Editorial
Article Type: Editorial From: Journal of Money Laundering Control, Volume 14, Issue 1
Former Head of Financial Crime at the FSA – a personal view!
Since 2004, when I first became responsible for the Financial Services Authority’s work on financial crime, we have seen significant changes in the way economic crime is being addressed in the UK. I expect that change to continue because of the new institutional structure proposed by the government– the creation of a new Economic Crime Agency to take over the responsibilities of the SFO, part of the Office of Fair Trading and possibly parts of the FSA.
The current structure is complex but will the new one be better?
This change must to be linked to the reform of the UK Police Service. Robert Wardle, former Director of the SFO pointed out the importance of having police involvement in the new agency in a recent article, saying “Bringing the police into the (Agency) would be a major improvement, indeed we now have the best possible opportunity to achieve that scenario and ensure that police skills are available for economic crime cases.”
The processes involved in dealing with any criminal matter are prevention,detection, investigation, prosecution and penalty. Responsibility for these processes is spread across the current institutional structure.
In the case of market abuse and insider dealing, each of these processes exists within the FSA, which has both criminal and regulatory powers to bring to bear. This appears also to be the SFO position in dealing with bribery and corruption.
When it comes to fraud, the position is not so coherent. The SFO only deals with major fraud, and then only investigation and prosecution, not detection or prevention. The FSA deals with certain market-related frauds but only at the prevention, detection and investigation stage, leaving criminal prosecution to the police. Nothing at all has been mentioned about the overlap between private sector fraud (said to be within the new ECA) and the arguably larger amount of public sector fraud. It was to address this overlap of crime, and often overlap of perpetrator, that the Fraud Review and the National Fraud Authority it set up, aimed to address.
What about money laundering? The huge effort and expense in the UK and elsewhere is on prevention (for example, by customer due diligence measures) and detection (using the suspicious activity reporting regime). The responsibility for the first, at least in the financial sector lies with the FSA, as the AML/CFT supervisor. The responsibility for the second lies with the Serious Organised Crime Agency while the overall AML/CFT strategy is the responsibility of HM Treasury.
Interestingly, it is the intelligence which is available from SOCA, in part from Suspicious Activity Reports, which facilitates the prosecution of market abuse by FSA, serious fraud by the SFO and small-scale fraud and scams by the OFT (not to mention the countless other police investigations which succeed due to financial investigation techniques). Yet, nothing at all has been said about the position of the AML/CFT regime under the new proposed approach to economic crime. If the responsibility for the AML/CFT supervision is to remain within the financial regulatory regime, where will it sit, in the Prudential Regulatory Agency or the Consumer Protection Agency?
Hard work in the UK has already delivered results
When I look back over the last six years, one fact is clear to me –significant progress has been made in tackling the way the UK addresses the threat of money laundering.
This has been achieved by hard, co-ordinated, work on the part of everyone involved in the AML/CFT regime.
HM Treasury responded to the call for a comprehensive and coherent AML/CFT strategy.
SOCA has dramatically transformed the reporting, processing and analysis of suspicious activity reports. SOCA has also produced and published the UK Threat Assessment. The UK response to the threats is set out in the “Restricted”UK Organised Crime Control Strategy. These two together inform the UK National Intelligence requirement which informs intelligence gathering priorities related to organised crime, including financial intelligence.
The FSA, along with many supervisors for other regulated sectors, has identified and trained specialist staff to carry out the job of ensuring that sectors they regulate properly implement an effective risk-based approach to preventing and detecting money laundering.
The private sector, especially the financial sector, has delivered effective,detailed, sector-specific guidance on AML/CFT obligations and approaches.
All of this hard work has been assessed by the FATF as effective, with(following the implementation on the 3rd EU AML Directive), 46 out of 49 FATF Recommendations being (in effect) either largely or fully compliant against the FATF 40 plus 9 Standards.
The importance of partnership
This successful transition of the AML/CFT regime over the last six years has not been achieved by institutional restructuring but by effective and meaningful partnership and collaboration. The sort of collaboration where each party carries out its tasks because it contributes to the greater good and all are clear what that greater good is.
As the government completes its new strategy about how to tackle economic and organised crime, I can give it some important advice. It will not be the institutional structures that will make it succeed; it will be the willingness of those in those structures to collaborate openly and fully with other parts of the system, particularly in sharing intelligence.
Philip Robinson
