What we are hearing – May 2021

It’s been another big month of financial crime news…

In Europe, the largest mafia trial in 30 years is under way with 350 defendants including politicians and public officials.  The Italian mafia’s estimated annual turnover is around £44bn (larger than Deutsche Bank and McDonalds combined!), making them one of the richest criminal organisations in the world and in the trial, the UK has once again emerged as the epicentre for laundering the lion’s share of the mafia’s illicit proceeds.

This seems to be consistent with the UK National Crime Agency, which has estimated that over £100bn in laundered criminal proceeds flows through the City of London every year, more than twice the estimated annual income of the Italian mafia –  giving the UK the unenviable title of the money laundering capital of the world.

Whilst the UK Money Laundering Regulations were introduced over 13 years ago they have only resulted in enforcement penalties of around £600m, which is a drop in the ocean compared the size of the problem and also very small when measured against fines made by other regulators, including Westpac’s AUD$1.3bn (£720m) fine.

Some have argued that the UK Financial Conduct Authority (FCA) have yet to really show their teeth – well until last month when they announced that they had started criminal proceedings against Natwest Plc in connection with over £365m paid into customer accounts (of which £264m was in cash) – which is the first criminal prosecution under the laws the the FCA and the first prosecution against a bank.

The FCA might find this challenging as it is not always easy prosecuting banks or their executives for negligence or wilful blindness – just ask the Danish authorities who recently dropped all charges against 3 top executives including the CEO whilst the organisation itself is still being prosecuted for its role in laundering over €242 billion, the largest money laundering case ever to be bought in Europe.

Now the European Banking Authority (EBA) has come up with a novel idea by establishing a centralised database to name and shame financial institutions in the EU that have weak anti-money laundering (AML) controls.  This is a welcome development and should be adopted by all regulators as decades on from AML/CTF laws coming into effect there remains widespread non-compliance and abundant examples of poor ML/TF risk management practices and weak internal controls to prevent money laundering by organised criminal networks.

Can we add this to your suggestion box AUSTRAC, DIA, FINTRAC, FCA, MAS, HKMA or others?

Closer to home In Australia, Crown is still dominating the headlines as the Perth Casino Royal Commission gets underway and it didn’t take very long for the Chair of the Gaming and Wagering Commission (GWC), Barry Sargent to come under fire for being asleep at the wheel.  When asked how GWC monitored Crown’s money laundering activity he responded “I did rely on them to raise issues with us, rather than the other way around,”

Oh dear, someone is living in cloud cuckoo-land.  This would be the equivalent of the police expecting motorists to call in to their local police station and report themselves for speeding – it’s never going to happen – which is why there are speed cameras everywhere to enforce compliance…!

It has further been revealed that there are some cosy relationships between Crown and it’s regulators – read into that what you will, but it’s not a good look.

Now with the proposed merger between Star and Crown, the gaming and money laundering regulators are likely to be under even more scrutiny to review the effectiveness of the entire casino industry in Australia in preventing exploitation by criminals. 

In Arctic news, the team has been incredibly busy getting ready to launch new content and features across the Risk Assessment Platform, our product team is on-fire, so if you would like to find out how our platforms can help your strengthen your risk management defences get in touch with us today.

Thanks

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