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Background
Another risk issue facing the financial services sector
is the linked subject of money laundering.
The term money laundering has been applied
to the process by which the proceeds of crime are converted into
assets which appear to have a legitimate origin, so that they can
be retained permanently or recycled into further criminal enterprises.
The G7 group of countries have set up
the Financial Action Task Force (FATF).
The FATF has developed three main measures to combat money laundering:
- Criminal offences for money laundering;
- Measures to identify laundered proceeds in financial institutions and elsewhere, with a view to their confiscation;
- Introduction of laws and systems to prevent the proceeds of crime being laundered in the first place.
Many countries
have adopted the FATF recommendations
and have passed money laundering legislation
to deal with the proceeds of serious
crime and have set-up systems
to develop intelligence on, monitor,
and solve the problem, giving primary responsibility for enforcement of money
laundering regulations
to the Customs Authorities and the
police.
The money laundering regulations also
placed requirements on the financial
and professional services sectors to
introduce systems and controls to prevent
money laundering in the first place.
These requirements are backed-up with
criminal sanctions for failure to comply. In
particular, institutions must ensure:
- proper identification is obtained from customers;
- records are
kept of identifications produced
and transactions made;
- a person is nominated
within an organisation to receive
notes of suspicions of money laundering from
staff and pass them to the relevant
authority; and
- staff are regularly trained to guard
against money laundering.
Initially, money laundering was thought to be a problem mainly associated
with international drug trafficking.
Subsequent trends have demonstrated money laundering was not purely
confined to drugs. It was especially
prevalent in financial fraud particularly
tax evasion of the type discussed above. Money laundering is ubiquitous.
It can affect financial
institutions everywhere. The perception
that it only takes place in Caribbean islands, Panama or Hong Kong
is not the case. For instance,
the FATF indicates that London is one
of the prime areas for international money laundering due to the
diversity of the financial institutions
located there.
How can we help?
Our approach to the risk of money laundering
is, as you would expect, similar to our
approach to the issue of financial guarantees, which is to provide:
- Awareness
training seminars to arm
relationship managers with the knowledge to identify risk situations or
transaction;
- Risk
assessment checklists to help identify risk in advance and to provide relationship
managers with the required
knowledge to evaluate those risks;
- Customs
Profiling Checks, which provide a ‘one stop shop’ in respect
of checking the bona fides of new or potential clients.
Clearly, these types of services can
only be provided by people with an
expert knowledge of the subject. We are fortunate to be staffed
by former
members of the Customs
Investigation Service, who had responsibility
for dealing with these matters.
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