Bankers, lawyers, accountants top UK money laundering risk assessment (again)
26 Oct 2017

The United Kingdom’s banking and professional services are still the greatest sectors of money laundering risk in the country, two years after a government study highlighted their key role in facilitating financial crime.

On Thursday the UK published a new national risk assessment (NRA) on money laundering and terrorism financing, which outlined progress made on recommendations in the 2015 NRA and areas that still need improvement.

It noted developments such as the new Criminal Finances Act 2017 and Money Laundering Regulations 2017, as well as reforms to its suspicious activity regime.

However, the UK Treasury, quoting the NRA, said: “the criminal exploitation of banks, professional and financial services and cash remain the greatest areas of money laundering risk to the UK.”

Retail banks, which provide personal and business banking services, such as cash saving accounts and payment services, “continue to be exposed to the highest volume of criminal activity out of all financial sectors,” the NRA stated.

“While controls are more developed in retail banking than other areas, the widespread criminal intent to exploit retail banking products and the increasing speed and volume of transactions mean that the sector remains at high risk of money laundering.”

Another area of concern in financial services is the use of ‘shadow banking’ or alternative banking platforms (ABPs) to conceal money movements in trading fraud.

According to the NRA, internal transactions within an ABP are outside of the regulated banking sector and are therefore difficult for law enforcement agencies and financial institutions to identify.

The latest NRA also found that there is still a high risk of money laundering in the accountancy services, despite the existence of strict controls.

“The inherent risks and vulnerabilities of accountancy services remain due to the value of these services to those engaging in high-end money laundering, and these services remain prevalent in cases identified by law enforcement, though there are strict controls in place in certain areas,” the NRA said.

It also found that there is still assessed to be a high risk associated with abuse of legal services in money laundering.

“Legal services remain attractive to criminals due to the credibility and respectability they can convey, helping to distance funds from their illicit source and integrate them into the legitimate economy,” the NRA explained.

“The creation of trusts and companies on behalf of clients is assessed to be the legal service at greatest risk of exploitation. Investigations by law enforcement often feature trusts and companies being used to facilitate high-end money laundering by hiding beneficial ownership, undermining due diligence checks and frustrating law enforcement investigations,” it added.

The NRA, also looked at terrorism financing in the UK, saying cash remains the favoured method for terrorists to shift funds.

It also outlined the UK’s policy on digital currencies, and explained that it “supports the intention behind bringing digital currency exchange firms and custodian wallet providers into AML/CTF regulation as part of the [EU Fifth Anti Money Laundering Directive].”

John Cullinane, policy director at the Charted Institute of Taxation, said: “The report is welcome on that it pinpoints the particular issues that contribute to high risk categorisation and gives us as supervisors material to draw on in further deepening our efforts to combat money laundering.”

KYC360 contacted the Law Society and UK Finance, which includes the industry group for bankers, but they did not respond with a comment.

-By Irene Madongo

Related topics:

US published national money laundering and terrorist financing risk assessment

Criminal Finances Bill 2016: Key developments to the UK’s AML regime

Interview with John Thompson, senior policy director and head of financial crime policy risk at the British Bankers Association

Labour demands review into London role in laundering

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