The City of London’s status as a favourite place for the world’s dishonest officials to hide stolen money will remain a stain on the UK’s reputation, despite a long-awaited government anti-corruption plan expected on Monday , according to a formerregulator who is now an MP.
Stephen Barclay, a Conservative MP, who worked in senior anti-money-laundering roles at the Financial Services Authority (FSA) and Barclays Bank before entering parliament in 2010, said the plan did not address flaws in the UK’s financial system that allow crooked officials from foreign countries to hide ill-gotten gains in London’s banks.
The MP said a series of official reports from the 1990s to the present had shown banks were not tackling money laundering adequately. “Money-laundering officers need to be senior figures with sufficient clout to turn down high-risk, highly lucrative clients [suspected of money laundering], but too often responsibility is passed down the decision tree.”
He stressed he wasn’t bashing the banks, which he believes face a system of costly regulatory compliance that leads them to spend millions on ineffective controls, such as running background checks on grannies, rather than high-risk, wealthy foreign clients moving large sums of money through the UK. Financial institutions also have little support from cash-strapped law-enforcement agencies, meaning “the banks are almost fishing in the dark”.
“When there is a high-risk multimillion pound transaction, the bank files a suspicious activity report, but 93% of the reports are never read,” he said.
Some of these fears were echoed in a recent report by the Financial Conduct Authority (FCA), the successor to the FSA, which found significant weakness in anti-money-laundering controls, following an investigation into 21 banks. The FCA declined to name the banks, but said the investigation was focused on small private and retail banks, rather than well-known high street names. More than half of the banks the FCA visited had not assessed money-laundering risk, while six were deemed to be seriously weak. One London-based branch of an overseas bank had opened an account for a client who had been charged with 107 counts of money laundering. Another bank reported a clean bill of health for a customer, when a Google search showed an African government committee had alleged they were guilty of corruption in the privatisation of state-owned companies. Another bank officer, with the job of stopping the flow of illicit funds, told the regulator he did not see the point of trying to find out the source of wealth for “politically exposed persons”, an official category in money-laundering law referring to senior government officials that banks are obliged to run checks on. Several money-laundering officers left their jobs following the FCA investigation.
Between £23bn and £57bn of stolen money is laundered through London each year, according to an estimate made by the City regulator in 2013. Barclay said the UK anti-money-laundering regime was flawed because government investigators did not have enough time to carry out detailed checks on suspicious transactions in UK bank accounts. “If you only have 38 days [the legal maximum] to prove in court that these are corrupt funds and corrupt officials in the home country don’t want to cooperate, you can imagine how difficult it is to prove corrupt assets.”
The MP said he welcomed the government’s anti-corruption plan, but “it doesn’t cover many of the flaws I am flagging”. The Home Office is expected to publish the plan on Monday, 24 hours before a UN day dedicated to fighting corruption. But a Home Office spokesperson was unable to confirm whether the long-delayed plan would be published.
A spokesperson for the Treasury, which drafts the anti-money-laundering rules, said: “The UK has a comprehensive anti-money-laundering regime and we are committed to ensuring our financial system is a hostile environment for illicit finances.
“Since the implementation of the money-laundering regulations in 2007 the UK has been one of the few countries to be considered to have sufficiently rectified deficiencies highlighted in previous evaluations.”
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