Archive for June, 2011

Two British banks investigated for Money Laundering

Wednesday, June 22nd, 2011

The UK’s Financial Services Authority (FSA) has announced that 2 banks in Britain are being investigated for lax money-laundering controls. Also, other banks are likely to be handling the proceeds of corruption and other financial crime.

According to the FSA, it had referred 2 banks to its enforcement division for “serious weaknesses” in “high-risk” customer management.

The FSA published a review of how banks manage money-laundering risks adding that it is being considered “whether further regulatory action is required in relation to other banks, and further cases may be referred for enforcement”. The regulator stated: “Around a 3rd of banks, including the private banking arms of some major banking groups, appeared willing to accept very high levels of money-laundering risk if the immediate reputational and regulatory risk was acceptable”.

It is worth noting that ma of the failings identified by the FSA are the same as those it spotted 10 years ago when deposed Nigerian strongman Sani Abacha, his family members and associates used 42 UK bank accounts to turn over USD 1.3 billion (GBP 806.2 million) in 4 years.

The FSA said that more than 1/2 of banks visited this time around failed to have meaningful due diligence measures in higher-risk situations. Also, they failed to identify or record negative information about customers.

Around 1/3 of banks visited dismissed serious allegations about their customers without adequate review, and more than 1/3 failed to identify customers as “politically exposed persons” (PEPs), who are considered the most vulnerable to corruption because of their public prominence.

According to the FSA, 3/4 of banks did not always manage high-risk customers and PEP relationships effectively, and needed to do more to protect themselves from money laundering.

Isle of Man to strengthen AML

Friday, June 10th, 2011

In accordance with the announcement made by the Isle of Man’s Treasury Minister, Anne Craine, a public consultation has been launched on proposals to further strengthen the offshore jurisdiction’s protection against money laundering and other financial crime.

Currently, all companies registered under the 2006 Companies Act must have a local resident agent in order to identify the beneficial ownership of the company if this is requested by the regulatory authorities in the course of enquiries. However, companies incorporated under the 1931 Companies Act are not required to have such an agent, while many of them are in fact administered by licensed Corporate Service Providers which effectively act as registered agents.

There is a proposal to introduce a requirement, similar to that already in operation in Guernsey, for all 1931 Act companies to appoint a local resident agent.

For locally-owned companies this could simply mean nominating an existing officer or shareholder of the company as the resident agent, accordingly, there will be no extra cost to the business. For companies administered by licensed Corporate Service Providers this would simply amount to the Corporate Service Provider acknowledging that they provide services to those companies. There also would be no extra costs incurred by the company or the Corporate Service Provider.

Minister explained: “The current difference in requirements between the 2006 and 1931 Acts creates an inconsistency in the island’s approach to access to information about the beneficial ownership of companies. The discrepancy means there is a perception, in the case of 1931 Act incorporations, that some companies are weak links in the chain of accountability. This perception creates a reputational risk for the Isle of Man.”

She said that this issue has been raised by the International Monetary Fund (IMF) in its assessment of the island’s defences against money laundering and other financial crime. She noted that it is in the interests of the the Isle of Man’s economy and its international reputation to maintain high regulatory standards as recognised by bodies such as the IMF.