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Money Laundering and Terrorist Financing (Risk Assessment)

Volume 600: debated on Thursday 15 October 2015

Money laundering can undermine the integrity and stability of our financial markets and institutions. Countering terrorist financing is also important in protecting national security and forms a key part of the UK’s counter-terrorism strategy.

Money laundering is a global problem and the laundering of proceeds of overseas corruption into or through the UK fuels political instability in some countries. The European Commission’s 2013 impact assessment of anti-money laundering and terrorist financing points to global criminal proceeds potentially amounting to some 3.6% of global GDP; around US$2.1 trillion in 2009.

The Government have already taken steps to improve the anti-money laundering and counter-terrorist financing regimes including by:

launching the Economic Crime Command in the National Crime Agency in 2013;

publishing the UK anti-corruption plan in 2014 and setting up a new specialist international corruption unit in the NCA;

strengthening the confiscation regime under the Proceeds of Crime Act 2002 and creating a new offence for participation in organised crime;

introducing a reporting process for anti-money laundering (AML)/counter-financing of terrorism (CFT) supervisors, improving the transparency and accountability of supervision and enforcement in the UK;

building asset confiscation enforcement (ACE) teams to crack down on those who refuse to pay their confiscation orders, contributing to the recovery of £199 million last year, the highest amount on record;

forming a new partnership with the financial sector to create the joint money laundering intelligence taskforce;

and launching a review of the suspicious activity reports (SARs) regime.

Today, the Government are publishing the UK’s first national risk assessment of money laundering and terrorist financing. It identifies and assesses the UK’s money laundering and terrorist financing risks, drawing on data from UK law enforcement and intelligence agencies, anti-money laundering supervisors, Government Departments, industry bodies and private sector firms.

The national risk assessment has found that while the UK’s response to money laundering and terrorist financing risks is well developed, more could be done to strengthen the UK’s anti-money laundering and counter-terrorist financing regime, including in the following areas:

the understanding of certain types of money laundering, and particularly in relation to “high end” money laundering, where the proceeds are often held in bank accounts, real estate or other investments, rather than cash;

the consistency of the UK’s supervisory regime, and specifically the understanding and application of a risk-based approach to supervision;

the priority given to combatting money laundering by law enforcement agencies and the effectiveness of their response.

The Government will take forward these findings in a comprehensive action plan. The priorities for the action plan will include:

fill intelligence gaps, particularly those associated with “high end” money laundering through the professional services sector;

enhance our law enforcement response and build more effective public-private sector partnerships, to tackle the most serious threats;

address the inconsistencies in the supervisory regime that have been identified;

work with supervisors to improve individuals’ and firms’ knowledge of money laundering and terrorist financing risks;

increase collaboration between law enforcement agencies, supervisors and the private sector to support prevention and detection.

The Government are committed to ensuring that the anti-money laundering regime is effective and proportionate, with businesses and regulators taking a risk-based approach to implementation. The Better Regulation Executive is leading a “red tape” review into the UK anti-money laundering regime to identify for example where companies are confused as to what is required or are undertaking unnecessary activity which diverts attention away from where there are real risks. The results of this review will inform the action plan.

The UK is periodically assessed under mutual evaluations by the Financial Action Task Force. The national risk assessment and the action plan will be kept under review and will inform the UK’s next evaluation.

A copy of the report has been deposited in the Libraries of both Houses.