National Risk Assessment of Money Laundering and Terrorist Financing

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On 15 October the HM Treasury and the Home Office jointly published its first UK National Risk Assessment of Money Laundering and Terrorist Financing (NRA). The NRA is “is the product of extensive consultation with law enforcement agencies, UK intelligence agencies, the UK Financial Intelligence Unit, supervisors and private sector representatives” and covers:

• Domestic risks of money laundering and terrorist financing within the regulated sector, and the risks associated with cash, new payment methods, and UK legal entities and arrangements

• International risks to the UK from money flowing into and out of the country

Key findings from the NRA are:

• The UK’s law enforcement agencies know most about cash-based money laundering, although some gaps remain

• There are significant intelligence gaps, in particular in relation to ‘high-end’ money laundering where proceeds of major fraud and serious corruptions is held in bank accounts, real estate or investments, rather than cash

• The UK financial sector it is more exposed to criminality than financial sectors in many other countries due to its size and complexity

• The effectiveness of the supervisory regime in the UK is inconsistent. Particular improvement is needed in understanding the risk-based approach to supervision if it is to provide a credible deterrent

• Increasing collaboration between law enforcement agencies, supervisors and the private sector is essential

• Suspicious activity reports (SARs) form a critical intelligence resource and enable law enforcement agencies to intervene in preventing suspicious transactions. The NCA received over 350,000 SARs in 2014, the vast majority of them submitted by the financial sector. However many supervisors and private sector representatives consulted in the course of producing the NRA voiced repeated criticism of the SARs regime

The findings in the NRA are expected to shape the yet to be published Anti-Money Laundering Actions Plan(AMLAP). The “risk-based” AMLAP is supposed to build on the 2013 Serious and Organised Crime Strategy. The AMLAP will set out how the UK Government works with supervisors and the private sector in addressing the risks identified in the NRA. Priorities for the AMLAP include:

• Plugging intelligence gaps, particularly those associated with ‘high end’ money laundering through the financial and professional services sectors

• Working with supervisors to improve individuals’ and firms’ knowledge of money laundering and terrorist financing risks in key parts of the regulated sector

• Reforming the SARs regime which in December 2014 the Government had already committed to reviewing

For a PDF of the full report please click here.

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