SOCA Presentation AML-Fraud

8/3/2019 SOCA Presentation AML-Fraud

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Anti-Money Laundering and

Data Protection

2009

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Money laundering

Money Laundering is any action taken to conceal,

arrange, use or possess the proceeds of anycriminal conduct.

Criminals try to launder 'dirty money' in an attemptto make it look 'clean' in order to be able to use theproceeds without detection and to put thembeyond the reach of law enforcement and taxationagencies.

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Definition from the SOCA web site:



You must have risk management systems andcontrols in place to address the risk of

financial crime.

Financial crimes include; fraud, laundering

the proceeds of crime, the finance of

terrorism and the abuse of financial markets.

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What the FSAwant in 2009



As well as meeting FSA requirements, there

are a number of wider legal obligations. For

example, the Proceeds of Crime Act 2002 &

the Terrorism Act 2000. This legislation applies widely to everybody in

the UK and covers offences related to money

laundering and terrorist financing.

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You also have obligations under the UK

financial sanctions regime.

HM Treasury maintains a list of individuals and

entities subject to financial sanctions.

You should not make funds or economic

resources available to them.

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If you know about or suspect money

laundering or terrorist financing, it should be

reported to the Serious Organised Crime

Agency (SOCA).

More information is available on the SOCA

website.

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Fraud offences can affect both firms and

individuals and rely on:

(a) the intent to make a gain or cause

someone else to make a loss and (b) the existence of certain behaviours, such

as making a misrepresentation, failing to

disclose information or misusing one'sposition.

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Examples of fraud offences

Misreporting a customer's income to secure a

mortgage, with or without the customer's

consent;

Advising a customer to take out an insurance

policy which you know is unsuitable following a

fact find; and Using information supplied by a customer in your

own interest rather than that of the customer.

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What you need to do

Carry out an assessment of the financial crime

risks your firm faces.

Be able to demonstrate the risk assessment

was systematic and not a one-off exercise.

Senior managers should understand the

identified risks and take appropriate and

proportionate action to mitigate them.

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Avoid Fines!

Enforcement action Aon ltd

On Thursday 8 January 2009 The FSA fined

Aon Ltd £5.25m for failing to take reasonable

care to establish and maintain effective

systems and controls to counter the risks of

bribery and corruption!

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Avoid Fines!

On 29 October 2008, the FSA fined Sindicatum

Holdings Ltd (SHL)

The corporate advisory firm was fined £49,000

for failures relating to its anti-money

laundering systems and controls and for not

adequately verifying and recording its clients

identities.

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Avoid Fines!

The FSA also fined Michael Wheelhouse, SHLs

money laundering reporting officer, £17,500 in

relation to his failures in overseeing and

implementing the anti-money laundering

systems and controls.

DONT LET THAT BE YOU!

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Avoid Fines!

This is the first time the FSA has fined an

MLRO for weak anti-money laundering

controls and it is a warning to firms and

individuals about the importance of complying

with requirements in this area.

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Tackling mortgage fraud

In July 1998 The FSA set out a programme of

work to tackle mortgage fraud which

emphasised the need for a coordinated

response from the mortgage community.

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key elements : targeted supervisory visits to

assess firms financial crime systems and

controls; strengthened engagement and

enhanced information sharing with partnersincluding :-

law enforcement,

regulators, the National Fraud Strategic Authority (NFSA),

and regulated firms.

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key elements :

a review of the role of the Approved Persons

regime

[as it relates to mortgage intermediaries.]

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Information From Lenders (IFL) scheme

and an increase in the amount of intelligence

the FSA have received

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2008 the FSA:

prohibited 26 individuals

issued fines of over £500,000.

sent cases to the police for criminal

prosecution.

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The FSA announced a new system to

encourage mortgage brokers to report

information to them.

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The link to the reporting forms are on web

pages for smaller firms

http://www.fsa.gov.uk/smallfirms/good_practice/protecting_your_bus

iness/financial_crimes.shtml

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Fraud

National Fraud Strategic Authority (NFSA)

regulators

trade associations law enforcement agencies.

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Fraud

1. Designing-out the fraud risks inherent in

different mortgage products and processes.

2. Instigating preventative safeguards and

controls within firms at the right level to

make mortgage fraud easier to spot and stop.

3. Ensuring professional integrity amongst key

professional sectors.

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Fraud

4. Driving-up the risk to perpetrators through

more effective detection and prosecution.

Intelligence sharing is a key part of thisstrategy.

Reviewing whether mandatory participation

from lenders in theIFL project is appropriate.

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Anti-Money Laundering (AML) and Combating

Terrorist Financing (CTF)

DO NOT FORGET THEANTI BIT!!!!

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Money laundering stages

Placement

Layering

Integration

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Who is responsible & who gets fined?

The ultimate responsibility for a firms systems and

controls lies with the senior management.

Use compliance consultants (e.g. IFAC) to help review

and formulate your AML policy

BUT senior managers must ensure that these aretailored to the firm.

Senior managers must also ensure they understand

how procedures are helping to manage their AML and

CTF risk.

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Cost to UK plc

The cost of identity fraud to the UK economy

is £1.2 billion thats £25 for every adult in

the UK.

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New Initiatives

Death records are to be released to vetted

organisations, such as credit-checking agencies.

This should make it much easier to detect

fraudulent activity, such as the takeover of arecently deceased persons identity to open bank

or credit card accounts.

New identity cards for foreign nationals are to be

rolled out as part of the National Identity

Scheme.

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Who is responsible?

Whether firms use consultants or not, it remains

the responsibility of the firm to ensure they

have AML procedures which are relevant tothe business of the firm and are understood

and followed by all staff.

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Money Laundering Reporting Officer (MLRO)

The role of the MLRO report is to bring to theattention of the senior management howeffective AML/CTF systems and controls are,

and where improvements are needed.You canuse a template report provided by

consultants.

BUT firms need to be able to demonstratethat the MLRO report is being properlyconsidered.

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Money Laundering Reporting Officer

(MLRO)

Cases should be referred to National Criminal Intelligence

Service BY THE MLRO and Individuals should ONLY refer

cases to their own MLRO....NO ONE ELSE!

The ONLY exception is the police WHEN REQUESTED BY THEM

if they are investigating a case.

Otherwise its potentially tipping off

Once referred that is all. Possibly record the fact [in T&C file

or make sure its recorded in the MLRO file] Not the client

file!!

CARRY ON WITH THE BUSINESS

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Checks to record

Evidence of a clients identity verification.

CHECK WHO PAYS THE MONEY...

Trustees

Employers

For group schemes

SHOULD BE DONE AT THE BEGINNING OF THE FIRSTMEETING

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In an FSA sample less than 50% of firms had

procedures for checking the Bank of England

Sanctions list.

Firms need to be aware of the sanctions list and,

therefore, should have in place systems and

controls for complying with legal obligations.

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Consumer ³Due Diligence´



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Consumer ³Due Diligence´

In an FSA sample, less than 50% of firms had

procedures for checking the Bank of England

Sanctions list.

[Any one spot the error?]

Its now the Treasury!

See link at the end of the slides.



Firms not only have an obligation to give specificAML training, but also to test its effectiveness.

Training should also be tailored to the specificroles of the staff in the firm.

In addition, consideration should be given to

adapting training to make it relevant to the risksposed by the firm and the roles that staff undertake.

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Training



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Tipping Off

If law enforcement has been informed, the firm mustnot:

1. Inform the consumer that an investigation is ongoing

2. Reveal to a consumer that the reason a transaction is

being delayed is due to an investigation

3. Subsequently reveal to the consumer that they were

the subject of an investigation, unless permission has

been granted by law enforcement/courts/NCIS. (This

is not affected by the outcome of the investigation)



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Tipping Off

PENALTIES FOR TIPPING OFF

5 YEARS IN JAIL



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What to look out for

Look out for overseas sources³

UNUSUAL Why

are they coming to you?

Particular countries higher risk

NIGERIA

ANGOLA

ETC



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S pecific situations to watch for (as per JMLSG)

Transactions which have no apparent purpose, or whichmake no economic sense.

Dealing with customers not normally expected as part of

the business.

Transfers to/from high risk jurisdictions, withoutreasonable explanation.

When a series of transactions are just below regulatory

threshold.

Unnecessary routing of funds through third partyaccounts.

Unusual investment transactions with no apparent

discernable profit.



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Regular series of address changes, with noreasonable explanation.

Sudden increases in cash deposits or levels of

investment without adequate explanation.

Significant payments/deposits by third parties.

Reactivation of dormant accounts.

Where a product/service requested by a client is

well out of the range of products/servicesnormally provided by the firm.

S pecific situations to watch for (as per JMLSG)



Spring 2009

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Data Protection



Data security: customer communications

Promotional offers

Annual statements

You must take appropriate steps to reduce

the risk of your customers becoming victims of

identity fraud and other crimes?

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Take care think through -have a plan

Is it Unnecessary?

Greater frequency than really needed?

Contains more personal data than is needed?

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Clients are entitled to find out what

information is held about them

This can be on computer or manual records,

These could include medical records or

financial information such as credit searches

Firms must comply with a client request but

are able to make a charge

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Individual clients rights ± access information



Individual Client Rights ± CorrectingInformation

Clients are entitled to apply to a court to

order a data controller

±Correct

±Block

±Remove or Destroy personal details

This is if the client feels they are inaccurate

or contain expressions of opinion based on

inaccurate information.

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di id l Cli i h f i



Individual Client Rights ± Prevent InformationProcessing

Client can ask a data controller not to process

information

This is if the client feels it may cause

substantial unwarranted damage or distress.

The data controller is not always bound to

act on the clients request.

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di id l li i h l k li i d



Individual Client Rights ± Block UnsolicitedMarketing

Clients can block unsolicited marketing

They can ask for information not to be

processed for direct marketing purposes

The client has to ask for this not to happen.

So, for example, clients have the right to stop

unsolicited mail or phone calls.

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Good Practice ±Control of personal information

±Fair use of information

±Marketing

Self Monitoring

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Firm¶s obligations

Fi Obli ti C t l f P l



Staff to be clear to whom information can and

cannot be disclosed.

Firms can include clauses in employment

contracts to clarify who controls the personal

information.

It should also be very clear what will happen

when an adviser or employee goes to work foranother firm.

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Firm Obligation - Control of Personal

Information

Firm Obligations Fair se of



Advisers often have to disclose client details

to other organisations

It is important that clients understand what

will happened to their personal information. Firms will need to tell clients

± Who is responsible for handling their personalinformation

± What their information will be used for ± Anything relevant to make the use of their

personal information fair.

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Firm Obligations ± Fair use of

Information



Delete or destroy personal information as soon asthere is no more need for it.

Beware of delete its still there!!! And can beretrieved

Disposal of old computers AND loss or re use of memory sticks!!!!

Have I trained my staff in their duties andresponsibilities under the Data Protection Act, and

are they putting them into practice? Do I need to notify the Information Commissioner

and if so is my notification up to date?

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Firm Obligations ± Self Monitoring



1. Deterrence to share scams deter boiler

rooms and those contemplating helping

them.

2. Disruption to disrupt the activities of the

criminals who operate the share scams.

3. Discouragement to discourage consumers

from dealing with unauthorised firms.

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Stop Scams



Data Protection

What is customer data?

Customer data is any personal information

held in any format. Examples includenational insurance records, address, date of

birth, family circumstances, bank details and

medical records.Information must be kept

secure because fraudsters can use it to

commit crimes such as identity theft.

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Data Protection What are the main risks?

This is not just an IT issue!!

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Data Protection

for instance, consider the physical safety of

your business premises?

Do you have a sign-in book for visitors and

supervise them while they are on the

premises?

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Data Protection

Another risk concerns the vetting of new

staff.

In the past we have found that whenhiring administrative staff especially

junior administrative staff many firms

carry out only basic reference checks.However, administrators often have

access to the most customer data.FINANCIAL



Data Protection

Your firm should take a risk-basedapproach to reducing financial crimeand should enhance recruitment checkswhere appropriate. You may wish toconsider credit checks and criminalrecord checks on individuals with access

to large amounts of customer data.

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Data Protection

Risks posed by third-party suppliers Many firms employ third-party suppliers

to carry out IT support or office cleaning

and security. This can lead to a situationwhere people from outside your firm can

have access to customer data, especially

if your staff leave confidentialinformation on their desks.

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Data Protection

Risks posed by third-party suppliers

You should carry out due diligence on

third-party suppliers before hiring them.

You should try to establish what their

vetting procedures are and ensure they

have a good understanding of your firm's

security arrangements.

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Data Protection

Risks posed by third-party suppliers Remember: Outsourcing to a third party

does not mean you have outsourced

your obligations to look after customerdata.

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Data Protection

When someone moves to a role wherethey will not require access to customer

data, do their IT permissions take account

of this? Are staff trained to ensure they

understand why they should follow

policies and procedures?

Is there an individual at your organisation

with responsibility for data security?

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Have a plan for when you send outcommunications!

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Small firms thematic review

FSA is over halfway through the visitprogramme in the review of financial crimesystems and controls in small firms.

Around 200 small firms were selected forreview as a representative sample from theregulated population.

Financial Crime Operations team & The Small

Firms and Contact Division All visits anticipated to be completed by the

middle of 2009.

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Financial Sanctions: Transfer of Function

The consolidated list of financial sanctions targets and other

information on financial sanctions previously held on the Banks pages

can be found on the financial sanctions page of the Treasurys public

website at the following URL address:

http://www.hm-treasury.gov.uk/financialsanctions

All enquiries regarding financial sanctions should be made to the

Treasury rather than the Bank of England at the following address:

Asset Freezing Unit

HM Treasury

1 Horse Guards RoadLondon

SW1A 2HQ

Telephone: 020 7270 5454

Email: [email protected]

b i k



Web Links

http://www.jmlsg.org.uk

http://www.hm-

treasury.gov.uk/financialsanctions

http://www.soca.gov.uk/faqs/index.html

http://www.bankofengland.co.uk/

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d !



Keep up to date!

To be added to the FSA financial crime

newsletter distribution list e-mail

[email protected]

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C l i



Complaints

Pension transfers

ISA transfers

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Mortgage, pension &investment complaints

the coming storm!

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The FOS are taking on

300 more staff

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Pensions & investment

complaints are expected

to jump 41% with

Mortgage complaints up

78%

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C l i t P i T f



Lots..

Retirement age

Inappropriate funds

You the IFA did not tell me;

- The cash fund was not in cash- The managed fund was not managed

- The Growth Fund did not grow

- The Real Return Fund did not give a realreturn.

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Complaints ± Pension Transfers

C l i t P i T f



Inappropriate funds

Wrong fund to start with

Did not switch me when you should havedome

Did not switch me quick enough Reviews not done

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Complaints ± Pension Transfers

C l i t Off h



Compensation scheme

Advice is regulated even if product isnt

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Complaints ± Offshore

C l i t i it h



Stakeholder

RIY

- from other IFAs and ambulance chasers

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Complaints ±pension switches

C l i t



If I lost money I must be badly advised.

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Complaints ±

C l i t



10 a month

Was 100 per month at height of Endowment

complaints

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Complaints ±

C l i t



Ministry of Justice

An IFA can

Help a client complain if they have arranged it

If they are not regulated by MoJ

Should not chase new work

Or help with an external complaint.

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Complaints ±

C l i t



Ministry of Justice

An IFA can

Refer up to 25 cases a quarter on to a MoJregulated firm

Applies whether or not you charge.

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Complaints ±

SOCA Presentation AML-Fraud

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Transcript of SOCA Presentation AML-Fraud