Countries/Jurisdictions of Primary Concern - United Kingdom
The United Kingdom plays a leading role in European and world finance and remains attractive to money launderers because of the size, sophistication, and reputation of its financial markets. Although narcotics are still a major source of illegal proceeds for money laundering, the proceeds of other offenses, such as financial fraud and the smuggling of people and goods, have become increasingly important. The past few years have seen an increase in the movement of cash via the non-bank financial system as banks and mainstream financial institutions have tightened their controls and increased their vigilance. Money exchanges; inbound and outbound cash smugglers; and gatekeepers, such as lawyers and accountants, are used to move and launder criminal proceeds. Also on the rise are credit/debit card fraud, internet fraud, and the purchase of high-value assets to disguise illicit proceeds. There are significant intelligence gaps, in particular in relation to ‘high-end’ money laundering. This type of laundering is particularly relevant to major frauds and serious foreign corruption, where the proceeds are often held in bank accounts, real estate, or other investments rather than in cash. Underground alternative remittance systems, such as hawala, are also common.
For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found at: //2009-2017.state.gov/j/ct/rls/crt/
Do FINANCIAL INSTITUTIONs engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or illegal drug sales that otherwise significantly affect the U.S.: NO
criminalizATION OF money laundering:
“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes
Are legal persons covered: criminally: YES civilly: YES
Know-your-customer (KYC) rules:
Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: NO
KYC covered entities: Banks, credit unions, building societies, money service businesses, e-money issuers, and credit institutions; insurance companies; securities and investment service providers and firms; independent legal professionals, auditors, accountants, tax advisors, and insolvency practitioners; estate agents; casinos; high-value goods dealers; and trust or company service providers
Number of STRs received and time frame: 354,186: October 2013 – September 2014
Number of CTRs received and time frame: Not applicable
STR covered entities: Banks, credit unions, building societies, money service businesses, e-money issuers, and credit institutions; insurance companies; securities and investment service providers and firms; independent legal professionals, auditors, accountants, tax advisors, and insolvency practitioners; estate agents; casinos; high-value goods dealers; and trust or company service providers
money laundering criminal Prosecutions/convictions:
Prosecutions: 64: January 1 - September 30, 2014
Convictions: 56: January 1 - September 30, 2014
Records exchange mechanism:
With U.S.: MLAT: YES Other mechanism: YES
With other governments/jurisdictions: YES
The United Kingdom is a member of the FATF. Its most recent mutual evaluation can be found at: http://www.fatf-gafi.org/countries/u-z/unitedkingdom/documents/mutualevaluationofunitedkingdomofgreatbritainandnorthernireland.html
Enforcement and implementation issues and comments:
The UK has a comprehensive AML/CFT regime and is an active participant in multilateral efforts to counter transnational financial crimes. The UK agreed to the EU’s Fourth Anti-Money Laundering Directive in June 2015; it will be transposed into UK law by June 2017.
In 2015, the UK government published its first national risk assessment (NRA) with the aim of identifying, understanding, and assessing the ML/TF risks. The NRA confirmed that the UK’s law enforcement agencies’ primary expertise is cash-based ML, particularly cash collection networks, international controllers, and money service businesses, although some gaps in knowledge remain. This is a result of the resources law enforcement agencies have invested over a number of years in tackling cash-based ML and narcotics trafficking, which have long been recognized as posing high ML risks.
In 2015, the Government of the United Kingdom committed to an action plan to follow up on the NRA’s findings. The action plan sets out how the government will increase collaboration among law enforcement agencies, supervisors, and the private sector; fill intelligence gaps and strengthen the law enforcement response; remove inconsistencies in the supervisory regime; and increase the international reach to tackle money laundering.
The UK supervises both financial institutions and designated non-financial businesses or professions (DNFBPs) for AML/CFT compliance. There are currently 27 AML/CFT supervisors in the UK. The supervisors include large global professional bodies, smaller professional bodies, and a number of public sector statutory organizations. Her Majesty’s Treasury has developed a voluntary reporting process for supervisors in the UK. The Annual Report on AML/CFT supervision is intended to improve the transparency and accountability of supervision and enforcement in the UK and encourage good practice.
In 2015, the UK launched a pilot Joint Money Laundering Intelligence Task Force, which brings together 10 banks and key UK law enforcement agencies to collaborate on the detection and disruption of money launderers. In the pilot phase, seven people have been arrested, £7.8 million (approximately $8.4 million) of criminal money has been frozen, and over 350 suspicious accounts have been identified.
The Financial Conduct Authority (FCA) is in charge of consumer protection and the integrity of the UK’s financial system. The FCA has changed its approach to AML supervision, which is now more risk based. The FCA is now more proactive, working closely with regulatory and industry stakeholders to identify current and emerging financial crime risks and ensure that banks are aware of their implications and how to mitigate them. Since 2012, the FCA has taken formal enforcement action again eight firms and individuals in response to AML failings, with fines totaling approximately £24 million (approximately $37 million). It currently has seven AML cases under investigation.
In March 2015, the UK passed legislation to establish a central public register of company beneficial ownership information. The register will be a freely accessible, searchable, single online source of information about the ultimate owners and controllers of UK companies. Law enforcement agencies can use the information as an accessible source of intelligence and evidence in their investigations. The central public register also will enable citizens and businesses both in the UK and other countries to identify who owns and controls the companies they are doing business with. The public sector will be able to use the information to support inquiries into corruption, money laundering, and other criminal activities. The register also may be used by covered entities as part of their customer due diligence (CDD) checks, but it cannot be relied upon, nor does it replace the obligation to perform CDD. UK companies will be required to obtain and hold their beneficial ownership information beginning in April 2016. They will be required to file that information with the central public register with the UK registrar of companies from June 2016. There will be sanctions and penalties for failing to comply with the register requirements, such as imprisonment of up to two years.
In June 2014, the Crown Prosecution Service Proceeds of Crime team was established to prioritize and streamline confiscation work, although responsibility for asset recovery is divided among different UK agencies. The UK is enhancing its international reach in asset recovery and provides technical assistance to other jurisdictions.
The UK should consider changing its rules to ensure domestic politically exposed persons (PEPs) are identified and, if appropriate, subject to enhanced due diligence requirements in accordance with international recommendations.