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Clifford Chance

Regulatory Investigations and Financial Crime Insights

There may be changes ahead: UK Treasury Select Committee has recommended a sweeping overhaul of the fight against economic crime

On 8 March 2019, the UK Treasury Select Committee released its report into economic crime, anti-money laundering supervision and sanctions implementation. On the back of sweeping recommendations, it may be time to embrace change (again). We summarise the key recommendations.

Recommendations

Of particular note to financial institutions, the Committee recommends:

  • That the FCA keep up a constant pressure on the core financial services businesses and take appropriate enforcement action against them;
  • That the Government publish its strategy to address disproportionate de-risking strategies within six months, to minimise the risk of illicit fund flows going underground;
  • That the Government set out a timetable for bringing forward legislation to improve the enforcement of corporate liability for economic crime;
  • Within the context of SARs, thought be given to how National Crime Agency requested delays to payments can be better handled;
  • A review within six months of the scope to increase information flows between banks whilst protecting rights of privacy and access to financial services;
  • Creating a centralised database of PEPs;
  • Consultation on whether the Government should have the power to block a public company listing on National Security grounds;
  • Reforming Companies House to ensure it has the statutory duties and powers to ensure it plays no role in helping those undertaking economic crime, whether in the UK or abroad; and
  • Placing OPBAS on a firmer statutory footing with its own identity protected under primary legislation, with consideration given to moving supervisory responsibilities from HMRC to OPBAS as well as ensuring a continuing close relationship between OPBAS and the FCA.

A copy of the full report is available here.

Comment

The recommendations in the report are far ranging, with widely differing timescales. It remains to be seen which will be taken forward and there will be practical issues to be addressed in many cases.

A key message from the report is that the Committee wants to see an increased supervisory role for OPBAS, with the transfer of supervisory functions from HMRC to OPBAS. Given OPBAS is part of the FCA, the effect of this will be to concentrate supervisory responsibility and AML capability within the FCA.

Whilst time will tell whether such a transfer will take place, an immediate impact of the report will be to maintain pressure on the FCA to continue to develop its anti-money laundering capabilities and to pursue enforcement action wherever possible. We are seeing a sustained increase in AML supervision and enforcement activity in our practice and expect that to continue long term.

Implementation of reforms to the law on corporate criminal liability for economic crime remain some way off, but the Select Committee's report adds to the growing pressure for legislative change in this area. When change comes the impact for firms and boards will be profound, with consequences ranging well beyond money laundering and economic sanctions.