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Ben Hur NIBC Bank

Ben Hur NIBC Bank. FINANCIAL CRIME 2009 United Kingdom and across Europe How bad can it be? Scoping the problem…. The job of MLROs (Money Laundering Reporting Officers) is to help stop bad money being laundered through their institution. How bad can it be?.

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Ben Hur NIBC Bank

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  1. Ben Hur NIBC Bank

  2. FINANCIAL CRIME 2009 United Kingdom and across Europe How bad can it be? Scoping the problem…

  3. The job of MLROs (Money Laundering Reporting Officers) is to help stop bad money being laundered through their institution. How bad can it be?

  4. €43 Billion is said to be laundered through the UK every year; • 63% of bank fraud is conducted with the use of an insider; • UK plastic card crime 50% higher than its nearest rival

  5. 1 in four cards involved in fraud in the last twelve months; • Last three years has shown a 190% increase in cloned cards; • People incarcerated, UK is the number 1 in Europe; • People Trafficking, UK number 1 in Europe;

  6. UK BEATS THE REST OF EUROPE!! CONTROLLED NARCOTICS USE: • UK number one in Europe in 2008 (5th year running); • UK number 1 in Europe for Cocaine use; • UK number 1 in Europe for Cannabis use; • UK number 3 in Europe for amphetamine use. These affect other crime levels by users seeking funds, and dealers laundering proceeds

  7. SERIOUS ORGANISED CRIME: • ATM fraud rampant • Motor car rigging • Insurance fraud (now estimated at £1.8 million a day in the UK) • Counterfeit goods of all descriptions • Motorway service station crime.

  8. The €uro Of huge assistance To the criminal – it is now more difficult to ascertain where the proceeds came from And - the lovely €500 note now means you need less space to transport more money.

  9. THE PRESSURES Main Priority - The employer, protecting them from tainted funds, from being implicated in any way in the whole range of financial crime.

  10. THE PRESSURES Then the European Regulators Regulators across Europe are communicating more than ever, which is a good thing. Most firms in most EU countries are already following legislation based on the 3rd EU, it is not 100% yet, but it is improving. The FSA has certainly introduced many measures that both UK and Passported firms must adhere to.

  11. Personal Liability

  12. Michael Wheelhouse was the MLRO for a small firm of only 35 customers, called Syndicatum, easy enough to manage, one would have thought. However, Mr Wheelhouse was personally fined £17,500 by the FSA in 2008 It is worth noting that personal fines imposed by the FSA cannot be paid for by one’s employer and cannot be insured against.

  13. The reasons for the FSA fine concern customer identification and record keeping issues, and are available on the FSA’s web-site, and in my opinion the FSA were spot on. Several institutions have been hit with some very tough fines, and these will be discussed shortly What should/could firms do to mitigate this risk, what are the lessons learnt? Twelve quick thoughts…

  14. Do you have the right person in charge of your AML regime, does he/she have experience? • Is your KYC/DD process up to date, has it been independently reviewed and assessed? (multi eyes principle); • Have you had the systems you have stress tested? • Automated systems – a must surely; • Skills and knowledge, BENCHMARKING;

  15. Training – on going; • The UK AML Report; • Record Keeping; • Effort; • Information dissemination, news reports; • Responsibility and accountability; • KYB, KYC, KYE, automated assistance.

  16. Ben Hur UK Compliance Officer and MLRO for NIBC Bank N.V. London Chairman: www.mlros.com Over 625 practitioner members. E-mail: ben.hur@nibc.com Telephone (UK) 0207 375 7909

  17. Simon Dilloway Lopham Consultancy

  18. Some cases to ponder… Abbey National Bank Lloyds TSB Bank of Cyprus Société Générale

  19. Abbey National Bank 2002/3 ‘Failing to implement proper AML Controls’ ‘Delaying suspicion reporting by up to 4 months’ FSA Fine: £2.3 Million

  20. Abbey allowed individual branches to certify themselves as being in compliance with the rules. However, when Abbey launched a review of the system in November 2002, it found that a third of the branches were not checking customers' identification properly.

  21. Over the same period: Royal Bank of Scotland was fined £750,000 Northern Bank was fined £1.2 Million For similar breaches

  22. And more recently: LloydsTSB has fallen foul of the US Justice Department in 2 separate actions concerning AML activity US$350,000,000 settlement

  23. The first concerned the alleged stripping of information from SWIFT transfers originating from OFAC sanctioned entities before arriving at US banks, making it appear that the funds originated with Lloyds TSB in London

  24. In terms of the SWIFT situation there have historically been data protection issues between Europe and the US. In an unrelated case where SWIFT were prosecuted by the US authorities (as they had a branch in the US)…

  25. Belgian Prime Minister Guy Verhofstadt is quoted as saying: “SWIFT finds itself in a conflicting position between US and European law – but it should have received stronger guarantees of privacy protection based on European standards, not by US standards, which are not as strong”

  26. This places certain strictures on European banks regarding protection of data before making SWIFT transfers to the US AND

  27. There is the perennial problem of the plethora of sanctions lists, Are they all being checked, and checked properly?

  28. Ongoing US Justice Department action Lloyds TSB, Bank of Cyprus and AmerisSoft alleging US$ 44Million Laundered Funds Through personal account Letter supporting asset levels

  29. Just to illustrate it is not only UK banks on the receiving end… “French bank Société Générale defended its handling of the world's biggest trading scandal on Sunday, but admitted its risk systems had failed to detect a 50-billion-euro (37 billion pounds) market bet by a lone trader.” (Reuters)

  30. The same issues keep cropping up under analysis. Lack of control Lack of oversight Lack of foresight Aggressive regulatory intervention, particularly from the US

  31. Not having proper compliance regimes is illegal and inexcusable Not reacting to changing practices and regulatory attitude is dangerous, and Not applying good procedures already in place is absolutely ludicrous!

  32. Direct Control Model: (CEO or President Accountable for Compliance with AML/CFT Law) Compliance Officer Accountable for: Developing, Agreeing, Implementing and Updating all AML/CFT Policies and Procedures Development & Delivery of Staff Training & Awareness Introduction, Operation and Effectiveness of AML Systems & Controls

  33. Transaction Monitoring, Identification, Investigation and Reporting of Mandatory and STRs Application of Financial Sanctions Monitoring Effectiveness, Production of Management Information and Reporting to Senior Management on AML Control Environment Although Activities may be Delegated, Ownership of the Risk Remains with the ComplianceOfficer Suitable for Medium/Smaller Firms

  34. Devolved Model (Larger/Complex Firms): (CEO or President Remains Accountable for Compliance with AML/CFT Law) Central Compliance Function Accountable for: Providing Leadership and Direction Developing and Agreeing AML/CFT Policy and Standards Articulating and Disseminating New or Evolving Legislation/Regulation Providing a Centre of Excellence on AML Risk Management Ensuring Senior Management Routinely Informed of AML Standards, Threats and Vulnerabilities

  35. Primary Interface with FIU on AML/CFT Issues on Policy Matters Oversight of Business Unit Compliance Function Business Unit Compliance Officer Accountable for: Local AML Training & Awareness Internal Processes, Systems & Controls Monitoring, Management Information Assessing Business Unit Standards of AML and Reporting to Central Function Implementation of Group Policies and Standards

  36. Many of the Core Anti-Money Laundering Requirements are Identical to those Adopted by Prudent Bankers Around the World. They Need Not be Onerous. • Foster a Compliance Culture within Your Bank and Provide Leadership in the Flight Against Financial Crime and the Financing of Terrorism • Progressively Introduce Key Processes and Controls • Continuously Evolve your AML Processes and Controls for Optimum Effectiveness • Seek to Adopt International Standards (FATF) • Take Account of National and International Findings of Material Deficiencies • Share Success with Your Staff • Foster a Mutually Supportive Relationship with your Peers (in other Banks) and the FIU • Build Upon Success.

  37. Simon Dilloway BSc(Hons) MSc FSyI AMAE Lopham Consultancy info@lophamconsultancy.co.uk +44(0)1379 687593 www.lophamconsultancy.co.uk

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