In our latest Comply and Outperform webinar, Tom Devlin, CCO and Co-Founder at KYC360 was joined by Neil Swift, Partner at Peters & Peters. They discussed the evolving UK Anti-Money Laundering (AML) landscape and took a detailed look at key compliance trends and enforcement risks. Below are the key takeaways from their discussion.
Below are the key takeaways from the session.
Account Freezing and Forfeiture Orders
Introduced in the 2017 Criminal Finances Act, account freezing and forfeiture orders are increasingly leveraged by law enforcement to target suspected crime proceeds. While unexplained wealth orders received significant attention when introduced, account freezing and forfeiture orders are more widely used as they require a lower threshold for application. They can result in freezing accounts for up to two years, in certain cases without a hearing. Swift highlighted their effectiveness but noted the severe impact on account holders that can leave them with limited options to contest the freeze. He concluded that financial institutions should ensure their customers clearly understand the process and rights when dealing with such orders.
Impact of Chinese Capital Controls
China’s strict currency controls on fund transfers have amplified compliance challenges for UK institutions as citizens and businesses often rely on unofficial channels to transfer money abroad. Financial institutions need to be vigilant about red flags such as third-party deposits, as using unlicensed money service businesses (MSBs) can result in forfeiture and increase regulatory risk. These businesses largely operate outside of traditional banking oversight and therefore institutions must apply greater due diligence to customers operating in jurisdictions with stringent currency restrictions.
Money Laundering Risks in Transmission
Even legally sourced funds can become “tainted” if transmitted through unauthorised MSBs, as shown in the Freshview Swift Properties case. This ruling suggests that funds can be considered proceeds of crime simply due to the path they took, emphasising the need for institutions to monitor the source and transfer methods of incoming funds closely.
Compliance Oversights: Lessons from the Starling Bank Case
The substantial £29 million fine imposed on Starling Bank underlines the importance of scaling compliance as financial institutions grow. Starling’s onboarding and AML screening lapses highlight the risks for challenger banks and underscore the need for financial controls that keep pace with expansion. Devlin and Swift noted that this case should serve as a warning to all financial institutions and highlighted the need for continuous compliance reviews. Ignoring FCA warnings can result in serve financial repercussions and long-lasting reputational damage. Firms can utilise scalable technology solutions to balance growth goals with the need to keep up with increasingly complex regulatory demands.
Future of AML Enforcement
While maintaining strong enforcement is expected, the newly elected Labour Government aims to target “professional enablers” of financial crime and expand whistleblower protections. These enablers include lawyers, accountants and other service providers who may be facilitating financial crime. Additionally, there may be an increase in using cooperating defendants, mirroring successful U.S. tactics in prosecuting financial crimes.
Conclusion
The session highlighted essential steps for institutions to stay compliant and manage emerging AML risks effectively. Even small oversights can lead to substantial penalties and being proactive with regulatory requirements can help lead to sustainable growth.
Watch the full webinar below.
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