Issue 3 March 2015
WMA JOURNAL In this issue
Financial Crime Technology The EU Managing Change
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Tackling Economic Crime The UK Government has placed the fight against economic crime firmly on its agenda in 2015. Financial institutions and senior management should ensure it is also high up on their agenda. In a recent speech at George Washington University, Keith Bristow, Director General of the National Crime Agency, explained how many hundreds of billions of pounds of criminal money was almost certainly laundered through the British financial system, undermining the UK’s reputation as a financial centre. His wide ranging speech explored the links between serious organised crime, economic crime, cyber-attacks and bribery and corruption. He also touched on the sheer scale of economic crime and cyber threats and how this made them national security threats. The speech should not be seen in isolation. It is further evidence of Government, regulators and law enforcement agencies working together to keep the spotlight on their fight against economic crime and it follows legislative and regulatory changes aimed at tackling economic crime and punishing perpetrators.
In the last year or so we have seen several initiatives to combat economic crime: The creation of the National Crime Agency (NCA) – to tackle organised crime, economic crime and cybercrime; Creation of the Financial Sector Forum – partnership between the Home Office, National Crime Agency, British Bankers Association, regulators and other financial institutions to share information and combat economic crime; Cybercrime and cyber defence initiatives, such as the Joint Cybercrime Action Taskforce (J-CAT) and CBEST (a framework to deliver controlled intelligence-led cyber security tests) - to fight cybercrime, seize illegal profit and reduce the risk of cyber-attacks on the financial system; Sentencing Council’s Guidelines on Fraud, Bribery and Money Laundering - which should result in an increase in corporate penalties; Successful prosecution and sentencing under the Bribery Act 2010; Introduction of Deferred Prosecution Agreements under which a company charged with a criminal offence can have proceedings suspended if it agrees to various conditions, such as co-operating with prosecutions of individuals, making reparations or paying a financial penalty; Proposed legislative changes to the disclosure of beneficial ownership of companies - to enhance transparency of UK corporates as well as combatting tax evasion and financial crime.
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UK Anti-Corruption Plan Building on these initiatives, the UK Government issued its long awaited “Anti-Corruption Plan” at the end of 2014.1 The Plan set out over 60 action points for the Government and its partners, both in the public and private sector. The Government has designed its strategic response to combatting corruption around four key components: Pursue: Prosecute and disrupt people engaged in corruption; Prevent: Prevent people from engaging in corruption; Protect: Increase protection against corruption; and Prepare: Reduce the impact of corruption where it takes place. One of the proposed actions in the Plan is for the Home Office and the Department for Business, Innovation and Skills to consider further incentives to support whistleblowers in cases of bribery and corruption. Another action point is for the Ministry of Justice to examine the case for a new offence of a corporate failure to prevent economic crime. This issue was foreshadowed in early September 2014, when the Attorney General, Jeremy Wright QC, speaking at the Symposium on Economic Crime, confirmed: “Government officials are considering proposals for the creation of an offence of a corporate failure to prevent economic crime, modelled on the Bribery Act section 7 offence.” 2 The Attorney General’s comments have the full support of David Green, Director of the Serious Fraud Office, who has previously spoken along similar lines of the need to consider a new offence. The year ahead The fight against money laundering and economic crime also seeks to restore the UK financial sector’s reputation. A series of high profile scandals, such as the LIBOR and foreign exchange regulatory investigations, have damaged the City and recent money laundering allegations against a global financial institution have further eroded the public trust in financial institutions.
The Home Secretary’s recent announcement of the creation of the Joint Money Laundering Intelligence Taskforce (JMLIT) will see representatives from the banking sector, including some firms that have been under scrutiny, exchanging information and intelligence with law enforcement agencies to detect, prevent and disrupt money laundering and wider economic crime threats against the UK. It will run for an initial period of 12 months.
Persue, Prevent, Protect, Prepare The FCA announced the findings from its thematic review into market abuse in the asset management sector. The review covered 19 asset management firms and the FCA will be writing to the firms to provide individual feedback. Separately, the FCA confirmed it is investigating 67 firms or individuals that fall within the AIFMD for possible abuses ranging from financial crime to market abuse. It is likely that some of these investigations will result in public enforcement action. Throughout the year, the Government, law enforcement agencies and regulators will continue their fight against economic crime, implement the action points in the Plan and keep this important issue firmly in the public spotlight. Now more than ever, there is a greater willingness to hold financial institutions and senior management to account and to take robust action to clean up the UK financial system. Economic crime is high up on the agenda of regulators and law enforcement agencies - firms and senior management within financial institutions should ensure it is equally as high up on theirs. JAGDEV KENTH DIRECTOR OF RISK & REGULATORY STRATEGY FINANCIAL INSTITUTIONS GROUP, WILLIS GROUP 1 https://www.gov.uk/government/publications/uk-anti-corruption-plan 2 https://www.gov.uk/government/speeches/attorney-generals-keynoteaddress-to-the-32nd-cambridge-international-symposium-on-economiccrime-on-tuesday-2-september-2014
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Protect yourself from boiler room share scams If you get an unexpected phone call from someone you don’t know trying to sell you shares it may be a boiler room scam. Boiler room organisations run a financial scam using convincing sales tactics to persuade you to buy shares which are of little or no value. If you do buy the shares you may find they are worthless. The majority of boiler room victims are male and experienced investors - it is not just the novice investor who can be duped. The average loss is £20,000, with around £200m* lost in the UK each year. If you deal with a boiler room they will not be authorised by the Financial Conduct Authority (FCA) and you may not have the right to complain or claim compensation. Generally it’s against the law to ‘cold call’ a person to try to sell shares or other investments. So, if you haven’t invited the call just hang up!
How to recognise a boiler room • The first time you hear from a boiler room could be by post or email. They may have written to you offering a free research report into a company in which you hold shares, or a free gift or discount on their dealing charges. • You will then receive a phone call from a well trained, highly professional sounding salesman. They can be very persistent, never taking ‘no’ for an answer. They often use a script to help them answer your questions or ward off your objections. They phone their victims every day until they finally make a sale, or until you hang up on them. • They will often claim to be from legitimate firms, or firms which sound legitimate and have professional looking websites. • You may be told that you have already entered into a contract to buy the shares and are under an obligation to pay. This is not the case as such contracts are not enforceable under UK law. *Source: Financial Conduct Authority
How to protect yourself FCA
• Get the name of the person and organisation contacting you. • Always ensure the firm is on the FCA Register and is allowed to give financial advice by visiting http://www.fsa.gov.uk/register/home.do. • Use the details on the FCA Register to contact the firm, rather than a direct line they might give you. • Call the FCA Consumer Helpline on 0800 111 6768 if there are no contact details on the Register or you are told they are out of date. • Check the FCA’s list of known unauthorised overseas firms at http://www.fca.org.uk/consumers/protect-yourself/unauthorised-firms/unauthorised-firms-to-avoid.
Report a scam • If you have any doubts, call the FCA Consumer Helpline with details, or complete the ‘Unauthorised firms reporting form’ at http://www.fca.org.uk/consumers/protect-yourself/report-an-unauthorised-firm. • If you think you have been a victim of boiler room fraud you should always contact Action Fraud on 0300 123 2040 or via their website http://www.actionfraud.police.uk./ For a list of FCA authorised stockbrokers visit the WMA website www.thewma.co.uk (go to ‘Buying and Selling Shares’) or contact WMA via telephone on 020 7448 7100 or email at info@thewma.co.uk.
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