Squid’s in

Something of a departure for this money laundering-obsessed blog (and an extra to my weekly post, which will appear as usual on Wednesday), but please indulge me.  I have been running a one-person AML consultancy for nearly a quarter of a century now and it occurred to me that I know a thing or two about working alone.  Many people these days are taking the (voluntary or reluctant) plunge into self-employment or consultancy and I thought they might appreciate some thoughts on how to enjoy the solo working lifestyle.  And thus was born “The Solo Squid: How to Run a Happy One-Person Business”.  As the back cover blurb explains, this is very much not a book on how to set up a one-person business: it is about how to enjoy working alone.

It’s out now on Amazon, as both a paperback and a Kindle book [the two listings should link soon], and I hope to get it into a few independent bookshops as well.  I have registered it with Nielsen (the UK’s book database) and once they have catalogued it, you will be able to order it from any bookshop in the land.  So if you run a one-person business or are thinking of doing so and wondering how to make the most of the experience, the Squid could be the book for you.

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Heading for the exit

One of my great ambitions – which I achieved for a short while in one jurisdiction – is to facilitate communication and foster understanding between the three sides of the AML triangle: regulator, law enforcement and industry.  Now, that’s a big ask, and my particular method was to offer training to all of them and to take, as the focus of that training, what is actually achievable in the world of AML.  So I told the regulator and law enforcement, for example, what MLROs could actually do with regards to CDD (e.g. it’s all very well telling them that they have to verify beneficial ownership, but you must recognise that very few jurisdictions – yet – offer reliable registers).  And I reminded MLROs and law enforcement that regulators are charged with protecting the stability and reputation of their jurisdiction and that they will, if circumstances demand it, cut loose a rogue institution in order to preserve the rest.  And I helped MLROs and regulators to understand that law enforcement are often not financial experts and that they have to present a certain standard of evidence to the court in order to be allowed to proceed.  It was great fun – I loved it.  But there isn’t much call for that sort of training: most people just want to know the law and what they have to do to stay out of prison.

So when I see a regulator trying something new to fill this gap in understanding, I give a cheer of approval.  It’s the Guernsey Financial Services Commission, and a couple of weeks ago they announced a six-month pilot initiative of exit interviews for MLROs and/or MLCOs [that’s a Guernsey/Jersey thing, the Money Laundering Compliance Officer] who leave their role at a bank or fiduciary firm from January 2020 onward.  To quote from their website, “the aim of the individual meetings is for regulators to develop a deeper understanding of the MLRO/MLCO role(s), responsibilities and challenges faced”.  Now I know that there will be some who will say that it’s none of their business and it’s just meddling and it will encourage people to dish the dirt on unpopular colleagues, but I’m assuming that an MLRO thus summoned can simply say, “I’m leaving for personal reasons” or “I just didn’t like the work”.  And for an MLRO who is leaving because the workload is too great or because he is not receiving the support he needs from his Board or because he has lost the will to fight the tide of money laundering that is overwhelming his jurisdiction [not a likely scenario, but some might feel it], well, isn’t it right that the regulator should know that?  Oh what I’d give to be a fly on the wall at those interviews, and I very much hope that the regulator will (a) continue the initiative after the six month pilot, and (b) publish their (anonymised) findings from these interviews.  In the meantime, I salute the bravery and imagination of the GFSC.

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The special joy of damage joy

I remember the first time I was told what schadenfreude means – pleasure derived from another’s misfortune.  I quickly realised what an essential component of life it is, and thought how odd it is that only the Germans have seen the need to coin a special term for it.  (Apparently it means literally “damage joy”, which just about does it.)  As an AML obsessive, schadenfreude is sadly all too rare – too often, the baddies triumph – but one reliable source for a regular top-up of this emotion is the National Crime Agency’s list of ancillary orders.

Ancillary orders are given alongside other sentencing options, and provide necessary support to those sentences – perhaps by redressing harm caused, or by preventing repeat offending or victimisation.  Here in the UK we have a pleasing array of ancillary orders, including compensation orders, driving disqualification orders, football banning orders and restraining orders.  But my very favourites are the ones designed to make life a right pain in the proverbial for financial criminals.  Yes, let us all give thanks for the financial reporting order (FRO), the travel restriction order (TRO) and the serious crime prevention order (SCPO – although wasn’t he that little gold fellow in the “Star Wars” movies?).

FROs, TROs and SCPOs are all administered and monitored by the NCA’s Lifetime Management team, and these marvellous people produce and regularly update a list (linked to from their web-page) of all the scoundrels whose freedom is currently being curtailed by an ancillary order.  It gladdens your little heart to read it, especially when you see a whole family not enjoying the fruits of their criminal labour.  At the moment, for instance, the Fitzgibbons of Manchester – I’m guessing it’s mum Christine and sons Ian and Jason – are living with a full set of FROs, TROs and SCPOs, requiring them to report all their financial transactions, accounts and assets, report if they move house, and hand in their passports.  They can be pleasingly specific, these orders: money launderer Yongheng Jin, for instance, is prohibited from possessing cash, coins or cash-counting machines, while money launderer Roger Budgen is forbidden to use telephone kiosks and internet cafés.  It’s not a long list, it’s fun to read, and it would be a handy check to make against your client list, just in case…

Posted in AML, Due diligence, Money laundering | Tagged , , , , , , , , , , , , | 4 Comments

A piggy new year to everyone

Welcome back, one and all.  Well, wasn’t that an exciting festive period?  Just as I was undoing the top button on my skirt, ready to launch into the yard of Jaffa Cakes that my husband (he knows me so well) had bought, HMG had a little unexpected present for me: the Money Laundering and Terrorist Financing (Amendment) Regulations 2019.  Yes, this piece of legislation is the UK’s response to the European Fifth Money Laundering Directive, as it serves to amend the current 2017 Regs to bring them into line with MLD5.  Yes, it was published at about 4pm on Friday 20 December 2019.  And yes, the requirement is to meet the deadline for compliance with MLD5… which is 10 January 2020.  The day after tomorrow.

“Leave well alone,” counselled my husband, laying a trail of Jaffa Cakes from my office, across the garden and into the festively-decorated house.  “No-one will notice anything until the new year.”  But I am constitutionally incapable of leaving anything well alone, and particularly not anything to do with my AML-ish endeavours.  And so I spent the evening of that Friday and the whole of the pre-Christmas weekend on three tasks:

  • Taking the new amendment Regs and cutting and pasting them into the 2017 Regs to create a Frankenstein-ish tracked changes version
  • Going through the changes very slowly to create my own crib sheet of what had altered
  • [This was the biggie] Removing all the UK piggy books (that’s five staff versions and one version for NEDs) from sale on Amazon and updating them all to reflect the changes and reformatting them all and republishing them.

The result, dear readers, is that as you return to your desks this week, refreshed of mind and enlarged of tum, the UK piggies are waiting for you, fully updated and ready to lead your staff through the thrills and spills of the amended Regs.  You can find purchase links to the staff versions here, and the NEDs version here.  Happy new year to everyone (except money launderers – I hope you rot).

Posted in AML, Legislation, Money laundering, Publications | Tagged , , , , , , , , , | 6 Comments

Take my word for it

I have written before about the reliance dilemma – the fact that nearly everyone’s AML legislation and guidance says that although you can delegate some or all of your AML work, you cannot delegate the responsibility for that work being done to the correct standard.  As our own dear JMLSG has it in paragraph 5.6.4 of Part I of their guidance, “the ML Regulations expressly permit a firm to rely on another [regulated] person to apply any or all of the CDD measures… the relying firm, however, retains responsibility for any failure to comply with a requirement of the Regulations, as this responsibility cannot be delegated”.  But the reliance dilemma is actually turning into a much more vexatious issue: although current legislation (and this is not set to change, as the topic of reliance is not addressed for reform in the Fifth Money Laundering Directive) says clearly that you can rely on other regulated firms, more and more evidence suggests that being covered by AML obligations (“regulated”, in my shorthand) is no indicator of reliability.

I first raised this concern myself with regard to the HSBC situation, back in 2015, when I mused about the concept of “reputable banks”.  And now Transparency International have expressed their own doubts about the reliability of CDD checks done by corporate service providers – even those regulated in the most reputable jurisdictions.  Like mine.  Yes, we’re talking about the tell-it-like-it-is Formations House, formerly of 29 Harley Street in London, which TI describes as a “company mill” and which has set up companies for “a Swedish Hells Angels boss, an Iranian state oil company, the Italian mob, and a fake Gambian bank”.  You can read the full exposé on the TI website – it’s quite the story.  And horrifyingly, Formations House is still in business (now at 22 Harley Place) – with a website offering a central London address for only £50, and a less than spectacular (albeit rather elderly) rating of 1½ out of 5 on Trustpilot.  But the frightening thing is that to some poor MLRO in a distant land, trying his best to do his CDD checks, an assurance from something called Formations House (heavens, it almost sounds like a government agency) based in the famous Harley Street in London would sound rather good, wouldn’t it?

So before we spend too much time debating the nature of reliance, perhaps we should consider whether – in these days of dwindling trust and escalating scammery – the very concept of reliance (for CDD purposes) is now outmoded and, frankly, dangerous.

I shall now take a festive break from blogging, to regroup my gripes and augment my outrage.  The usual AML-ish wrath and bile will commence once more on 8 January 2020.  I wish you all a very merry Christmas (apart from money launderers – I hope you rot).

Posted in AML, Due diligence, Money laundering | Tagged , , , , , , , , , , , , , | 1 Comment

Snatching defeat from the jaws of victory

In my opinion, there are countless precious and all but irreplaceable things that the UK will lose if it leaves the EU, including access to many of the EU-wide initiatives, agencies and programmes that make the bloc such a success.  And so it rubs salt into the wound when, in the very month we are holding an election that, in effect, will determine whether we remain or leave, the Council of the European Union has made up its mind on an AML-ish debate that I have been following for years: should there be an overarching EU AML body?  (Spoiler alert: yes there should.)

At a meeting of the Economic and Financial Affairs Council of the EU on 5 December 2019, Mika Lintilä (Minister for finance of Finland) confirmed that “fighting money laundering and terrorist financing is a key priority for the European Union”.  Facing a seemingly unstoppable flow of AML failings at large European banks, the EFA Council acknowledged that there are “a range of shortcomings with respect to banks, AML authorities, prudential supervisors and intra-EU cooperation and… that there is fragmentation in both AML rules and supervision.”  They therefore recommend that the European Commission should consider “the possibilities, advantages and disadvantages of conferring certain supervisory responsibilities and powers to an EU body”.

I cannot tell you how much I would like to work at such a place.  Can you imagine working in either Brussels or Luxembourg (where they put most EU agencies) – both stuffed with gorgeous buildings and chocolatiers – and being able to spend all day working on promoting the very best in AML…  But of course, why on earth would the UK want to belong to such an agency – after all, we’ve made such a marvellous job of preventing money laundering through our own jurisdiction that we have no use whatsoever for any foreign expertise.  And now I am going to hide under the duvet until the election results are in the day after tomorrow.

Posted in AML, Legislation, Money laundering | Tagged , , , , , , , , | 2 Comments

Vote early, vote often

Thank goodness it’s nearly over: I don’t think I can take much more politicking this year.  Regular readers will know that I loathe, detest and despair at the idea of our leaving the EU and I have voted (postally) accordingly.  But it is perhaps wise to look at the manifestos published by the three main parties here in the UK, as we rush towards a general election on 12 December, to see what they have said on AML issues.  (Actually, they have said nothing at all about AML – but they have said stuff about financial services and about law and order, so that will have to do to give us an idea of the direction of travel.)  I’ll present them in alphabetical order, in case you’re wondering.

With regard to financial services:

  • the Conservative Party manifesto does not mention financial services specifically, but they do say that “through our Red Tape Challenge, we will ensure that regulation is sensible and proportionate, and that we always consider the needs of small businesses when devising new rules, using our new freedom after Brexit to ensure that British rules work for British companies”
  • the Labour Party manifesto says that they will “create a National Investment Bank, backed up by a network of Regional Development Banks, to provide £250 billion of lending for enterprise, infrastructure and innovation over 10 years”
  • the manifesto for the Liberal Democrats promises that they will “take tough action against corporate tax evasion and avoidance especially by international tech giants and large monopolies” (by reforming “place of establishment rules” and ensuring tax bills are more closely related to the sales companies make in the UK), “work with the major banks to fund the creation of a local banking sector dedicated to meeting the needs of local small and medium-sized businesses”, and “expand the British Business Bank to perform a more central role in the economy, to ensure that viable small and medium-sized businesses have access to capital, even when the rest of the commercial banking system can’t provide it”.

And with regard to (AML-ish) law and order:

  • the Conservative manifesto promises “a new national cybercrime force [and] a world-class National Crime Laboratory”
  • the Labour manifesto promises “a fund of £20 million to support the survivors of modern slavery, people trafficking and domestic violence”
  • the LibDem manifesto promises “a new Online Crime Agency to effectively tackle illegal content and activity online”.

So that’s the runners and riders, with eight days to go – place your bets, ladies and gentlemen.

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Making AML count

One of the most common requests I hear when designing AML training for clients is for case studies (which I have blogged about recently) and for “lessons learned”.  Alongside this, we have regulators regularly reminding us that their final notices (or regulatory decisions or whatever they call their findings when someone has been punished for AML shortcomings) should serve as quasi-guidance: for instance, in the recent finding against Betfred by the UK’s Gambling Commission, the public statement is concluded with a section of “Good practice – we consider that this case provides valuable learning for remote (online) and non-remote gambling operators”.

I am always more than happy to truffle out such lessons for clients to pass on to their staff, but a paper (titled “Deep Impact”) published in October 2019 by RUSI in London has made me pause for a moment.  This is a “big picture” paper, considering whether we need to refocus our AML approach and base it on evidence and outcomes rather than on (in essence) the FATF’s Forty Recommendations.  As the paper’s author Mathew Redhead explains, “despite substantial levels of private sector investment, doubts remain among practitioners and academics about whether the [FATF-based] model is effective, not only in terms of how well it is implemented, but in its impact on money-laundering metrics and wider costs and benefits”.  Moreover, as the FATF-based AML model is now well-established and almost universally adopted by regulators, it is quite straightforward for them to levy penalties on institutions that fail to meet the standards – regardless of whether their failing leads to any money laundering.  And the – perhaps inevitable – outcome is not favourable, if our stated aim is to create a hostile environment for money laundering and terrorist financing, as the RUSI paper continues: “Unfortunately, the potential punitive risk that goes with being ‘wrong’ continues to bias the private sector towards over-investment in preventative measures and over-reporting, despite regulatory advice to the contrary.  This makes ‘real-life’ effectiveness for financial institutions a matter of balancing the costs and risks of regulatory action against the size and efficiency of their compliance functions.  The ultimate focus is not therefore on the reduction of money laundering, but on protecting the institution and the bottom line.”

I suspect that the disconnect exists partly because it is so very difficult to measure money laundering while it is so very easy to measure money.  (As this paper reminds us, “the UK’s National Strategic Assessment of Serious and Organised Crime 2019 repeated the previous year’s estimate that the volume of money laundering in the UK was in the ‘hundreds of billions of pounds’” [how many hundreds – do we mean £200,000,000,000 or £999,000,000,000?].)  And if money laundering is hard to measure, then the effect of AML on that uncertain figure is all but impossible to gauge.

Conversely, expenditure, income and profit are all very easy to measure, alongside any other thing you can count.  Regulated firms can report how much they have spent on AML, how many compliance staff they have, how many SARs they have made – and the regulator demands this information in annual financial crime returns.  In their turn – and for the pleasing of their governments, who underwrite them – regulators tell us in their annual reports how many AML supervisory visits they have made, how many warnings they have issued, how many fines they have levied.  Until we find a way to measure the uncountable, people will continue to measure the countable – and to punish those whose numbers are not right.

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Lights, camera, action!

After my little rant about podcasts, I can report this week that conversely I am fully in favour of what I still call video clips.  In the olden days, when I used videos as part of my AML training, we would wheel in a telly and everyone would gather round (no, not cross-legged on the floor – that was primary school) and we’d watch a few minutes, stop and discuss, watch a few more minutes and so on.  In fact, one of my most treasured possessions is a video called “Money Laundering: The Soap” produced by the New Zealand Bankers’ Association in 1996.  The soap it has most in common with is “Crossroads”: the scenery shakes whenever anyone shuts a door, and the actors are plainly reading from cue cards or from prompts written on the backs of their own hands.  But the days of people being able to pay attention to one wobbly video for 27 minutes are long gone: modern staff need speedy soundbites and high production values.  And I can recommend three video clips that provide these in spades.

The first has been produced by Santander: “MC Grindah’s Deadliest Dupes: The Money Mule”, in which “our boys learn about the dangers of letting someone else use your bank account”.  It’s 3 minutes and 27 seconds long, looks more “EastEnders” than “Crossroads”, and makes me laugh.

The second – more serious but still tongue-in-cheek – also deals with money mules.  Put out by UK Finance [formerly the British Bankers’ Association and others] and Cifas, it’s called “Sponsor a Child Trafficker” and, in its 1 minute and 49 seconds, mimics those sad daytime telly ads imploring you to pony up some sponsorship money for a dilapidated donkey.

And the third deals with another crime of our times: modern slavery.  Produced by the Salvation Army, this 1 minute 20 second video reminds us to look around our local communities for the signs of modern slavery.  It’s short on laughs but packed with information – worth every second of your time, and that of your staff.

Posted in AML, Due diligence, Money laundering, Organised crime | Tagged , , , , , , , , , , , , , | 2 Comments

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 , , , , | 18 Comments