Latest leak lessons

This is a tricky time to write a blog post, as everywhere is swirling with stories from the “FinCEN Files”.  I have explored the leaks on the ICIJ website, read the reputable (and disreputable) press sources and watched the “Panorama” programme on the BBC (“Banking Secrets of the Rich and Powerful”).  I shall leave the dissection of the details to them, but a few things have struck me.

First, I am disappointed at how the SAR process is being, well, misrepresented.  I am always delighted when money laundering hits the headlines (if a little embarrassed that the UK is always, but always, involved) because it tells the general public about what we AMLers do, and why we ask for identity documents, and why we might be concerned about that large payment they are making to a lovely chap they have been chatting with in Afghanistan or Nigeria or China.  But sometimes the educational opportunity is squandered with inaccurate or incomplete information.  For instance, the BBC newsreader, breaking the story on the late-night news on Sunday, said: “SARs are how banks can report their wealthiest clients if they do anything suspicious.”  This makes it sound as though SARs are for PEP/rich people only – not for all clients.  And it seemingly restricts the system to banks.

Then on Monday morning I opened my Economist Espresso update [I can’t stomach full news first thing in the day – this little digest is all I can tolerate] and read this: “SARs are to be filed to the American government when a bank suspects a client’s assets have been acquired nefariously.  They also indemnify the banks from taking further action – thus allowing them to move trillions of dollars in suspicious transactions, which facilitates money-laundering.”  For now, I shall put to one side my ongoing battle with the Economist about the hyphen that they insist on putting in “money-laundering”.  But SARs do not indemnify anyone – unless this is an American flavour of the system…?  (I don’t work in the US so have only a passing acquaintance with the niceties of their AML legislation, such as it is.)  In the UK, making a SAR is far from a “get out of jail free, well done for spotting that and now you can launder to your heart’s content” card: it may provide you with a defence to a charge of failing to disclose, but as for indemnifying the reporting institution so that it can carry on without doing anything else about that dodgy money, well, that’s not my view of how it works.  I’d be grateful for any clarification re US or UK “indemnification”.  And none of the sources so far has mentioned that SARs must also be submitted by lawyers, accountants, TCSPs, etc. – they make it sound as though all the responsibility lies with the banking sector.

The “Panorama” programme contains the usual mix of “can you believe it?” and “we told you so” stories.  Diligent MLROs will already be well aware of the dangers of using “box-ticking, lawyer-ish reasons why they haven’t done anything wrong” (Edward Lucas of the Center for European Policy Analysis).  But one lesson they could take from the programme is that of Christopher Harborne aka Chakrit Sakunkrit.  Mr Harborne holds a British passport in that name, and a Thai one as Mr Sakunkrit.  (Which means that any financial institution he uses which is unaware of his dual identity cannot be certain that they have the full picture when it comes to exposure to their client.)  In recent years, thanks to the explosion in golden visas and passports for investment, I have been advising MLROs to ensure that their CDD procedures include the question: “Is this your only nationality?”  It seems that we should then ask a follow-up/variant question: “Do you hold a nationality in any other name?”  Or perhaps just go for it, Senator McCarthy-style: “Are you now, or have you ever been, a money launderer?”

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4 Responses to Latest leak lessons

  1. Fraudsters Diary says:

    It clearly raises the question regarding how many other dual identities (officially sanctioned or otherwise are ‘in the system’ No surprises re Companies House . They might as well replace their records with a whiteboard and marker oen.

  2. Robert James Long says:

    ” They also indemnify the banks from taking further action – thus allowing them to move trillions of dollars in suspicious transactions, which facilitates money-laundering.”

    To be fair, while this is not 100% accurate, its a impression that is easy to form of the current system given the number of SARS that are issued by banks AFTER they have got rid of a client for suspicious activity they have otherwise tolerated for a year or two (” We reviewed the client and noticed all this behaviour that was not apparent when we on-boarded them…” Perhaps the overworked compliance department just for round to exmaning them hmm?), that is made a profit from, before then getting rid of the client and submitting a SAR.

    Oh, and the fact that we now refer to some SAR’s as “DAMLs” (Defence Against Money Laundering) you can see how the above impression is formed. I suspect whoever leaked the material in the first place did it out of frustration at how ineffective the current regime is at stopping large scale Money laundering. I would never leak documents, but I understand to well the frustration at the ineffectiveness of our current arrangements,

    • Thank you for your comment, Robert. And you’re right: there is a lot of (disingenuous?) misunderstanding of the system, which is why I was a little frustrated at this missed opportunity to explain it more clearly and accurately. Still, some publicity for AML is better than none at all!

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