , , , , , | 11 Comments

Pass the popcorn

My telly viewing habits are rather old-fashioned: I like nothing better than watching a repeat of a beloved programme (original “Upstairs, Downstairs” and “Poldark”, I’m talking about you) and I steer clear of anything gory, violent, scary or – saints preserve us – cutting edge.  This means I am generally quite happy with free telly and my own extensive collection of elderly DVDs and videos – although whenever a new series of “The Crown” is released, I sign up for a month of Netflix, bulk-buy the Maltesers, and settle in for a binge.  But am I now going to have to do this for “The Laundromat”?

It’s a case of bad timing: this movie was showing in my local Cambridge cinemas during one of my Guernsey weeks – and then it disappeared.  I was irritated to miss it: how often do we get a film starring Meryl Streep and Antonio Banderas, with money laundering as a central theme?  Never, that’s how often.  Early reviews told me that it wasn’t the greatest epic ever filmed, but still – I was keen to see “my” subject on the big screen.  The trailer looks good (although, in the manner of trailers, it may be that it shows all the best bits: I’ve certainly never met any lawyers who dress quite like Messrs Mossack and Fonseca).

But now I am ABSOLUTELY DESPERATE to see it – because Mossack Fonseca is suing Netflix.  A lawsuit was filed in Connecticut on 13 October 2019 alleging that “in its movie… [Netflix] defames and portrays the plaintiffs (Mossack and Fonseca) as ruthless uncaring lawyers who are involved in money laundering, tax evasion, bribes and/or other criminal conduct”.  I should jolly well hope so.

Posted in Due diligence, Money laundering, Organised crime, Tax | Tagged , , , , , , , , , , , | Leave a comment

Staying the course

Brace yourselves: this is going to be one of those posts where I have a vision of how it is all going to tie together, but it will take time.  I was at an event recently where I was told – to my combined delight and horror – that “everyone in AML reads your blog”.  I was entirely unaware of this: the only stats I get are from WordPress, which informs me that I currently have 1,006 followers; I have no way of knowing how many people are reading my posts on LinkedIn (to which I copy them automatically) or because other people have forwarded them.  So “everyone in AML” – that’s unexpected.  I am hugely gratified, of course, and would like to claim particular brilliance, but as with most things in my life, I think my success can be put down to stickability.  I am a great sticker-at things: once I start a project, I will always finish it.  (I bought a car in 1985 and still drive it today; I met a man in 1984 and reader, I married him.)

I mention all of this not to boast, but because I think it’s the characteristic I have in common with compliance people in general and MLROs in particular: we’re like a dog with a bone.  Not for us the quick buzz of a sale and then move on: we like to dig and pick and revisit until we really understand a client or a transaction or a situation.  And yet, this tendency is rarely recognised with any admiration: financial institutions reserve their praise for those who bring in profit rather than for those who prevent it being lost (to dodgy clients, or in regulatory fines, or in reputational damage).  In an entirely unscientific survey of the current Big Four banks in the UK (please don’t write in), I find that all four are led by individuals who have risen through the sales side of their organisation – not one has a compliance background.  Jes Staley of Barclays was in corporate finance and private banking; Noel Quinn of HSBC came through equity finance and commercial banking; António Horta-Osório or Lloyds Banking Group through corporate finance; and Ross McEwan of the Royal Bank of Scotland Group through securities and retail banking (he’s to be replaced next month by Alison Rose, whose career has been in commercial and private banking).  Perhaps it’s simply a matter of personality – sales people are better at selling themselves, while compliance people are happier in the background – but it would be interesting to see how a regulated firm would operate with a compliance expert at the helm.

So stickability: that’s the identifying characteristic of my tribe (and therefore presumably many of the “everyone in AML” readers of this blog).  Welcome to you all, and thanks for sticking with me: this blog started in 2011 and has continued without a break since then.  Perhaps it will turn out to be the part of my AML career for which I am best remembered.  At least it’s solved the problem of what to put on my gravestone: Susan Grossey – she really hated money laundering.

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Dutch courage

One of the dearest ambitions of my little AML-ish heart has been to participate in a think-tank or colloquium or workshop or similar learned gathering, with the aim of influencing AML strategy.  I want to take part not for the splendid biscuits – although I believe that participants are usually well-rewarded in the baked goods department – but for the co-operative atmosphere.  I know that regular readers will be sick of this particular drum and my banging of it, but it is called “organised crime” for good reason: criminals co-operate to their mutual benefit, sharing expertise and laundering methods and the names of likely victims and professional accomplices.  We, on the side of the angels, make mealy-mouthed excuses about commercial confidentiality and sectoral differences.  I’ve ranted about it recently, in my plea for a repository of case studies for more lively training.

But lo! what is this I read in the Dutch press?  A month ago the Dutch banking association (Nederlandse Vereniging van Banken, or NVB) announced that five Dutch banks – ABN AMRO, ING, Rabobank, Triodos Bank and de Volksbank – have agreed to set up an organisation that will monitor payment transactions: Transaction Monitoring Netherlands (TMNL).  The five banks and the NVB will spend the next six months checking the technical and legal challenges, but the aim is to monitor their combined transactions – all 27 million transactions a day, across the five banks – to spot money laundering.  If it goes well, other banks will be invited to join.  As we know, money launderers do like to share their money around, so each bank looking at its own transactions in isolation is really not the best approach.  As the NVB puts it: “The combining of transactions effected by the various banks is expected to make it easier to spot flows of criminal funds.”  It won’t be easy, we know that, but then good, effective changes rarely are.  Of course, TMNL will not be the very first example of competitor banks co-operating on an IT project: that is probably the SWIFT system, set up in 1973.  Here’s hoping that TMNL becomes as much of an industry standard – and that we don’t have to wait another forty-six years for the next co-operative initiative.

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The stink of money laundering

Have you ever fibbed slightly about what you do for a living (that you work in AML) in order to avoid yet another tedious story about someone’s grandma who was with her bank for 312 years and STILL had to prove her identity when she wanted to pay in a cheque for £3 million when she sold her council house?  I know I have: I just say I work in finance, which gets rid of most people pretty sharpish.  And of course the more rabid end of the press is full of tales of woe from people who have been asked to take in their passport to their local bank branch or give an explanation for source of funds and really don’t think they should have to.  Which is what made me sit up and take notice – and cheer rather loudly, which startled the office cat – when I read this on one of my news alerts at the weekend.

On the This is Money website, financial journalist Tony Hetherington responded to a question from “Ms J W”, which was this: “I have had my Barclays accounts since 2014, when I was a student, before moving to Gibraltar.  My balances of almost £25,000 have been wiped clean by the bank, without notice.  All my transactions are normal, but now I am left with no money.”  I sighed, expecting the usual “poor you, you’ve been caught in the fiendish web of over-zealous AML checks, I will take up the cudgel on your behalf and here’s hoping the ill-informed and overly-pedantic bank staff learn their lesson” – but no!  Mr Hetherington’s response is entirely unexpected.

“I receive letters like yours quite often.”  (I bet he does.)  “If a bank suspects a customer of money laundering, it must freeze the account.  This does not mean the money is lost, but it is temporarily blocked.”  (Excellent explanation.)  “That’s what I thought had happened, but your own experience is more serious.  The National Crime Agency uncovered evidence that you and other current or former overseas students at British universities were laundering criminal cash from China.  NCA investigators won a court order to freeze 95 bank accounts holding about £3.6 million – rather more than you might expect to be held by students or recent graduates.  More than a dozen pages of evidence about your own accounts” (a dozen pages – I’m now wondering why on earth Ms J W wrote in in the first place) “highlight three deposits at a bank in Wood Green in London: £4,000, another £4,000, and then £3,560.  These separate deposits were made in cash over the space of seven minutes.  Four days later, there were three separate cash deposits in less than 30 minutes at a bank in Knightsbridge, totalling £8,000.  And two days after that, more than £3,000 in cash was deposited at a bank in Canary Wharf.  On the day those deposits were made in Wood Green, your debit card was used repeatedly in Gibraltar and you have confirmed to me that you were there.  You have told me that the cash deposits in London were made by a currency exchange firm that turned Chinese funds into sterling, though why the firm would make multiple cash deposits just minutes apart is unexplained.  It has the stink of money laundering and the NCA was completely right to take action.”

Mr Hetherington, you have restored my faith in financial journalism – and I may have your final sentence printed onto a t-shirt to wear under my work clothes (no-one will see it, but I’ll know it’s there and will take succour from it at difficult moments).

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The smile on the crocodile

As regular readers will know, last month I spent two weeks in Botswana, on safari.  We saw all the usual amazing beasts (elephants using their trunks as snorkels!), but perhaps the most alarming were the crocodiles – enormous, prehistoric and terrifying.  At the same time as we were making sure not to dangle any body parts in the croc-infested waters, the Most Serene Republic of San Marino (yes, that’s its real name) announced that it had confiscated €19 million that had allegedly been deposited in local bank accounts by Denis Sassou Nguesso – president of the Republic of Congo since 1997.  The Sassou Nguesso family is not known for its poverty, nor for its open manner of doing business: Global Witness reckons that the president, his son Denis Christel and his daughter Claudia have all had their hand in the state’s till.

San Marino has been running a money laundering investigation and the €19 million is only part of the €69 million deposited in thirty-six accounts in San Marino’s banks by the president and his relatives and cronies between 2006 and 2011.  Not all the money was socked away for future use: investigators’ notes reveal that, alongside the usual blingy watches and luxurious hotel stays, Sassou Nguesso spent €114,000 on crocodile skin shoes.  It’s hard to know which reptiles are more scary: the ones in the rivers, or the ones in power who wear them.

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An officer and a target

I’m very familiar with the work of Money Laundering Reporting Officers, Money Laundering Compliance Officers, general compliance officers and police officers.  But I had never heard of Section 151 officers until a money laundering story of relevance to them popped up on one of the news feeds that I follow.  Section 151 refers to a part of the UK’s Local Government Act 1972 (now don’t all rush that link at once and crash the government website), and this section requires every local authority to appoint a suitably qualified officer responsible for the proper administration of its financial affairs – hence the Section 151 officer.  These people have their own dedicated online news and discussion forum called Room151, and it was here that a warning appeared in August (traditionally the silly season for government, but this warning is deadly serious).  In the wake of the NCA’s recent annual report, the Chartered Institute of Public Finance and Accountancy has been reminding its members that money laundering is a big deal, and that with the new powers introduced by the Criminal Finances Act 2017 (I assume here they are talking about UWOs), Section 151 officers should be vigilant.  As Marc McAuley, head of counter fraud services at CIPFA, put it: “Councils should put in place appropriate and proportionate AML safeguards.  Anyone who has enabled a transaction linked to money laundering could be liable – especially if the person behind the crime has been designated as a PEP.”

So, for those of us unfamiliar with the ways of local government, how could they be at risk?  Two suggestions offered by CIPFA are:

  • Signing rent contracts on housing properties where the landlord is running a front company to launder drug money
  • Organised crime groups could take on public sector contracts, thereby defrauding the government and also creating a legitimate-looking front for money laundering and other criminality (such as modern slavery offences).

Mr McAuley advises his readers: “Whilst local authorities are not directly covered by the requirements of the regulations, CIPFA would advise that councils should comply with the underlying spirit of the legislation.”

This is music to my ears.  I am more used to sectors trying to find ways out of their AML obligations – even sectors who are categorically included in those obligations.  But a sector that is not covered and still thinks it’s a good idea – well, I am delighted.  And of course it makes sense.  As we (quite correctly) make it harder for criminals to launder their money through the regulated sector, their wicked little thoughts are bound to turn to the unregulated sector.  To be frank, if you deal with money in any way, you can be sure that criminals somewhere are trying to devise a way to use you for laundering, so you might as well be ahead of the curve.

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From little acorns

Apologies for the confusion at the start of my blog post on 4 September: I was not back at all, but actually watching elephants swimming in Botswana.  I wrote a couple of posts in advance, to cover my absence, and then moved them around at the last minute without noticing the mistake.  I am now genuinely, really, honestly and totally back home.

In the spirit of sharing real-life examples and near misses, I offer this cautionary tale.  I was recently discussing a money laundering case with a financial investigator.  Underlying it all was a story as old as time: a young woman had convinced an older man that, if he really loved her in the way he professed (of which she needed to be certain before sharing her womanly favours with him), he would lend her large amounts of money to invest in her business.  When he did (both love and lend), she spent the lot on bling-y fripperies and general high living.  When denied the favours to which he felt entitled, the poor fellow had eventually taken his tale of woe to the police, who thought they might be able to bring charges of fraud and money laundering.  Central to it all were those fripperies (now that’s not a sentence you read every day).  They visited the young lady and had a snoop around her apartment, but she lived seemingly modestly, surrounded by minimal bling.  And then they asked for her bank statements.

Now, they weren’t expecting to find much, to be honest.  The lovesick swain had demonstrated his love by handing over wads of cash (she told him it was simpler), so the investigators doubted they would see much movement through the bank.  But then they spied something interesting: a monthly payment to one of these self-storage places, for three large containers.  A search warrant was obtained for the containers, et voilà – fripperies as far as the eye could see.

The monthly storage charge on the bank account is the sort of tiny detail that might escape notice.  It’s a handy example to pass on to staff, of something seemingly innocuous that could – in a due diligence exercise – raise questions.

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Family values

As I hope is clear from this blog, I work with clients from all over the regulated sector – although I will admit that I have very few law firms (because lawyers like to be trained by other lawyers) and very few estate agents (because, well, they’re estate agents and just can’t accept that they have to do all this AML stuff).  But the proportions of my client base do change: sometimes I will have more fiduciary firms, and then the banks get interested, and in the past three or four years I have taken on more clients in the gambling sector.  And one area of strong recent growth for me is family offices.

When I first heard the term, I had images of “Dallas” and JR, wheelin’ and dealin’, darlin’.  But turning to industry dictionary Investopedia, we learn that a “family offices are private wealth management advisory firms that serve ultra-high-net-worth (UHNW) investors – they are different from traditional wealth management shops in that they offer a total outsourced solution to managing the financial and investment side of an affluent individual or family”.  And I have noticed that in their elegant offices they tend to have rather superior biscuits, no doubt intended for the UHNWIs but gratefully snarfed by me.  But all is not well in the rarefied world of the family office, for money launderers – the little devils – have realised their potential.

It could be argued that we AMLers are not helping the cause: as AML obligations around PEPs (politically exposed persons) and other high-risk clients are increased, the more familiar, larger institutions may come to the conclusion that it’s all too much trouble, and decline to take them on as clients.  They then turn to more boutique firms, who need the business and might be willing to be that little bit more… accommodating when it comes to CDD.  We can’t say too much at the moment, for obvious reasons, but it seems that Jahangir Hajijev of Azerbaijan and his family (including his wife, of UWO fame) made extensive use of the family office services of Werner Capital in Belgravia – I bet their biccies are top-notch.  Although family offices could – quite rightly – say that they know their clients really well, it must be remembered that their clients will generally be really complicated, with – to put it simply – lots of money all over the place.  Checking source of wealth and source of funds for such people will be a full-time job.  Keeping track of their close associates will not be an easy task.  And then we have the age-old problem of client capture: if your entire livelihood depends on one client, how likely are you to rock the boat by reporting a suspicion about that client?

In the US there is an organisation called the Family Office Association, which offers guidance, training and networking to its members, and that seems a good idea – but a search on the word “laundering” on their website brings up no matches at all, which suggests that it is not on their radar.  This will not have escaped the notice of money launderers.

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