The start of a new year can mean many different things to different people. Here at kompany, we look forward to celebrating new beginnings and for the opportunity to continue honoring our mission to be the first line of defense against money laundering for obliged entities from around the world. Expanding our global register network will remain a top priority for our team throughout 2022, as well as continuing to evolve our current KYB services and products to serve our clients better.
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Staying informed about the ways in which our community is affected by financial crime, new technology and regulatory policies, plays a critical role in maintaining dominance within your respective industry. That’s why we started our monthly RegTech Roundups nearly two years ago - to help our clients catch up on the most important stories making headlines so they can spend more time on what matters most: building audit-proof AML compliance programs.
Let’s get started with our first recap of 2022! We begin with a story from The Guardian about the ways in which the UK is failing to keep up with its own commitments to increase corporate transparency.
Due to the city’s long history as a major cosmopolitan force, London has grown popular with ruling elites from around the world looking to store their illicit wealth in one of the world’s biggest economic hubs.
The ongoing civil unrest in Kazakhstan is the latest crisis with connections to the United Kingdom’s real estate market. “Property worth hundreds of millions of pounds in London and southern England has already been identified as bought by Kazakhstan’s wealthy elite in the past two decades.”
Independent anti-corruption investigators are claiming that the unchecked investment into the UK’s property market has played a significant role in maintaining a system that has left the majority of Kazakhstan's citizens with little to no financial means. 162 people are said to maintain control over approximately half of the country’s total wealth.
John Heathershaw, professor of international relations at Exeter University and lead author of “The UK’s Kleptocracy Problem” report (which can be read here) recently stated that “London has been really important for the political elite in Kazakhstan and that includes the relationships they have developed with individuals such as Tony Blair and Prince Andrew”. It has been previously reported that Prime Minister Tony Blair has provided advice to the regime while Prince Andrew maintains personal connections to some of the country’s wealthiest individuals.
According to The Guardian “The Kazakh elite’s properties bought during Nazarbayev’s presidency include Prince Andrew’s marital home, Sunninghill Park in Berkshire, bought in 2007 for £15m by oligarch Timur Kulibayev, the son-in-law of the former Kazakhstan president.”
It’s believed that the total amount and value of the properties tied to Kazakhstan’s ruling class is not completely known at this time. Many other properties may be owned by offshore shell companies - which do not disclose their beneficial owners.
How is the UK government responding to these concerns? Five years ago a different former prime minister, this time David Cameron, promised that the UK would end the secret offshore ownership of its property but the country has yet to find a way to do so. However, the government previously announced its intention to establish a new beneficial ownership register for overseas entities that own property in the UK. The ultimate goal is to establish greater transparency while also minimizing burdens on legitimate commercial activity.
As domestic and international pressure intensifies, the world waits to see how the UK’s transparency register will be fully realized.
Nearly $765 million in fines were handed out last year by the United Kingdom’s Financial Conduct Authority, working out to be almost three times as much as those given out in 2020.
The regulatory agency came down hard on investment banks and financial service firms across the country, with some of the highest individual fines reaching $354 million, $197 million and $122 million. Fines were handed out for a variety of reasons including “financial crime and anti-bribery and corruption failings in the investment banking sector” and for one business, “breaches of the Money Laundering Regulations Act of 2007 related to financial crime in the retail bank sector.”
The insurance and protection sector also failed to make it through 2021 unscathed with two notable organizations “hit with fines of £91 million for customer communication breaches of the FCA’s own code within the general insurance and protection sector.”
After some of the biggest firms in the UK found themselves on the receiving end of major fines, it’s become clear that the Financial Conduct Authority is prepared to crack down on anti-money laundering failings across sectors. According to Fintech Futures, “The scrutiny of these large financial services giants formed part of the FCA’s broader strategy to protect consumers from harm, enhance the integrity of the UK’s financial system and promote competition.”
The FCA also went on to say that as part of their shift to a post-Brexit, data-driven financial services sector in the UK, they have begun pushing for “changes to the regulation of crypto-assets, challenging crypto asset firms who require registration for money laundering purposes.”
Finally, they have also set out plans for its use of data, “which will mean the FCA collects data more effectively and uses algorithms to identify risks to consumers or markets more quickly”.
The former chief of the Financial Action Task Force, David Lewis, has been sharing his thoughts on how the world’s powers have been doing in our shared fight against money laundering. According to Lewis, ‘“Governments need practical help if we are to more effectively prevent and detect money laundering and to better investigate and prosecute it.”
He goes on to say that our collective efforts to combat money laundering have been inadequate and that many institutions are too focused on avoiding fines instead of implementing measures to stop serious crime and terrorism. The former chief of FATF criticizes “jurisdictions at a political level who don’t fully understand the importance of tackling money laundering.”
There is also a growing concern that the burgeoning crypto market could present even more opportunities for financial criminals to do their dirty work without restraint; a recent report published earlier this month by data company Chainanalysis revealed that nearly $15bn in crypto was sent to accounts with known criminal associations throughout 2021. However, Lewis believes that the biggest challenges are “more fundamental” in nature.
“For many countries, it’s just about building up the capacity to properly invest in money laundering [controls],”
The FATF responded to the comments from their former chief with the comment that they found that “it is increasingly no longer the absence of laws and regulations that is the problem . . . The problem lies in how effectively the measures are used…”
The Council of Europe’s anti-laundering body, Moneyval, has also added their perspective to the conversation, saying that shared rules and standards are only the foundation but what matters is how many criminals are caught and convicted and how much money is recovered at the end of the day.
That’s why the ability to demonstrate “satisfactory results” on the number of convictions and assets recovered will be the key focus of the organization’s evaluation process.
That's it for this month! But before you go...
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