UK appoints new Justice Secretary – experts flag up his AML past, for better or worse?
08 Jan 2018

British Prime Minister Theresa made a number of changes to her team in a cabinet reshuffle on Monday.

By night time, as more announcements were made, it turned out that the overall shake-up had little impact on the main porfolios that shape the United Kingdom’s financial crime strategy and implementation.

Specifically, Home Secretary Amber Rudd and Chancellor Philip Hammond kept their positions, as did others that might affect areas like sanctions risk and Brexit strategy, such as Foreign Secretary Boris Johnson and Exiting the EU Secretary David Davis, respectively.

Then came the announcement that ex-Treasury man David Gauke would be the new Justice Secretary, taking over from David Lidington, who moves to the Cabinet as Chancellor of the Duchy of Lancaster.

The appointment of a new Justice Secretary is an important development for UK AML, considering the Justice department’s strategic role in this area.

It has made some key announcements, including plans for the criminal offence of a corporate ‘failing to prevent’ bribery and other economic crimes and also the establishment of courts to handle economic fraud and cybercrime cases.

Gauke spent about seven years in the Treasury department (HMT), working his way to become Chief Secretary to the Treasury in 2016.

In June last year he left the section to take on the role as Works and Pensions Secretary.

In UK AML circles, though, he is better known for the several years that he has served in the Treasury department.

He has seen some hot topics during his tenure at HMT, including beneficial ownership, the public register, the EU Fourth Anti-Money Laundering Directive, data leaks like the HSBC Swissleaks and Panama Papers, and the cumbersome HMRC/tax evasion portfolio.

How did he respond to these issues, and what can be expected of him in his new role in terms of fighting money laundering and other economic crime?

This is what experts told KYC360:

Nicholas Ryder, anti-money laundering author and Professor in Financial Crime, University of the West of England

With Gauke’s appointment, we have the first lawyer appointed Secretary of State for Justice, so the news will be likely welcomed by the legal fraternity.

However, the concerns I have with him was his lacklustre response to combating money laundering and tax evasion regarding while working with Treasury/HMRC.

Gauke served in Treasury under David Cameron and George Osborne, who both made some stunning remarks on fighting money laundering – and yet they delivered very little, such as in terms of the number of prosecutions.

It makes me concerned reading back some of their statements.

HMRC still struggles with prosecutions. The Justice department has a key role in AML legislation, including an announcement last year that new laws could be considered to tackle economic crime, so Gauke will have an important role.

Regarding news that the UK will launch a new anti-money laundering court – with such a poor rate in terms of prosecutions from HMRC, who will they prosecute in these courts? Also, while under Treasury, Gauke snubbed the EU Panama Papers Committee.

It had requested to meet up with Treasury to discuss the issue of the Panama Papers and the UK, but he did not show up – instead his Treasury department sent a short email and pulled out of the meeting. Of course we must give people the benefit of doubt, however at times – and in this case – his past record does not bode well for AML issues.

He, like his other colleagues such as Home Secretary Amber Rudd, will have to do more to prove that this government is serious about fighting financial crime.

John Christensen, director, Tax Justice Network

Of all the appointments made today, I don’t see any players that will impact the fight against money laundering and tax evasion. I have met David Gauke personally and have had some discussions with him during the time he was at Treasury, especially under the [Tory-Lib Dem] Coalition government. He did not come across as a man who prioritises these topics – tackling money laundering and tax evasion.

Over the years he has not shown himself to be very energetic when it comes to tackling them either. It’s hard to see what new thing he will bring into the picture. Going forward, my worry is that as the UK leaves the EU completely, it will become more secretive and less reluctant to deal with corporate secrecy – it may become a sort of Singapore, a haven for financial crime.

Yes, the UK has launched a public register of beneficial ownership – but it is very weak in keeping the data up-to-date. London loves laundering money, despite talk of clearing up. The UK, with people like David Gauke in Treasury, has proven very reluctant in getting its overseas territories to launch public registers too.

Paul Sharma, managing director Alvarez & Mashal, and formerly deputy head of the UK’s Prudential Regulatory Authority

There’s been a high turnover of Justice Secretaries in the UK over the years, however, what is interesting with David is that he comes in rounded on a number of important issues, including beneficial ownership and corporate structures. So he will not be a novice when it comes to AML matters.

Looking ahead, there are considerable challenges regarding fighting money laundering , and this comes with the fact that the UK is one of the world’s top financial hubs.

It therefore has to come up with higher standards in this area and the new Justice Secretary, together with the other parts of government, will have to work towards keeping the UK at the forefront of tackling financial crime.

KYC360 presented the experts comments to the Justice and Treasury Departments, they directed the query to Number 10 Downing Street, which declined to comment. The Conservative Party HQ did not respond.

– By Irene Madongo

Photo: Jay Allen. Copyright: Crown Copyright

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