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The UK Legal 500 2016

SHARED INTELLIGENCE

The Joint Money Laundering Intelligence Taskforce is an attempt to tackle money laundering in the UK. But it poses challenges for bankers, who have to be sure they respond appropriately if they are to be above suspicion.

When it was ushered in, the Joint Money Laundering Intelligence Taskforce (JMLIT) was heralded as a way of tackling the money launderers at the source of their wealth – their bank accounts. The offenders, it was declared, would find it harder to hide their ill-gotten gains. Very little, has been said, however, about the problems it could cause for the banks involved.

Under the JMLIT, ten of Britain’s banks have agreed to give the National Crime Agency (NCA) full bank account and transaction details of those believed by the authorities to be involved in money laundering. Previously, it was often the case that banks would refuse to hand over such details unless the request was backed with a court order.

Account information

The ten JMLIT banks have signed up to it voluntarily, perhaps swayed by the NCA’s claims that money laundering through UK financial institutions is on such a scale that a complete change of approach is necessary. They will now pass on account information whenever the NCA says it has received a suspicious activity about a customer’s financial activities.

For those who find themselves under investigation, it could well see them charged under the Proceeds of Crime Act with one of its three offences of money laundering. Prosecutors will now have speedier access to the information they seek in order to decide whether to charge someone. Those being charged will find that the timescale of any investigation may be considerably swifter than it would have been before the JMLIT came into effect three months ago.

But what of the banks? They, after all, are the ones given the task of making the whole initiative worthwhile. A lot of the account details they hand over will be the subject of lengthy legal argument prior to, and during, any trial. But that is not the issue they need to consider: they need to assess what the JMLIT means for them.

Regulatory burdens

If anything, this initiative could mean the banks facing greater regulatory burdens. Will they find themselves under pressure to produce suspicious activity reports when previously they would not have produced them? There is little doubt that the initiative suits the law enforcement agencies; who now have the ability to identify bank accounts that they need to investigate quicker. But for banks, their activities are now more open to scrutiny. One of their accounts would previously have only come under investigation if a bank had submitted a suspicious activity report or the authorities’ enquiries had led them to that account.

This new, greater transparency makes it harder for suspects to hide money in seemingly unconnected accounts but it also places a much greater responsibility on banks. Their anti-money laundering burden appears to have become that much heavier. In the past, an account may not have been deemed worthy of a suspicious activity report. But if NCA investigators come to examine that account as a result of information produced under the new initiative then the bank may well have some awkward questions to answer: Why was no report raised on the account? Why did the bank not at least seek advice from the authorities about the account? Did it not have any suspicions about it? And if not, why not?

The need to react

Banks could previously have gone about their business with or without the best of intentions, relatively secure in the knowledge that the activities of those whose finances they handled were not a matter for banking staff. That has now changed – and banks need to react.

Banks have to have policies in place to both manage the risk of and detect money laundering. These policies need to be clearly documented and enacted by staff at all levels. JMLIT puts an onus on banks to be more forthcoming when it comes to tackling money laundering. Banks already have obligations to do this under the 2007 Money Laundering Regulations, the Proceeds of Crime Act 2002 and the 2007 Transfer of Funds Regulations. But JMLIT has been introduced at a time when serious and organised crime is estimated to be worth £24 billion a year in the UK. The government sees tackling money laundering as a key component in tackling organised crime – and it sees banks as an increasingly important part of this.

With this in mind, banks have to be able to show that they are beyond reproach. If need be, they should not be afraid of seeking legal advice on the best way to introduce and operate such policies. If banks were to think that JMLIT brings no risk to them they would be wrong. Part of the reason for its introduction must be the inadequacies shown by banks when it has come to tackling money laundering over the years.

Concerns

Four years ago, the Financial Services Authority wrote in its report “Banks’ management of high money-laundering risk situations’’ that banks “must do more to ensure they are not used for money laundering’’. The report voiced concerns that around three quarters of banks were not managing the problem and were showing “serious weaknesses’’ when it came to money laundering. It highlighted a widespread lack of due diligence being carried out on customers, a reluctance to turn away any kind of business that could be profitable and conflicts of interest when it came to relationships bank staff had with high-risk clients.

The FSA no longer exists. But the NCA and other authorities will be looking at banks closely during the 12 months of JMLIT. It is a chance for banks to show they are serious about tackling money laundering. But they can only prove this by instigating and maintaining strong, anti-money laundering policies. If they do not, they too may find themselves with serious questions to answer.