White Collar Crime Forum 2017: key takeaways
Author: IFLR Correspondent | Published: 29 Jun 2017
Corporate crime – the 2017 global
- Volumes of money laundered each year is between $2
trillion and $3.5 trillion depending on reports. This raises
the question as to whether regulation is working and whether,
a less prescriptive approach may be more successful.
- Organised crime is still using the banks to launder,
criminals just know the regulations and are engaging lawyers
- Within five years financial institutions will move from a
transaction monitoring system to institution-wide, pulling on
third party data, KYC, and using it as an automated
artificial intelligence verification of your
- Individual responsibility is crossing the Atlantic to the
UK and now enforcement bodies are targeting the most senior
level executives possible.
- Brexit will exacerbate the already pronounced staffing
shortage in banks’ anti-corruption teams. Most
banks are already 20% understaffed in their London
- Frankfurt, Paris and other post-Brexit locations will
offer even fewer qualified staff. This will result in huge
pay rises and under – qualified staff.
- The only way to fill this shortfall is investing in
graduate programmes or training up candidates with matching
skillsets but often no financial experience.
Bribery and corruption – promoting
coordination and cohesion
- What constitutes cooperation on DPAs is unclear for
self-reporting obligations. Sir Brian Leveson, President of
the Queen’s Bench Division, has issued guidance
but one thing is clear: self-reporting does create
- Plans to scrap Serious Fraud Office (SFO) have been
condemned. Many believe decision to be
'ridiculous’, considering the recent Rolls-Royce
and Tesco DPAs where the body has made real progress. Pledge
was not mentioned in queen’s speech so reprieve
possible but morale thought to be low.
- The SFO has gained worldwide recognition. It had
solidified relationship with DoJ and other international
peers but since the decision was taken the DoJ is thought to
be sharing less intelligence with the body.
- UK Bribery Act was motivated by a desire for more
convictions. A wider number of crimes possible to convict
companies on – anything with a dishonesty portion.
It is worrying from a financial crimes perspective. FCA
already has systems and control systems in place where fines
are incurred without proper systems.
FOCUS: protecting and representing executives and
- Since crash of 2008, there has been a political
imperative to satisfy a perceived public demand to put heads
on sticks. Seen in the Libor case onwards. But junior staff
were often targeted and senior managers left alone. This has
changed, with more DPAs now taking place and senior
individuals more liable.
- Panellists discussed the relationships between companies
and executives during investigation processes. The UK is more
guarded about sharing information on defence cases. The
motive should be creating cooperative atmosphere with those
conducting the investigation.
- On cross-border investigations, if a company is going to
make a decision based on the facts that have been found
through interviews with the lawyer, then they need to be sure
that the facts are reliable.
- There are real dangers for companies conducting surprise
interviews in adversarial circumstances where there are no
lawyers and no documents to prepare. It can be a disaster for
- Travel risk for defendants was discussed. Advice was to
contact the relevant prosecutor and flag with them the
potential investigation and the desire for them to continue
the ability to travel and face arrest.
- Counsel must take a careful view of their
client’s nationality and assess the countries in
which he or she might reside. If for instance, they are a
citizen of a country that does not extradite its own
nationals it may be advisable to take residence there.
Corporate criminal offence - failure to prevent tax
- Tax is an issue that has moved into the boardroom
– companies need to think about what their attitude
to tax is, if and how they use offshore jurisdictions
- Following the implementation of the Criminal Finances
Bill (CFB) 2016, HMRC and the FCA now have civil recovery
powers – the power to seize property and/or assets.
Interestingly, these kinds of powers are falling out of
favour with the SFO.
- The new offence of failure to prevent the criminal
facilitation of tax evasion was introduced under the CFB
– this applies to both UK and foreign tax evasion
offences, and to corporate entities anywhere in the world,
provided that the facilitation or part of it has taken place
in the UK. This will only be an offence if it’s
recognised as such as in the UK and in the relevant foreign
- Any associated person can be held liable – no
contract is required between the company and the individual
but it’s a question of behaviour.
- The statutory defence to this offence is for the company
to prove that reasonable procedures were in place to prevent
- This 'reasonable procedures’ requirement
raises the question of how far companies need to go to comply
– it’s not enough to insert the word
'tax’ in those procedures but there needs to be
a proactive process.
- Steps to take include risk assessment, checking the
proportionality of risk-based procedures, top-level
commitment, due diligence, communications and training (both
in the company, and with agents and subsidiaries), and
ongoing monitoring and review;
- Official figures from the National Audit Office show HMRC
has been increasingly been prosecuting tax evasion: in
2006/7, there were 256 convictions but in 2014 there were
- What kind of taxes are most likely to lead to
convictions? 37% of these were for VAT evasion (similar
levels for tobacco duty evasion), 22% for income tax, 2.3%
for money laundering. Evasion of corporate tax contributed to
Sanctions and anti-money laundering
- Russia and Iran have seen sanctions imposed against them
in recent years, because of heightened risks of
money-laundering – this is especially relevant when
to it comes to politically exposed persons and businesses in
the financial services and retail sectors.
- While both the EU and the US have imposed sanctions,
their approaches diverge, and there have been calls for
- When it comes to Iran, there has been little or no use of
'general licence H’ by banks – this
allows subsidiaries of US parents to engage in certain
activities not permissible to the US parent because of
sanctions against a country.
- But in spite of sanctions, including the 2015 JCPOA with
Iran, a lot of EU clients that had operations in Iran before
the sanctions kicked in are already back (snapback), and this
poses practical compliance challenges. In the US, 183
NYSE-listed companies filed with the SEC that they were doing
business in Iran.
- The UK has agreed to implement the fourth Anti-Money
Laundering Directive (4AMLD) in spite of Brexit, in part
because of political reasons. But there isn’t a
great disconnect between 4AMLD and current UK regulations
anyway as both approaches are risk-based.
- There is a clash of cultures between demands for privacy
(GDPR etc) and enhanced due diligence requirements (Patriot
Act in the US for instance) – though ironically,
both these requirements emanate from the same
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