Over a month has passed since the Panama Papers were unleashed, revealing a substantial level of corruption and financial wrongdoing amongst high-ranking politicians and world leaders. Since then, there has been a lot of news, reaction and official response to the reports.
The U.K. has been one of the quickest countries to respond, with many Conservative party members taking an active role in supporting the government’s continuing fight against financial corruption – a fight which publicly began around three years ago. It’s easy to see why the release of the Panama Papers has elicited such an immediate response. As well as naming a number of “enablers” with U.K. addresses, the Panama Papers also verified a practice that has long been suspected, but which has been invariably difficult to prove: that prime Central London property is being used to hide wealth and to launder money across country borders.
In response to this and other financial criminal activity uncovered in the Papers, not only has the Prime Minister created a multi-agency task force, jointly lead by the Treasury and the National Crime Agency (NCA) to follow up on the details revealed, but, on April 21, 2016, the U.K.’s Home Secretary Theresa May announced a new anti-money laundering and counter-terrorist finance policy. Part of that policy included the proposal of a new law targeting corrupt public officials. The new law proposes the creation of an illicit enrichment offense, for use when a public official is found to have a significant and inexplicable increase in their assets.
“Britain’s world-leading financial system is at risk of being undermined by money laundering, illicit finance and the funding of terrorism,” Ms. May said in a statement. “We will act vigorously against the criminals and terrorists responsible to protect the security and prosperity of our citizens and to safeguard the integrity of Britain’s financial economy.”
Response to the new anti-corruption plan has been, on the whole, positive. Transparency International, however, remains a little skeptical regarding the proposed changes to what it calls “the U.K.’s creaky anti-money laundering regime.”
“There are some excellent ideas here,” advised Robert Barrington, Executive Director of Transparency International U.K. “The powers that are envisaged could make a real difference and, whilst it is important that they are properly debated in parliament to allay any concerns over civil liberties, it is equally important that they are not watered down by self-interested lobbying during the consultation process.”
This fresh anti-money laundering action comes just weeks before Prime Minister David Cameron’s Anti-Corruption Summit. It also highlights the importance of a clean reputation and transparent business practices to a country whose economy relies heavily on its globally dominant financial services sector.
Of course, the U.K.’s current anti-money laundering policy isn’t the only global strategy that could do with a significant shake-up. But, as one of the world’s leading financial centers, these announcements and activities are designed to set out the U.K.’s stall as a leader against financial corruption whilst at the same time potentially netting a significant payday, once financial criminals have been investigated and subsequent fines paid to the coffers of the government’s Treasury– some of which will undoubtedly be at the expense of a number of corporate treasuries.
The global financial sector is being targeted by intelligent financial criminals who will do whatever they can to move funds illegally in order to avoid taxes and identification, as well as to support broader criminal activity. Firms need to do more to identify and limit this behavior and to therefore remain compliant. We recommend that they use corporate intelligence professionals to supplement their internal capability, particularly in higher risk situations, where undertaking effective due diligence is more of a challenge because the client tends to operate in opaque markets, they are unwilling to provide sufficient information or where they are sensitive to repeated requests to the client for further information. Making decisions on the back of inadequate information represents a major risk – but, too often, organizations don’t ask sufficient questions, stop short of adequate due diligence because they fear upsetting a (potential) client or simply don’t recognize the true level of effort – and therefore cost – required to obtain an accurate assessment of risk.”
With so many new regulatory changes and developments to adapt and adhere to over the past decade, this latest U.K. edict might seem like another headache that financial, corporate treasury and compliance officials just don’t need. But, instead of viewing this change as yet another annoying issue to have to deal with and adapt to, it could be seen as the final conclusive evidence that a company or department needs to decide to make wholesale changes – changes that will not only help reduce the number and size of fines today, but which will also be easy to update to deal with governance changes tomorrow.
To begin with, greater communication between company departments is essential for a company to operate profitably and efficiently.
Additionally, there is a growing body of evidence suggesting that many of the traditional compliance and investigative methods that firms are using can no longer keep pace with the increasingly sophisticated way in which financial crime is being committed or the increasing level of regulation being placed upon firms. While there will always be a need for human investigation when it comes to assessing financial crime, it would also prove beneficial for firms to invest in new technologies that are capable of measuring and analyzing the huge amount of data that is now available to financial companies.
By making use of RegTech, (regulation technology), many finance and compliance professionals will spend less effort using cumbersome, outdated technologies and processes. This will give them more time to investigate suspicious activities identified by their new tech systems, helping to keep their business fully compliant – thereby freeing up valuable resources for corporate treasury teams to devote to the wider company picture.
New law and Theresa May quote: https://www.gov.uk/government/news/biggest-reforms-to-money-laundering-regime-in-over-a-decade
Transparency International quote: http://www.transparency.org.uk/press-releases/transparency-international-uk-responds-to-home-office-anti-money-laundering-action-plan/
Panama Papers unveils London property use to hide money: http://www.ibtimes.co.uk/panama-papers-london-property-offshore-wealth-exposed-global-elite-who-own-it-1553521
AML multi-agency taskforce: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/517992/6-2118-Action_Plan_for_Anti-Money_Laundering__web_.pdf
Regulation Technology: https://www.siliconrepublic.com/business/2016/04/18/fintech-glossary-regtech-startups-inclusion
Anti-corruption summit: http://www.bbc.co.uk/news/business-36272225
Government’s 3+ years fight against money laundering: https://www.gov.uk/government/news/government-to-introduce-new-criminal-offence-for-tax-evaders