Cowboys beware; the AML Sheriff is on her way
With under a year until the first Financial Action Task Force ("FATF") visit to the UK in a decade, the FCA is consulting on proposed changes to its Handbook as the new money laundering regulations ("MLR 2017") come into force today.
MLR 2017 give the FCA an expanded toolkit designed to deal with failures to meet AML and counter terrorist financing standards and manage the risk of money laundering and terrorist financing effectively. The FCA has a new power to cancel, suspend or restrict an authorisation or registration of an authorised person or payment service provider. MLR 2017 also gives AML supervisors greater power to deal with non-compliance, including powers for the FCA to assess the fit and proper status of the those running 'Annex I Financial Institutions' (i.e. providers of services including money lending, payment services, trading in FX and securities and portfolio management advice).
The FCA's existing powers to impose a financial penalty or publicly censure a person or its officers and prohibit an officer from holding a management role at a relevant person or payment service provider will continue.
The FCA is consulting on its proposals to apply the same factors it currently does when deciding the level of sanction imposed for breaches of MLR 2017. It also proposes that no settlement discount will be available for cancellations of authorisation or registration and for permanent prohibitions. Feedback to the consultation is expected to be published next month.
The FATF is due to visit the UK in February / March 2018, 10 years after its last visit, to assess the effectiveness of the UK's system. FATF recently issued new international standards which were put into place in the EU's AML and counter terrorist financing framework by the Fourth Money Laundering Directive and Fund Transfer Regulation, and led to MLR 2017 in the UK. Its visit is therefore likely to be a driver for the FCA to bring a number of money laundering or other financial crime related enforcement cases ahead of the visit in order to demonstrate that the UK is taking steps to tackle the issue.
More widely, it is no secret that the FCA expects its new approach to investigations to lead to more investigations being opened (see speech by James Symington, Director of Investigations). Its expanded toolkit in relation to AML and countering the financing of terrorism will give it more scope to take investigatory action for potential breaches. The emphasis of the above powers on the accountability of senior managers also suggests that the regulator's focus is likely to be on bringing cases against individuals. In that context, the consultation paper provides some helpful guidance on the approach the FCA might take in deciding when to use its powers, for example by outlining the factors to be taken into account in determining the level of fine.