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What is an internal investigation and why would one occur?
An internal investigation is one that is carried out to investigate an allegation of fraud, corruption or any other violation of the company’s code of conduct. The reason for such an investigation may even be to identify statutory or regulatory concerns and take the necessary action and remedial measures. An internal investigation that is thoroughly conducted would generally assist the company in ensuring compliance with applicable legal requirements, whilst identifying the necessary remedial actions to be taken to avoid such situations, as well as to prepare for potential legal proceedings. The widening ambit of potential liabilities under the various statutes has increased the importance of ensuring that any allegation of wrongdoing is immediately investigated.
t is prudent to involve external legal counsel, who is covered by attorney-client privilege to an extent, to ensure advice on consequences and legal action that may be taken by the company or against the company.
How can companies prepare for an internal investigation? How do you conduct an internal investigation?
Before commencing any investigation, the scope, nature and purpose of the investigation should be identified and formulated. The investigation plan would need to identify the specific work steps, phases and timelines based on the allegation and the information involved. It is prudent to involve external legal counsel, who is covered by attorney-client privilege to an extent, to ensure advice on consequences and legal action that may be taken by the company or against the company. The need and timing of involving the board of directors/ relevant committee of the board, statutory auditors would also need to be kept in mind given the possibility of statutory reporting that might be triggered. Identification of the steps to be taken prior to the investigation, including suspension of the relevant employees pending enquiry, taking custody of devices and documents which are to be reviewed.
Depending on the outcome of the investigation, the company would need to assess the next steps that would need to be taken including perhaps terminating the services of vendors or distributors.
Review of the data, relevant documents and preparation of the interview questions should be clearly identified before conducting the interviews. Strategizing the sequence of persons to be interviewed and ensuring that the interviews happen in a comfortable and non-threatening atmosphere is important. After each interview, it is important for the team to take stock of the responses and consider if any additional questions are to be raised or if other persons connected with the matter are to be interviewed. Recording of the interviews to ensure that they can be used as evidence if the matter is litigated is also important.
What are the next steps after an investigation is concluded?
Depending on the outcome of the investigation, the company would need to assess the next steps that would need to be taken including perhaps terminating the services of vendors or distributors. In addition to identifying and taking the necessary remedial measures to avoid a repeat, the company would also need to assess the kind of disciplinary action that would need to be taken against any involved employees ranging from a warning letter, holding back of promotions or even termination. Additionally, there could be reporting and filings that would need to be taken by the company under various statutes which could have ramifications for the company for which it should be prepared. A well thought through and well-strategized internal investigation should ensure that the company would be prepared for the consequences.
Nohid Nooreyezdan
AZB House | Peninsula Corporate Park | Ganpatrao Kadam Marg | Lower Parel | Mumbai 400 013
Tel: + 91 22 4072 9999 | Fax: + 91 22 6639 6888 | www.azbpartners.com
As a Senior Partner based out of Mumbai, I have been with the Firm since its inception and head up the Employment Law practice along with being a part of the Firm’s Compliance and Investigation practice team. Being in the profession for over 24 years, I have advised clients from various sectors on the rapidly evolving nuances of Indian employment law as well as the Indian anti-corruption laws and compliance requirements and conducted document review and interviews of custodians in relation to allegations of commercial and public corruption and bribery.
AZB & Partners is one of the few firms in India that has a formidable Compliance and Investigation team consisting of several individuals who are not only highly qualified but also possess extensive experience in the practice area. The firm stands out as being one of the few that offers clients equal and seamless coverage of white-collar crime matters across national regions such as Delhi, Mumbai and Bangalore and internationally. AZB & Partners’ team of specialized lawyers and forensic investigators allows it to bring an integrated multi-disciplinary approach to white collar crime.
Neil Williams, of business crime solicitors Rahman Ravelli, is concerned for the cross-border policing of business crime if and when Brexit becomes reality.
Statistics recently released and publicised show that a record number of European criminals are believed to be on the run in Britain.
Analysis of figures produced by the National Crime Agency (NCA) reveals that the UK received 17,256 European arrest warrants last year for suspects wanted by police in other European Union countries.
This figure includes 619 people who are sought in connection with murders or manslaughters, 229 who are suspected of rape and 265 suspected paedophiles. And although there was a record number of warrants, the number of arrests from April 2017 to April 2018 as a result of such warrants was 1,027: a five-year low and a 35% drop on the figure for 2016-17.
Such statistics do little to raise the mood. But the situation is perhaps more serious than the figures suggest. That is due largely, of course, to the prospect of Brexit. Last year the Director of Public Prosecutions, Max Hill QC, said that a no-deal Brexit would result in delays in suspects being extradited if the UK was to leave the European arrest warrant system.
This is an issue that goes beyond those alleged to have committed the most horrific crimes. It highlights the problems that Brexit can bring for the investigation and prosecution of business crime.
Business is more multinational than ever before. As a result, business crime and the investigations it prompts are more likely than ever to cross borders and involve law enforcement agencies from a number of countries. The UK’s enforcement agencies regularly liaise with their foreign counterparts on complex and multijurisdictional cases; often working together and sharing information and expertise. Extradition has been a relatively routine procedure. Whether that will continue remains to be seen.
Business is more multinational than ever before. As a result, business crime and the investigations it prompts are more likely than ever to cross borders and involve law enforcement agencies from a number of countries.
The lack of a post-Brexit security agreement has already cast doubt on the UK’s ability to extradite suspects or convicted individuals from EU countries under the European arrest warrant scheme. Post-Brexit extraditions could still be sought under the 1957 Council of Europe treaty but these will be more complex and expensive for the government than a standard European arrest warrant extradition.
In February 2018, Ireland’s Supreme Court declined a request to extradite an Irish company director to London, who had fled the UK after a tax fraud conviction. The court did this on the grounds that by the time he finished his prison sentence, the UK would have left the EU. February 2018 also saw a German court refuse to extradite four former Deutsche Bank traders to the UK to face trial for Euribor rigging. The following month, Monaco refused to extradite Unaoil executive Saman Ahsani to the UK to face corruption charges following an “adverse opinion’’ from Monaco’s Court of Appeal. A court official stated that the allegations against Ahsani were not liable for criminal prosecution, under Monaco’s laws, at the time they were alleged to have occurred.
Extradition appears to be in a state of flux. But it is a far from the only business-related problem. The National Crime Agency has stated that money laundering opportunities may rise after Brexit. While critics of the European Union (EU) could claim with some justification that it has not been exemplary when it comes to tackling money laundering it has at least introduced a series of directives to stop the proceeds of crime flowing into member states.
Membership of the EU has been no guarantee of protection against laundering. But it has led to progress in this area. It can be argued that the UK enforcement agencies’ prowess in tackling money laundering and other forms of business crime is unrivalled by those nations staying in the EU. This may mean individuals EU members missing the UK’s expertise. But from a UK point of view, it is hard to see such prowess remaining at its existing level if its enforcement agencies can no longer rely on the relationships that currently exist between them and their European counterparts.
EU withdrawal means a UK exit from the EU’s law enforcement agency, Europol, whose centralised intelligence is a massively valuable asset in tackling cross-border crime. Even though the UK has tough anti-money laundering and corruption legislation and its agencies have recently been given enhanced powers to identify and seize the proceeds of crime, its likely loss of valuable cross-border cooperation could prove costly.
With recent charges brought forward in the Danske Bank money laundering investigation, Neil Williams of business crime solicitors Rahman Ravelli argues that the effectiveness of bank regulation also needs scrutinising.
Wondering about the final consequences of any scandal that involves an estimated 200 billion euros is perhaps inevitable. After all, the bigger the amounts then the larger the headlines. Any financial scandal has implications for the company and individuals concerned but it is also only natural that onlookers want to know what happens next. The scale of the problem at Danske Bank makes it imperative that how it happened is determined and that the potential for it happening again is removed.
The scale of the problem at Danske Bank makes it imperative that how it happened is determined and that the potential for it happening again is removed.
But this goes beyond the staff at Danske, its customers and the various figures who were using the bank to launder their ill-gotten gains on a massive scale. It involves taking a long, close look at the issue of regulation: both the quality of regulation of financial institutions in general and the exact duties and activities of the regulators whose job it was to ensure a Danske Bank scandal never happened. As there seems little doubt that regulation failed on this occasion.
This was an occasion where thousands of apparently suspicious customers were responsible for 200 billion euros’ worth of transactions over nine years at Danske’s Estonian branch in the capital, Tallinn. The Danske Bank scandal has so far been focused – and quite rightly – on what went wrong and who was to blame. But if anything is to be learnt from what now appears to be the biggest money laundering scandal in history, the investigators need to be finding out what the regulators were (or were not) doing to prevent wrongdoing on such a massive scale.
Only by taking such an approach can we have any confidence that a problem of this scale and nature will never happen again.
At the time of writing, nine Danske managers have been charged in connection with the scandal; including former chief executive Thomas Borgen, who stepped down last October when the scale of the scandal became apparent. In fairness to the Danish prosecutors, they have acted swiftly and decisively. They have been the subject of global scrutiny and what happened at Danske bank is something that has implications for the reputation of the Danish banking system as a whole. This is a matter that needs to be resolved quickly and any lessons learned immediately if Danske and Denmark’s financial system as a whole are to restore their reputations.
This is a matter that needs to be resolved quickly and any lessons learned immediately if Danske and Denmark’s financial system as a whole are to restore their reputations.
The authorities have investigated, assessed the scale and the nature of the problem and taken the actions necessary to identify and prosecute those that they believe are responsible for it happening.
While matters are at this stage, it would be unfair and unwise to try and pre-judge the issue or cast aspersions on any of those who have been – and even those who have not been – charged. We know there has been wrongdoing and we know that it has been allowed to happen due to either assistance or incompetence from those within Danske Bank.
But what we know nothing about is the effectiveness of regulation and / or those who had the task of enforcing it. And that cannot be something that can be left unaddressed.
The competence of the regulators and how much they knew about what was happening are issues that are as central to the Danske Bank scandal as the conduct of the launderers and the bank staff. There is a clear and urgent need to discover the reasons for why the regulators either knew little or nothing – or knew more but did little or nothing.
What has happened at Danske has done the bank, its staff and Danish banking in general no favours at all. It has to be seen as a wake-up call for either new approaches to bank regulation or at least better enforcement of existing regulation.
Identifying a gap in the market, Pinsent Masons created a dedicated forensic investigative capability, offering a unique multi-disciplinary offering. This drives significant efficiencies and collaboration, enabling Pinsent Masons to conduct internal investigations that are efficient, proportionate, reliable and, where appropriate, privileged.
Below we discuss the forensic accountant’s role and how Pinsent Masons has brought this to the forefront of its multi-disciplinary delivery to clients.
Who are and what does the Forensic Accounting Service ("FAS") do at Pinsent Masons?
“Forensic” in this context means suitable for use in Court, such that forensic accountants must comply with Court standards and may be appointed to provide expert evidence at hearings.
The role of a forensic accountant can vary and is often considered to be the most impactful aspect of the accounting profession. A forensic accountant is an "investigator" focusing on the detailed financial aspects of investigations into fraud, financial irregularities and disputes. In essence, forensic accountants apply their accounting knowledge and experience to legal issues.
There are two main aspects of the work of forensic accountants – Litigation Support and Investigations albeit, they are not mutually exclusive as components regularly overlap throughout client matters.
For Litigation Support, forensic accountants are engaged to advise on the financial aspects of engagements that result from actual or anticipated disputes or litigation. Forensic accountants use their accounting, auditing and investigative skills to determine the financial impact of events, including quantifying damages sustained by parties involved in legal disputes.
“Forensic” in this context means suitable for use in Court, such that forensic accountants must comply with Court standards and may be appointed to provide expert evidence at hearings. Forensic accountants also assist in resolving disputes even before they reach the courtroom.
For Investigations, forensic accountants are engaged to investigate whether criminal matters such as fraud, bribery, theft or misrepresentation of financial data have occurred and to assist with recovering proceeds of crime. Forensic accountants are also engaged at Pinsent Masons in civil investigations and matters, including asset tracing and recovery of funds.
Forensic accountants also have an important role to play in compliance through risk management and monitoring programmes. They assess accounting systems, assisting in detection and prevention as well as engaging in subsequent remediation.
The nature of the work FAS has undertaken for litigation matters has evolved considerably since our team was first established. We now see an increasing proportion of multi-jurisdictional disputes and international arbitration matters and expect that trend to continue. In response to changes in the market and clients' requirements we continue to further apply innovation to our delivery.
The extent of our in-house forensic accounting team's involvement in matters depends on the client's circumstance and the nature of the dispute.
So when should businesses consider a forensic accountant?
Businesses should consider using forensic accountants in addressing relevant issues that are on the Board's agenda, including: risk management; resolving costly and business distracting disputes; investigating issues of fraud and financial irregularities; as well as responding to regulatory enquiries and investigations.
FAS works with lawyers from Pinsent Masons' leading litigation practice, advising clients on the financial aspects of disputes. We advise claimants and defendants or respondents in a wide range of contentious matters within the UK and globally in connection with dispute resolution forums, High Court proceedings and international arbitrations.
The extent of our in-house forensic accounting team's involvement in matters depends on the client's circumstance and the nature of the dispute. FAS’s involvement is at all stages of a matter from the outset by providing initial advice on merits and potential recoveries, to supporting the legal team at hearings.
Providing greater support and insight around expert determination processes.
Advising clients on quantum will range from case to case and is tailored to the client's particular needs and circumstances and the stage of the dispute. In some cases, we simply advise on the quantum principles and best ways to present the case, or work with the client to prepare detailed quantum calculations.
FAS is regularly involved in helping clients resolve disputes through negotiations and mediations. Advice to in-house counsel, Boards and key members of the business handling disputes has resulted in several successes for our clients. These include:
Providing greater support and insight around expert determination processes. A key element of advising clients on dispute resolution is the use of decision tree visualization tools. These in-house tools, enabled by FAS, allow clients to visualise the benefits and impacts of the different options available to them at key decision points. The decision trees show details of costs, damages awards, cost recoveries, timescales, potential risks and other commercial considerations and help our clients and lawyers work together to determine the overall strategy. We also find that decision tree visualization is a particularly powerful tool when used for mediation preparation, helping clients understand what a reasonable settlement value might be and as part of the overall negotiation strategy.
FAS’ forensic intelligence offering enables Pinsent Masons to obtain intelligence and to conduct integrity risk assessments in relation to:
(i) third-party suppliers and agents;
(ii) investors and other parties involved in transactions to assess the activities, reputation and financial health of prospective business partners;
(iii) the parties connected to the dispute including the other party, connected companies, witnesses and experts, and;
(iv) regulatory, sanctions, Anti-Money Laundering (“AML”) and Politically Exposed Person (“PEP”) review.
Whether we are supporting litigation or an investigative matter we analyse the underlying financial data to quantify the resulting impacts.
How does FAS support Pinsent Masons' multi-disciplinary delivery strategy?
Whatever the extent of our advice, our first step is to work closely with our lawyers and the client team to establish the potential consequences from a financial perspective arising from the legal issues identified (e.g. early termination of a contract, breach of contract, business interruption). We draw on relevant sector expertise from our colleagues across the firm to enhance our understanding of the client's business and operations.
Whether we are supporting litigation or an investigative matter we analyse the underlying financial data to quantify the resulting impacts. For example, when assessing loss of profits claims we assess the level of lost revenue and the associated costs that have been avoided and compare the profits that we claim would have been achieved, to ensure that losses claimed are robust and will withstand further scrutiny. We present the data in a format that is most applicable for the nature of the case, the stage in the matter and the recipients of the information.
Matters may start out as advice in relation to a dispute which turns into a wider investigation matter.
What signs stick out that may signal fraud? What should businesses be mindful of?
Potential signs of fraud include:
Matters may start out as advice in relation to a dispute which turns into a wider investigation matter. For example, we are regularly involved in post acquisition cases where the parties disagree over working capital values included in completion accounts, or where an expected earn-out has not materialized. In these cases, we are instructed to establish and investigate the cause and underlying support or rationale. Do the completion accounts or earn-out accounts comply with the provisions set out in the sale and purchase agreement for their preparation? Is the failure to achieve an earn-out a result of a breach of a financial warranty as a result of non-compliant or misrepresentation of accounting or reporting obligations? In such cases, we then support clients in the expert determination phase and potentially assist them in bringing or defending claims for breach of financial warranties. Or, is the failure to achieve targets or an earn-out a result of fraudulent reporting? In this case, we then assemble teams to deal with the issue which draw on Pinsent Masons’ relevant accounting and corporate crime expertise.
Reporting failures that have previously gone undetected or have been overridden may also put into question the capabilities and integrity of employees and management involved.
Your multi-disciplinary offering enables you to provide a flexible solution to the client's issue which typically evolves over the course of the matter. When tracing potential fraudulent activity, what issues may arise?
Generally, when a forensic investigation is conducted it will initially focus on areas of the business where issues were first identified. As the investigation unfolds this will highlight failures in the reporting and control environment that have allowed the issues to occur, and point to other areas of the business that may be exposed to similar risks.
In response, a company will be required to critically assess its control and reporting environment and to further strengthen them in response to the failures identified, as well as assessing the ability to meet the future needs of a growing business. As such, the company and its advisers will need to identify and mitigate the root causes of the issues so that any likelihood of recurrence is significantly reduced and any other areas of weakness identified through the investigation are appropriately remediated.
Reporting failures that have previously gone undetected or have been overridden may also put into question the capabilities and integrity of employees and management involved. Companies at this point need to be advised on and consider if reporting was deliberately withheld or falsified or if any weaknesses have been deliberately exploited, and potentially for what benefit (personal). Often it is found that the issues extend beyond the company itself and there has been third-party involvement and/or awareness.
Typically, external parties, including independent auditors, banks and regulators, will require to be kept informed of progress, findings and actions that are being undertaken by the company to help them better understand the events, impact and results of the investigation. They will require to be satisfied that along with an independent investigation being reasonable and proportionate, that appropriate measures are being undertaken by the company and its management in response to it.
Key to further strengthening a business and benefiting from the lessons learned in an investigation is training and awareness by reaffirming at both an individual and group level what the expectations are within the business.
FAS can help address these issues so that a thorough and complete investigation is conducted uncovering root causes so that our client's business is able to minimize the disruption and develop a comprehensive remediation plan to address not only the business concerns at hand, but also public and regulatory scrutiny and oversight.
How do you overcome these issues?
Key to further strengthening a business and benefiting from the lessons learned in an investigation is training and awareness by reaffirming at both an individual and group level what the expectations are within the business. This will allow the business to better protect itself from further recurrences and enable employees to better detect and respond to events in the future. This training should not be limited to the business itself but also to third parties (agents, distributors, resellers, suppliers, subcontractors, etc.) so that all parties that have an impact and support the business are aware of the policies and procedures they are required to operate and adhere to.
Data analytics and monitoring will allow companies to benefit from prior investigations and apply data analytics proactively to monitor operations, flagging suspect transactions early on to prevent a further escalation of issues.
Forensic Intelligence can also assist with the management and review of third parties so that they are appropriately vetted, prior to onboarding resulting in the company having a firm understanding of its third parties and their operations and ensuring that the company isn't being exposed to unnecessary or unknown risk.
Many regulatory breaches now have the potential to attract fines in the millions of pounds (as well as substantial follow on compensation claims) and so, robust, proactive and pragmatic risk management systems and processes are essential.
Considering related legislation, such as the Bribery Act, are there any developments which are on the horizon which will impact clients?
Over recent years the international focus on Fraud and Corruption has intensified. Companies face unprecedented levels of regulatory scrutiny from authorities globally. Companies and their Boards and management increasingly face the threat of major financial and reputational damage not just for their own conduct, but for that of their suppliers, agents and third-party providers. This is giving rise to more investigations, with the challenge being how to approach these matters more rigorously and efficiently.
Regulatory compliance is a fact of life for all corporates – anti-bribery, competition, data protection, environmental, health & safety, insurance, modern slavery and failing to prevent tax evasion. Many regulatory breaches now have the potential to attract fines in the millions of pounds (as well as substantial follow on compensation claims) and so, robust, proactive and pragmatic risk management systems and processes are essential.
We also work closely with our highly experienced Civil Fraud & Asset Recovery colleagues to provide comprehensive, joined-up advice as to the civil and criminal implications of fraud.
Keeping pace with today's businesses must be a challenge: what innovative tools are you using?
Demonstrating clear symmetry between lawyers and accountants, remaining cognizant of the specific skill sets required and with a truly innovative strategy in place, Pinsent Masons has successfully invested in some of the market's best accounting professionals.
At Pinsent Masons, we take great pride in the work we do with our clients to think differently. Innovation sits at the heart of our strategy. For us, it’s about more than finding ways to make an old model fit a new world. Innovation is about fundamentally changing how high-quality legal advice is formulated and excellent service is delivered. We are partnering with our clients to lead through innovation, rather than be disrupted by it.
The FAS team's mixed skillset and expertise enables it to apply innovative technologies , such as data analytics, to developing clients' risk management, compliance and monitoring programmes. Through combining this expertise and capability with professional experience and sector knowledge, Pinsent Masons is able to present an enhanced view of the business and market, delivering Board level insights for better informed strategic decisions.
The FAS team, through its Forensic Intelligence tools, provides innovative delivery around identification and remediation of Anti Money Laundering/Sanctions/Watch lists issues, including Politically Exposed Persons, asset tracing and complex corporate and ownership structures, providing clients with greater transparency and insights in identifying and addressing key fraud and risk related issues.
We are innovative in how we deliver multi-disciplinary advice, working with our outstanding litigation teams to deliver successful results in complex litigation matters. We regularly use decision tree visualization tools to design meaningful, "costed" strategic options to our clients, nuanced to suit our client, whether they are among Europe's 400 fastest growing companies, as surveyed in Pinsent Masons' exclusive recent 'Pacesetters' report, or are a significant corporate with a developed in-house legal function.
Demonstrating clear symmetry between lawyers and accountants, remaining cognizant of the specific skill sets required and with a truly innovative strategy in place, Pinsent Masons has successfully invested in some of the market's best accounting professionals.
The national Forensic Accounting Team remains on course to double the size of the practice by close of 2020.
Chris Richardson: +44 20 7418 8078 M: +44 7833 234 835 / Chris.Richardson@pinsentmasons.com
Hayley Boxall: D: +44 113 225 5466 M: +44 7917 594 792 / Hayley.Boxall@pinsentmasons.com
Chris Richardson, Partner ("non-lawyer") Forensic Accountant, leads the Forensic Accounting Service ("FAS") team at Pinsent Masons, with over 20 years of professional accounting experience in responding to high profile, mission critical corporate events across financial and transactional reporting, forensic accounting, investigations and Anti-Bribery & Corruption.
Chris' innovation through forensic data and technology provides Pinsent Masons' clients with greater transparency and insights in identifying and addressing complex fraud and risk related issues.
Chris advises corporate boards, senior management and counsel through the delivery of holistic solutions and remediation to minimize downtime and resulting impacts on operations, reputation and shareholder value.
Hayley Boxall, Director Forensic Accountant, leads our in-house forensic accounting team's offering for litigation and contentious matters. Hayley is a Fellow of the ICAEW and has specialised in forensic accounting since 2000, first at Big 4 Firms before joining Pinsent Masons in 2006.
Hayley has a wide range of experience of dispute resolution, acting for both claimants and defendants in contentious matters; including breach of contract disputes, post-acquisition disputes, breach of warranty disputes, loss of profits claims, business interruption claims, shareholder disputes, family disputes and professional negligence claims. Hayley has acted for clients in sectors including IT, engineering, manufacturing, facility services, pharmaceutical, professional services, energy, infrastructure and real estate.
Hayley also provides pre-completion advice in respect of the drafting of completion accounts provisions, earn-out mechanisms and financial warranties within sale and purchase agreements. Hayley is experienced in the preparation of share valuations in both contentious and non-contentious situations and advises clients on share valuations for tax purposes.
Below Nick Barnard, Associate at Corker Binning, takes a deeper look at the reports.
Overall, the House of Lords Bribery Act 2010 Committee’s post-legislative scrutiny report published last month (14 March) gives the Act a glowing review. Aside from minor issues on guidance provided to business, disapproval is reserved for investigation and enforcement rather than the regime itself. The need for police anti-bribery training, the slow pace of investigations, poor communication with suspects and the importance of individual prosecutions following Deferred Prosecution Agreements (with nods to the recent outcomes in Tesco and Rolls Royce) are all commented on. These bugbears aside, the Committee declares the Bribery Act to be ‘an excellent piece of legislation, which creates offences which are clear and all-embracing’.
Contrastingly, following its debut in February 2018, the OPBAS first-year assessment of legal and accountancy sector supervisory procedures published last Tuesday (12 March) paints a bleaker picture for the fight against dirty money. The report identifies significant inconsistencies between the performance of the 22 Professional Body Supervisors (‘PBSs’) and a conflict of interest between supervising AML and representing members’ interests. Amongst a smorgasbord of worrying statistics, OPBAS reports that 23% of PBSs had undertaken no form of AML supervision at all, whilst 18% had not fully identified those they were supposed to be supervising.
So has AML become the poor cousin of anti-bribery? Recent big-ticket Deferred Prosecution Agreements and these reports might suggest so. However, it is probably more an issue of timing than intent. Although AML has been a priority for many years, the focus has traditionally been on the financial services industry immediately involved with potentially criminal assets, rather than the ‘professional enablers’ such as lawyers and accountants who also have the power to facilitate or disrupt the flow. Furthermore, there has been no ‘big bang’ for AML akin to the Bribery Act, which was the first significant new anti-bribery legislation for over a century. Having now had nearly a decade to bed in, it is no surprise that it gives the impression of being the favoured child.
Whilst the OPBAS report may make for disappointing, occasionally alarming reading, it should be remembered that this is Year One. OPBAS was created to promote quality and consistency of AML supervision amongst professional enablers, and it is almost inevitable that the first reviews would be poor. The important concern is whether and how quickly future performance improves.
A recent study found that only 13% of EU regulations have been replaced following Brexit.[1] Brexit continues to cause uncertainty for leading regulatory bodies across the UK and Europe and remains to be a cause for concern as the UK faces large gaps in the law. The deadline for all regulations to be agreed on is April 12, 2019.
In preparation of the exit from the EU, the UK is introducing ‘Statutory Instruments’ which will act as a mechanism to translate EU law into replacement UK law. However, with hundreds of Statutory Instruments being drafted, there are scarcely any final updates on the horizon.
Only after the withdrawal is agreed will the trading and regulatory relationship between the UK and the EU be clear. “Having large gaps in the law throughout the financial sector could see significant growth in financial crime, as bad actors are constantly in search of chinks in the armour to commit fraudulent activities,” says Zac Cohen General Manager at Trulioo, identity verification experts.
Zac continues: “Following Brexit, Fifth Anti-Money Laundering Directive (5AMLD) will change slightly as the EU member states will have to treat the UK as a ‘third country’. Currently, EU regulation requires UK payment providers to supply specific documentation from official sources such as government registers and public registers, in connection with transfers of funds between the UK and EU. However, treating the UK as a ‘third country’ will require moving from a simplified way of verification to enhanced due diligence checks. The implementation of such techniques may take some time and ultimately will give bad actors further opportunity to commit fraudulent activity.”
“Regulation kept in the silos of government policy can have a negative impact on global trade. Instead, compliance and verification should be instant across a shared international system to combat fraudulent activities and encourage global trade.”
“By leveraging innovative technologies to enable a more cooperative approach, there is scope to create a standardized digital structure, which will aid in the dissemination of information that works across borders. By having a shared framework in which the EU and UK both operate, it means that the UK will be included along with other EU member states in the interoperability of systems across Europe. This in turn will allow the global marketplace to flourish.”
[1] https://www.mirror.co.uk/news/politics/brexit-just-13-12000-eu-14013286
Criminals who obtain millions of dollars through illegal means need to make that dirty money appear clean.
Bloomberg QuickTake explains the most popular ways that crooks launder money. Warning, don't try this at home.
Among the political turmoil over Brexit and the UK’s future relationship with Europe, the issue of money laundering seems to have been overlooked so far. And that would be a big mistake. There can be no conclusive estimates of the scale of money laundering in Europe. But we are talking about many billions a year.
Many commentators would say the EU has been far from perfect when it comes to tackling money laundering. But it has at least introduced a series of money laundering directives in recent years that aim to stop the proceeds of crime flowing into its member states.
The most recent one, the Fifth Money Laundering Directive (5MLD), is set for implementation in 2020. Following on from the Fourth Money Laundering Directive, which ordered major changes to how businesses should take a risk-based approach to money laundering and removed automatic exemptions from due diligence, 5MLD will regulate virtual currencies, improve precautions for transactions involving high-risk countries and enhance the centralisation of bank data in member states. In short, it is a further removal of weaknesses that allow money laundering to flourish.
Membership of the EU has been no guarantee of protection against laundering, especially as some of its smaller members lack either the expertise or the resources to tackle it - as has been shown in a number of financial scandals in recent years. Such problems have led to louder calls for an EU-wide organisation to see greater consistency between member states’ identification and prevention of laundering.
Yet now such arguments are now overshadowed by Brexit. Whether the EU states come to miss the UK’s expertise in identifying sources of illegal wealth and its movement around Europe and the rest of the world remains to be seen. But what has to give concern is the issue of how the UK’s investigating agencies will be able to continue to track those proceeds of crime if they cannot benefit from the sharing of intelligence that currently goes on between them and their European counterparts.
We are obviously yet to see how this problem is resolved. It is possible that, given time, new relationships will be forged on a country-to-country basis between the UK and EU members. But how quickly they are put in place and how effective an alternative to EU membership they prove to be in tackling money laundering remain to be seen.
Withdrawal from the EU means the UK is no longer part of the EU’s law enforcement agency, Europol. Europol’s centralised intelligence database for members, the Europol Information System (EIS), is arguably one of the world’s most valuable assets when it comes to sharing information across borders to tackle crime. And money laundering is certainly a crime that crosses borders.
Yet it seems unlikely that the UK will be able to continue to use this, which has to hamper its attempts to tackle flows of laundered money. And a lack of such cooperation will also be to the detriment of countries who are still in the EU. They are unlikely to be able to call on UK expertise and intelligence as part of their money laundering investigations as seamlessly as they can while the UK is still in the EU.
The EU has been criticised for its efforts to tackle money laundering in its member states not being concerted or consistent enough. But at least its members have an infrastructure and working relationships in place.
The UK can boast tough anti-money laundering legislation. Its recent use of unexplained wealth orders and account freezing orders are testimony to its authorities’ willingness to tackle money laundering. But soon it will not have those working relationships in place that EU members benefit from in their efforts to tackle money laundering.
No doubt attempts will be made to instigate replacement arrangements. But the speed with which a patchwork of anti-money laundering agreements between the UK and other countries can be established – and the value of those arrangements compared to EU membership - has to be a cause for concern. For both the UK and those nations still in the EU.
Among the political turmoil over Brexit and the UK’s future relationship with Europe, the issue of money laundering seems to have been overlooked so far. And that would be a big mistake.
There can be no conclusive estimates of the scale of money laundering in Europe. But we are talking about many billions a year.
Many commentators would say the EU has been far from perfect when it comes to tackling money laundering. But it has at least introduced a series of money laundering directives in recent years that aim to stop the proceeds of crime flowing into its member states.
The most recent one, the Fifth Money Laundering Directive (5MLD), is set for implementation in 2020. Following on from the Fourth Money Laundering Directive, which ordered major changes to how businesses should take a risk-based approach to money laundering and removed automatic exemptions from due diligence, 5MLD will regulate virtual currencies, improve precautions for transactions involving high-risk countries and enhance the centralisation of bank data in member states. In short, it is a further removal of weaknesses that allow money laundering to flourish.
Membership of the EU has been no guarantee of protection against laundering, especially as some of its smaller members lack either the expertise or the resources to tackle it - as has been shown in a number of financial scandals in recent years. Such problems have led to louder calls for an EU-wide organisation to see greater consistency between member states’ identification and prevention of laundering.
Withdrawal from the EU means the UK is no longer part of the EU’s law enforcement agency, Europol.
Yet now such arguments are now overshadowed by Brexit. Whether the EU states come to miss the UK’s expertise in identifying sources of illegal wealth and its movement around Europe and the rest of the world remains to be seen. But what has to give concern is the issue of how the UK’s investigating agencies will be able to continue to track those proceeds of crime if they cannot benefit from the sharing of intelligence that currently goes on between them and their European counterparts.
We are obviously yet to see how this problem is resolved. It is possible that, given time, new relationships will be forged on a country-to-country basis between the UK and EU members. But how quickly they are put in place and how effective an alternative to EU membership they prove to be in tackling money laundering remains to be seen.
Withdrawal from the EU means the UK is no longer part of the EU’s law enforcement agency, Europol. Europol’s centralised intelligence database for members, the Europol Information System (EIS), is arguably one of the world’s most valuable assets when it comes to sharing information across borders to tackle crime. And money laundering is certainly a crime that crosses borders.
The UK can boast tough anti-money laundering legislation.
Yet it seems unlikely that the UK will be able to continue to use this, which has to hamper its attempts to tackle flows of laundered money. And a lack of such cooperation will also be to the detriment of countries who are still in the EU. They are unlikely to be able to call on UK expertise and intelligence as part of their money laundering investigations as seamlessly as they can while the UK is still in the EU.
The EU has been criticised for its efforts to tackle money laundering in its member states not being concerted or consistent enough. But at least its members have an infrastructure and working relationships in place.
The UK can boast tough anti-money laundering legislation. Its recent use of unexplained wealth orders and account freezing orders are a testimony to its authorities’ willingness to tackle money laundering. But soon it will not have those working relationships in place that EU members benefit from in their efforts to tackle money laundering.
No doubt attempts will be made to instigate replacement arrangements. But the speed with which a patchwork of anti-money laundering agreements between the UK and other countries can be established – and the value of those arrangements compared to EU membership - has to be a cause for concern. For both the UK and those nations still in the EU.
Since establishing Rahman Ravelli in 2001, Aziz’s expertise in serious and white-collar crime has seen both his and the firm’s reputation rise dramatically. His ability to coordinate national, international and multi-agency defences has led to success in some of the most significant business crime cases of this century.
Aziz's achievements have led to him being described as “top class”, “charismatic and indefatigable” and a “strategic thinker” by The Legal 500; which keeps naming him as one of the elite solicitors in the UK. The latest Legal 500 calls him “a Rolls-Royce performer’’ and adds that his “formidable intellect and great strategic judgement mark him out as an exceptional lawyer’’.
The reason Russians embraced the technology was because they had fears of aggressive motorists, insurance fraud and even accidents not being investigated properly without the equipment.
Dashboard cameras – or dash cams – have become more popular in recent years. In 2015, nine per cent of drivers had a dash cam, while last year more than one in four of us on the road had installed the device.
Here, alongside Lookers Group, who offer car servicing plans, we take a look at why you should invest in a dashboard camera.
Some of you may be unsure what exactly a dashboard camera is – although most of you may know. Simply put, a dash cam is a camera than can be attached to your car’s interior and exterior via the car’s electrical system. They can also be hardwired and are designed for continuous recording.
There are two main reasons how a dashboard camera can help you with your insurance. One is to prevent insurance fraud. This is because your insurance company will have the peace of mind that there won’t be any unforeseen legal battles. You can save up to 20% on your annual insurance by declaring you have a dash cam fitted. This can make a huge difference, especially for younger drivers who are likely to have a high premium. A survey by Nextbase found that the 41 top major insurance providers now all accept dash cam footage as proof of an incident.
This highlights that one advantage of having a dashboard camera is that if you have dash cam footage to prove you were not at fault in an incident then it makes it much easier to settle your claim quickly and in your favour. As well as being used for insurance purposes, dash cam footage can also be used as evidence in court should you ever need.
In fact, Aviva’s research found that 17% of people with a dash cam bought the equipment due to not being able to prove their innocence in an accident. Also, 48% installed the recording device for peace of mind incase they were ever involved in a collision.
Distracted driving is a common problem on our roads. Many believe that by having a dash cam, drivers are more likely to travel safely. This is because they are aware that any error will be picked up. Huge efforts have been made to eradicate this, including not being allowed to be on your phone while driving. Laws have been put in place to hand out six penalty points and a £200 fine if you are found to be using a mobile phone while driving. The punishment is much more severe for those who have been driving for less than two years as they will also lose their licence.
Last but most definitely not least, having a dashboard camera can also act as a safety feature. After all, it can act in a similar way to a CCTV camera as it will constantly record what is going on when you’re in your vehicle. In July 2018, dash cam manufacturer, Nextbase, collaborated with regional constabularies in England and Wales to launch a national dash cam safety portal. This was set up to allow owners of any dash cam to easily and quickly submit any footage to relevant authorities to help with any cases.
As well as this, over a third of drivers who own a dash cam agree that one of the main reasons they installed the device was to feel safer when driving, according to research by Aviva.
There is a range of products available at a variety of prices, meaning you’ll be able to find one to suit your personal needs.
The Garmin Dash Cam 55 is a compact all-in-one with a two-inch LCD screen and integrated GPS. It provides a viewing angle of 122 degrees and is a well-priced all-rounder.
If live streaming is what you’re looking for, the Philips ADR820 with a CMOS sensor allows you to stream your footage to a phone app. It also has a rear camera that is available separately. Of course, there are cheaper models – and more expensive – available so it’s a case of finding out what is most important to you.
It is expected that dash cams will soon be a feature of most new cars due to technological advancements. By taking in the above points, it’s also clear to see why.
Sources: https://www.which.co.uk/reviews/dash-cams/article/dash-cams-and-the-law-what-you-need-to-know https://www.theguardian.com/technology/shortcuts/2015/oct/12/dashcams-dashboard-cameras-dramatic-crashes-safer-roads https://www.which.co.uk/news/2018/06/one-in-four-motorists-now-use-a-dash-cam/ https://www.nextbase.com/en-gb/hub/do-dash-cams-reduce-insurance/ https://www.insurance.com/auto-insurance/claims/7-reasons-to-use-a-dash-cam.html https://www.aviva.com/newsroom/news-releases/2018/07/dash-for-dash-cam/
