MONEY LAUNDERING Past, present and future

1. MONEY LAUNDERING � Past, present and future Alan Bryce Senior Manager Counter Fraud Practice Audit Commission

2. Agenda Money Laundering - a brief history Current legislation: -public sector message - key legislation and reporting obligations - CIPFA guidance - video scenarios Future direction � what you may want to consider

3. What is money laundering? Traditionally the process by which: illegal or dirty money is put through a cycle of transactions (or washed) so it comes out the other end as legal or clean money allowing criminals to maintain control over criminal proceeds.

4. Money laundering, did you know? criminals are willing to lose up to 70% of illegally gained funds in the money laundering process approximately �500 billion laundered worldwide per annum �18 billion to �48 billion laundered in UK each year

5. Messages from key public sector stakeholders important prevention and detection role for the public sector Making sure crime doesn�t pay messages from; - David Thomas, Head of the Financial Intelligence Unit, Serious Organised Crime Agency (SOCA) - Jane Earle, former Chief Executive, Asset Recovery Agency

8. Principal money laundering legislation Proceeds of Crime Act 2002 (POCA) Money Laundering Regulations 2007 Terrorism Act 2000

9. Money Laundering intended to make sure crime doesn�t pay legislation intended to prevent use of financial systems for the purpose of money laundering extensive legislation imposing duties to report applies to financial services sector and other relevant persons e.g. estate agents, casinos

10. Money laundering: Proceeds of Crime Act 2002 Concealing, disguising, converting, transferring or removing criminal property Being concerned in an arrangement which a person knows or suspects facilitates the acquisition, retention, use or control of criminal property Acquisition, use and possession of criminal property

11. Money laundering: Money Laundering Regulations 2007 applies to �relevant persons� - persons acting in the course of their business enhanced due diligence record-keeping training reporting to SOCA

12. Terrorism Act 2000 Creates specific offences and obligations to report: terrorist financing terrorist activity

13. Terrorist activity and financing: Terrorist activity is: high impact � in human suffering as well as financial loss but minimal cost to undertake terrorist activity Bishopsgate bomb 1993 - damages over �1 billion - cost �3,000 to undertake 7/7 London bombing 2005 - 52 people killed - cost �1,000 to carry out

14. Terrorist Financing � Obligation to report To the police, if you have a belief or suspicion about: financing of terrorism, or the proceeds from terrorism, and that information is obtained as a result of your employment

15. Do I have knowledge about money laundering? Knowledge can mean: actual knowledge wilful blindness

16. Do I have a suspicion about money laundering? Suspicion: more than speculation some foundations no requirement for �reasonable grounds� no need to specify the offence

17. And be careful���� avoid telling anybody you don�t need to about your concern or you may be committing a criminal offence (tipping off)

18. Terrorist Activity � We ALL have an obligation to report: To the police, information you know or believe would assist in: preventing an act of terrorism catching, prosecuting or convicting somebody involved in an act of terrorism YOU should report your concern to the police terrorist hotline: 0800 789 321

19. CIPFA Guidance �Proceeds of Crime (Anti-money laundering): Practical Guidance for Public Service Organisations� appropriate and proportionate arrangements risk-based approach embrace underlying principles of ML legislation

20. CIPFA guidance Organisation are recommended to: Raise staff awareness Provide targeted training for staff most likely to encounter ML Make arrangements to make reports to SOCA

21. In this scenario: Is there anything in this scenario that raises a concern about money laundering? Are there any other issues of concern to you? Can you think of any similar circumstances at an audited body where this might occur? Would your colleagues be suspicious, do they know who to report to?

23. Charitable contribution scenario Is there anything in this scenario that raises a concern about terrorism, terrorist financing or money laundering? - classic money laundering scam. �Donor� now has cheque for �45k from a reputable charity Are there any other issues of concern to you? - internal control. Was original �50k in the charities bank account before reimbursement - �45k reimbursement cheque made out to the individual donor

24. Charitable contribution scenario Can you think of any similar circumstances at an your organisation where this might occur? - Council Tax or NNDR overpayments Would your colleagues be suspicious, do they know who to report to? - MLRO - SARs

25. In scenario two: Is there anything in this scenario that raises a concern about terrorism, terrorist financing or money laundering? Are there any other issues of concern to you? Would you report any concerns, and to whom?

27. Scenario 2: Right To Buy Is there anything in this scenario that raises a concern about terrorism, terrorist financing or money laundering? - �60k cash transaction - high value cash transaction should always raise a suspicion Are there any other issues of concern to you? - indication of potential benefit fraud

28. In scenario three: Is there anything in this scenario that raises a concern about terrorism, terrorist financing or money laundering? Are there any other issues of concern to you? Who are the potential victim(s) in this scenario?

29. In the scenario you are about to see, a performance specialist is completing the interview of an employee at a local authority. The employee then comments upon office cleaning arrangements in the authority In the scenario you are about to see, a performance specialist is completing the interview of an employee at a local authority. The employee then comments upon office cleaning arrangements in the authority

30. Scenario 3 : Cleaner Is there anything in this scenario that raises a concern about terrorism, terrorist financing or money laundering? proceeds of crime reportable under money laundering legislation includes failure to comply with relevant legislative requirements Are there any other issues of concern to you? possible breach of contract obligations false tendering exploitation of workers potentially employing illegal workers

31. Scenario 3: Cleaner Who are the potential victim(s) in this scenario? Council cleaners other contractors and their employees

32. In scenario four: Is there anything in this scenario that raises a concern about terrorism, terrorist financing or money laundering? Would you report a suspicion if it concerned the activity of a colleague? ? ?

34. Scenario 4: Coffee break Is there anything in this scenario that raises a concern about terrorism or money laundering? changed pattern of behaviour and attitudes knowledge of involvement with potentially extremist individuals Would you report a suspicion if it concerned the activity of a colleague? - it is an offence NOT to report to the police information you know or believe would assist in preventing a terrorist act

35. Future direction - some horizon scanning CIPFA updated guidance 2009 CIPFA awareness raising training Use of Resources criteria for 2009 � �performing well� ALARM �Managing the Risk of Fraud� - good practice framework

36. Use of Resources 2009 KLOE 2.4 � �performing well� includes: Counter fraud and corruption arrangements consider relevant requirements and professional guidance about money laundering and terrorist financing.

38. The ALARM standard for risk advisors states that Key elements of an anti fraud and corruption framework include:��.. Meeting key legislative requirements relevant to this area (i.e. Terrorism Act 2000, Proceeds of Crime Act 2002, etc)

39. Any questions?