Ben Hur

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Ben Hur NIBC Bank
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• FINANCIAL CRIME 2009
• United Kingdom and across Europe
• How bad can it be?
• Scoping the problem

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• The job of MLROs (Money Laundering
• Reporting Officers) is to help stop
• bad money being laundered through their
• institution.
• How bad can it be?

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• 43 Billion is said to be laundered through the
  UK every year
• 63 of bank fraud is conducted with the use of an
  insider
• UK plastic card crime 50 higher than its nearest
  rival

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• 1 in four cards involved in fraud in the last
  twelve months
• Last three years has shown a 190 increase in
  cloned cards
• People incarcerated, UK is the number 1 in
  Europe
• People Trafficking, UK number 1 in Europe

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• UK BEATS THE REST OF EUROPE!!
• CONTROLLED NARCOTICS USE
• UK number one in Europe in 2008 (5th year
  running)
• UK number 1 in Europe for Cocaine use
• UK number 1 in Europe for Cannabis use
• UK number 3 in Europe for amphetamine use.
• These affect other crime levels by users seeking
  funds, and dealers laundering proceeds

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• SERIOUS ORGANISED CRIME
• ATM fraud rampant
• Motor car rigging
• Insurance fraud (now estimated at 1.8 million a
  day in the UK)
• Counterfeit goods of all descriptions
• Motorway service station crime.

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• The uro
• Of huge assistance
• To the criminal it is now more difficult to
  ascertain where the proceeds came from
• And - the lovely 500 note now means you need
  less space to transport more money.

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• THE PRESSURES
• Main Priority - The employer, protecting them
  from tainted funds, from being implicated in any
  way in the whole range of financial crime.

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• THE PRESSURES
• Then the European Regulators
• Regulators across Europe are communicating more
  than ever, which is a good thing. Most firms in
  most EU countries are already following
  legislation based on the 3rd EU, it is not 100
  yet, but it is improving. The FSA has certainly
  introduced many measures that both UK and
  Passported firms must adhere to.

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Personal Liability
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• Michael Wheelhouse was the MLRO for a small firm
  of only 35 customers, called Syndicatum, easy
  enough to manage, one would have thought.
• However, Mr Wheelhouse was personally fined
  17,500 by the FSA in 2008
• It is worth noting that personal fines imposed by
  the FSA cannot be paid for by ones employer and
  cannot be insured against.

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• The reasons for the FSA fine concern customer
  identification and record keeping issues, and are
  available on the FSAs web-site, and in my
  opinion the FSA were spot on.
• Several institutions have been hit with some very
• tough fines, and these will be discussed shortly
• What should/could firms do to mitigate this risk,
  what are
• the lessons learnt?
• Twelve quick thoughts

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• Do you have the right person in charge of your
  AML regime, does he/she have experience?
• Is your KYC/DD process up to date, has it been
  independently reviewed and assessed? (multi eyes
  principle)
• Have you had the systems you have stress tested?
• Automated systems a must surely
• Skills and knowledge, BENCHMARKING

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• Training on going
• The UK AML Report
• Record Keeping
• Effort
• Information dissemination, news reports
• Responsibility and accountability
• KYB, KYC, KYE, automated assistance.

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• Ben Hur
• UK Compliance Officer and MLRO for
• NIBC Bank N.V. London
• Chairman www.mlros.com
• Over 625 practitioner members.
• E-mail ben.hur_at_nibc.com
• Telephone (UK) 0207 375 7909

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Simon Dilloway Lopham Consultancy
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• Some cases to ponder
• Abbey National Bank
• Lloyds TSB
• Bank of Cyprus
• Société Générale

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• Abbey National Bank
• 2002/3
• Failing to implement proper AML Controls
• Delaying suspicion reporting by up to 4 months
• FSA Fine 2.3 Million

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• Abbey allowed individual branches to certify
  themselves as being in compliance with the rules.
  However, when Abbey launched a review of the
  system in November 2002, it found that a third of
  the branches were not checking customers'
  identification properly.

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• Over the same period
• Royal Bank of Scotland was fined 750,000
• Northern Bank was fined 1.2 Million
• For similar breaches

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• And more recently
• LloydsTSB has fallen foul of the US Justice
  Department in 2 separate actions concerning AML
  activity
• US350,000,000 settlement

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• The first concerned the alleged stripping of
  information from SWIFT transfers originating from
  OFAC sanctioned entities before arriving at US
  banks, making it appear that the funds originated
  with Lloyds TSB in London

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• In terms of the SWIFT situation there have
  historically been data protection issues between
  Europe and the US. In an unrelated case where
  SWIFT were prosecuted by the US authorities (as
  they had a branch in the US)

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• Belgian Prime Minister Guy Verhofstadt is quoted
  as saying
• SWIFT finds itself in a conflicting position
  between US and European law but it should have
  received stronger guarantees of privacy
  protection based on European standards, not by US
  standards, which are not as strong

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• This places certain strictures on European banks
  regarding protection of data before making SWIFT
  transfers to the US
• AND

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• There is the perennial problem of the plethora of
  sanctions lists,
• Are they all being checked, and checked properly?

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• Ongoing US Justice Department action
• Lloyds TSB, Bank of Cyprus and AmerisSoft
• alleging
• US 44Million Laundered Funds
• Through personal account
• Letter supporting asset levels

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• Just to illustrate it is not only UK banks on the
  receiving end
• French bank Société Générale defended its
  handling of the world's biggest trading scandal
  on Sunday, but admitted its risk systems had
  failed to detect a 50-billion-euro (37 billion
  pounds) market bet by a lone trader. (Reuters)

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• The same issues keep cropping up under analysis.
• Lack of control
• Lack of oversight
• Lack of foresight
• Aggressive regulatory intervention, particularly
  from the US

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• Not having proper compliance regimes is illegal
  and inexcusable
• Not reacting to changing practices and regulatory
  attitude is dangerous, and
• Not applying good procedures already in place is
  absolutely ludicrous!

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• Direct Control Model
• (CEO or President Accountable for Compliance with
  AML/CFT Law)
• Compliance Officer Accountable for
• Developing, Agreeing, Implementing and Updating
  all AML/CFT Policies and Procedures
• Development Delivery of Staff Training
  Awareness
• Introduction, Operation and Effectiveness of AML
  Systems Controls

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• Transaction Monitoring, Identification,
  Investigation and Reporting of Mandatory and STRs
• Application of Financial Sanctions
• Monitoring Effectiveness, Production of
  Management Information and Reporting to Senior
  Management on AML Control Environment
• Although Activities may be Delegated, Ownership
  of the Risk Remains with the Compliance Officer
• Suitable for Medium/Smaller Firms

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• Devolved Model (Larger/Complex Firms)
• (CEO or President Remains Accountable for
  Compliance with AML/CFT Law)
• Central Compliance Function Accountable for
• Providing Leadership and Direction
• Developing and Agreeing AML/CFT Policy and
  Standards
• Articulating and Disseminating New or Evolving
  Legislation/Regulation
• Providing a Centre of Excellence on AML Risk
  Management
• Ensuring Senior Management Routinely Informed of
  AML Standards, Threats and Vulnerabilities

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• Primary Interface with FIU on AML/CFT Issues on
  Policy Matters
• Oversight of Business Unit Compliance Function
• Business Unit Compliance Officer Accountable for
• Local AML Training Awareness
• Internal Processes, Systems Controls
• Monitoring, Management Information
• Assessing Business Unit Standards of AML and
  Reporting to Central Function
• Implementation of Group Policies and Standards

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• Many of the Core Anti-Money Laundering
  Requirements are Identical to those Adopted by
  Prudent Bankers Around the World. They Need Not
  be Onerous.
• Foster a Compliance Culture within Your Bank and
  Provide Leadership in the Flight Against
  Financial Crime and the Financing of Terrorism
• Progressively Introduce Key Processes and
  Controls
• Continuously Evolve your AML Processes and
  Controls for Optimum Effectiveness
• Seek to Adopt International Standards (FATF)
• Take Account of National and International
  Findings of Material Deficiencies
• Share Success with Your Staff
• Foster a Mutually Supportive Relationship with
  your Peers (in other Banks) and the FIU
• Build Upon Success.

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Simon Dilloway BSc(Hons) MSc FSyI AMAE Lopham
Consultancy info_at_lophamconsultancy.co.uk 44(0)1
379 687593 www.lophamconsultancy.co.uk