Underfunded, under-supervised and over here

I know, I know: who thought I would spend my last few months as an AML-er shaking my fist impotently at the madness that is freeports?  But here we are.  I’ve written before (here and here) about why they’re such a bad idea from the point of view of money laundering, and how they will further damage our international reputation (such as it is…) for financial uprightness.  But recently I’ve spotted a few stories that address something more basic, more concrete, more old-fashioned if you will: the physical security of freeports (and customs warehouses and bonded warehouses).  (Quick and shameless plug, if I may: my fourth Sam Plank novel, “Portraits of Pretence”, includes a murder in a Thames-side bonded warehouse in 1827 – exciting stuff!)

You will remember, I am sure, HMG’s reassuring confirmation that “the government does not want the introduction of UK Freeports to lead to an increase in illicit activity”, and that “as part of the authorisation process, checks will be conducted on Freeport operators and businesses operating to ensure they do not present and undue risk and that Freeport operators have adequate policies in place to ensure control over the movement of goods”.  All very well in theory, but – as this article from the Guardian way back in November 2002 shows – we were already hampered by “the slow-motion disaster inside an underfunded and under-supervised customs”.  The culture was already “more business friendly [as] red tape was cut and the emphasis shifted to facilitating trade”, while “customs officers were pulled back from the ports and warehouses and staff cut”.  I appreciate that this is a report from nearly twenty years ago, but can we believe that HMRC has bucked the trend of every other government agency and in the past two decades has received more funding and better supervision?  And with our standard ports already under-supervised, how will we cope with the new freeports as well?

With an underfunded and under-supervised (and presumably demoralised) workforce, can we really be sure that people working in the freeports, or with access to them, will be screened and monitored robustly enough?  In August 2020 a man pleaded guilty to stealing nearly 300 iPhones from a customs warehouse in New Jersey in the US; he worked for a maintenance contractor to the Treasury Executive Office for Asset Forfeiture, which gave him access to the warehouse for a three-week period, and each day at work he stuffed a few phones down his trousers and boots.  (Actually, if he worked there for fifteen days, that’s twenty phones a day down his britches.  I assume they were Oxford bags.)  And just to pull us back to money laundering again, on 8 October 2021 three men were jailed in London for laundering £25 million from the sale of alcohol where duty was not paid, through their cash-and-carry warehouses.  I know it’s a different sort of warehouse, but the men – presumably identified by banks and solicitors as running a cash-and-carry operation and subjected to relevant CDD checks – moved millions through a network of shell companies.  The money laundering was exposed when investigators discovered that the shell companies – claiming to be legitimate alcohol sales businesses – had no storage facilities for the bottles and were fronted by people with no experience of the trade.  With such basic schemes still working so well, I fear for the future – and take little to no comfort from HMG’s desire that the new freeports should not lead to an increase in crime and requirement for them to have (sadly unambitious) “adequate” procedures.

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