Financial Crime

Money Laundering. Telling it how it is?

This interview is reproduced with permission from © Informa UK Ltd 2009 Tel: +44 (0)20 7017 5532.

"I think the whole idea of a de minimis threshold is nonsense," David Blackmore, Director of Financial Crime at Risk Reward Ltd, snorted when MLB raised the Law Society's continued agitation for it at his office on Moorgate, a stone's throw from the Bank of England. "They've completely lost sight of any terrorism connection. It shows a degree of naivety of how terrorism is financed, which is often by small amounts, such as the UK £8,000 total cost of the 2005 London bombings."

There are many other areas, of the Money Laundering Regulations 2007 (MLR 2007) rather than the Proceeds of Crime Act 2002 (POCA), which, he believes, do need attention; third party reliance for customer due diligence is one. "I've not met a single firm - large or small - that has used it." Blackmore says the reason is that it is simply too difficult to secure confirmation in writing from the firm relied on that it accepts responsibility. "If a firm is FSA-authorised, that should be enough I think."

Equivalence is another bugbear. The authorities should either address the 'defects' in the existing EU sponsored list [how is it possible that Russia is deemed Third ML Directive equivalent?] or publish more on the criteria that decide inclusion in order that firms may form their own view. Treatment of equivalence (beyond the examination of equivalent markets) may well be handled in 'Part 3 Guidance', anticipated from the Joint Money Laundering Steering Group (JMLSG). "It would make sense to create a compendium of enhanced guidance, which could also cover sanctions and the Counter Terrorism Act 2008, and the sooner the better."

Politically Exposed Persons (PEPs), another sensitive issue, should be a "standard part" of the MLRO's annual report: Blackmore contends it would be reasonable to include "broad numbers" rather than identifying details. Prior to this though, "a more workable definition of a PEP is essential and ought to include UK PEPs, particularly now that Parliament has been brought into disrepute."

"I'm not sure what the Regulations [MLR 2007] could achieve in the area of enhanced due diligence [EDD]." But PEPs are an obvious candidate for further clarification. There was no chance of a list being issued, he agreed, but the exclusion of domestic PEPs from EDD was "absurd," especially in light of the MPs' expenses scandal, in which some honourable members skirted if not stepped over into criminal conduct. The Third Directive requires PEP customers to be signed off by senior management. "The [JMLSG] Guidance says that it should be by a level higher than customer take-on. I think it should be by senior management and firms may need to re-consider the level, especially in private banking and wealth management."

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