Cleaning house

Last week I attended an event at the elegant Whitehall premises of RUSI at which they launched “No Rest for the Wicked”, their report into what the UK’s next steps should be, now that we have (to quote the modest press release from the Treasury) “taken top spot in the fight against money laundering”.  Top spot, that is, in the eyes of the FATF – and it is important to remember that the FATF looks at things from on high, concentrating on legislative regimes, supervisory structures and international co-operation.  They do not concern themselves with (as a French friend of mine so charmingly has it) the nitties and the gritties of everyday AML efforts, but rather with assessing the framework within which the nitties and the gritties can be performed.

The RUSI report – which I recommend – clarifies the three areas in which the UK, despite its top spot, did not receive a ringing endorsement: the use of financial intelligence (basically, we’re not squeezing enough goodness from SARs); the supervisory regime (which dreams of being as structured as a dog’s dinner); and the international laughing stock that is Companies House.  As the FATF mutual evaluation report from December 2018 notes with admirable restraint, “beneficial ownership information on the People with Significant Control (PSC) register is not verified and there are limited screening checks”.  Personally, I would have put it thus:  I have written before about this embarrassing shortcoming: what on earth is the point of telling MLROs (in the UK and elsewhere) to check the CH database for company ownership information if a company can submit whatever garbage it wants to CH, secure in the knowledge that no-one will verify it?  Will we soon see a hapless MLRO doing the required due diligence checks, carefully saving a printout of the CH entry for the entity he is researching, making a reasoned risk assessment based in part on this information – and then coming a cropper when an investigator tells him that everyone knows that CH is an unreliable source?

But it seems that things may be, finally, creakingly, on the move at Companies House.  In answer to a written question on 19 February 2019, Economic Secretary to the Treasury John Glen confirmed that “a broader package of reforms to Companies House will be consulted on later this year”.  Given that the UK government is planning for an additional new register – of overseas companies that own property in the UK – to come live in 2021, we need to get a move on.  And of course, in time-honoured, finger-wagging fashion, the UK has already passed the Sanctions and Anti-Money Laundering Act 2018, which requires that “the Secretary of State must, no later than 31 December 2020, prepare a draft Order in Council requiring the government of any British Overseas Territory that has not introduced a publicly accessible register of the beneficial ownership of companies within its jurisdiction to do so”.  I’m no apologist for OTs that do AML on the cheap but even I can see that this is a bit of a cheek (unless we really would be content for an OT to set up a BO register that is just as toothless as ours).  To reap what the RUSI chap so eloquently called the “diplomatic dividend”, we do need to get our own Companies House in order, and sharpish.

This entry was posted in AML, Due diligence, Money laundering and tagged , , , , , , , , , , , , . Bookmark the permalink.

4 Responses to Cleaning house

  1. CDWOS says:

    Couldn’t agree with you more. Having spent, like you, too long fighting the regulatory and AML corner I find it particularly exasperating that the UK rather than looking at what is done in our Island where there is a propensity for ‘gold plated’ regulation (at a cost!!) take it upon themselves to unconstitutionally try to dictate to us as to precisely what we will do and how we will do it. As you have so elegantly put it “look to the mote in your own eye before you cast the first stone”, ever more relevant with some of the “nitties and gritties” back peddling and loosening that has been witnessed in the AML arena in the UK over recent months and years never mind the failure to implement properly in the first place..

  2. DCM says:

    Re the “hapless MLRO”, the AML Regs do require client due diligence around beneficial ownership to be more thorough than simply using the PSC Register: s.28(9).
    Still, I look forward to the CH’s “broader package of reforms”, but don’t anticipate anything as revolutionary as verified information or thorough screening…

    • Welcome to the blog, DCM, and thank you for your comment. Indeed, the PSC register is only part of the BO efforts, but surely the least we can ask is that it be a stable starting point. And yes, “broader” is not saying much, is it? It’s like me vowing to eat fewer Jaffa Cakes… it’s all relative. (I don’t, by the way – vow to eat fewer. Just to be clear. If anything, I’m upping my intake in these turbulent times.)

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s