Money Laundering Regulations – individuals and organisations receive large fines

The Fourth Anti-Money Laundering Directive, which came into force on 26th June 2017, brings some key changes to the anti-money laundering policies in law firms and organisations. Recent high profile money laundering scandals demonstrate the importance of having the right procedures in place to prevent money laundering. This blog gives some examples of the money laundering convictions that have damaged the reputations of firms and organisations.

Deutsche Bank learns anti-money laundering lessons the hard way

Deutsche Bank

In January, Deutsche Bank, Europe’s largest investment bank, was hit with an incredible £500 million from multiple regulators. The bank ran a $10bn money laundering scheme involving the Moscow, New York and London branches shifting roubles between Cyprus, Estonia and Latvia in a manner that was “highly suggestive of financial crime.” The regulators said “the bank missed numerous opportunities to detect, investigate and stop the [money laundering] scheme due to extensive compliance failures, allowing the scheme to continue for years.”

The scheme involved “mirror trades”, whereby stocks were purchased in roubles in Moscow and sold at the same price in London. The roubles were being converted to dollars through trades that “had no discernible economic purpose” in an “unsafe and unsound” manner.

AIB fined €2.3m by the Irish Central Bank for money laundering breaches

In April, the Irish Central Bank issued a hefty fine to AIB for six major breaches of money laundering regulations. The Central Bank ruled that AIB failed to have the correct procedures in place to prevent money laundering and the financing of terrorist organisations. This includes providing banking to over 500,000 customers without verifying proof of address and identification, as well as taking 18 months to address a backlog of potentially suspicious transactions. The Central Bank has now imposed fines of €57m in the last 11 years.

Record fine for leading City firm Clyde & Co

Leading City law firm Clyde & Co were recently fined a record £50,000 and three of its partners £10,000 each for allowing its client account to be used as a banking facility, thus breaching money laundering rules. The firm admitted this breach of money laundering regulations, stating “that any mistakes made were honest and inadvertent. It is not alleged that the firm or the three partners lacked integrity, probity or trustworthiness, or laundered or misappropriated money”. The case shows the importance of following legislation and guidance when it comes to money laundering regulations.

High street banks scrutinised over international money laundering scheme

HSBC bank

Russian criminals moved at least $20bn out of Russia between 2010 and 2014 in a vast money laundering scheme, with British banks thought to have handled $740m of this money. HSBC, RBS and Coutts were all found to have processed some of the money, with other large banks such as Barclays, the Royal Bank of Scotland and Lloyds among several other banks facing questions.

Large amounts of this money, after being processed in the UK, disappeared to offshore companies. According to the banks, there are units dedicated to preventing financial crime. However, they say, the vast amounts of payments makes it difficult to determine each case of money laundering. HSBC was found to have processed $543.3m in “Laundromat” money, mainly funneled through its Hong Kong branch, while the Royal Bank of Scotland processed $113.1m. Coutts, the bank used by the Queen, accepted $32.8m in payments via its office in Zurich. Other large banks involved in the “Laundromat” scheme include Citibank and Barclays.

Gang of four jailed for laundering £760,000 in Manchester

In June, the National Crime Agency (NCA) arrested and put under surveillance four people when they recovered just over three quarters of a million pounds. The NCA watched as the gang, including a married couple, removed a large black suitcase from the boot of a car, found to contain around £420,000. Police officer also searched the car of another culprit and found a further £340,000 split into different bags as well as several mobile phones and a notebook containing several bank notes of differing currency.

At Kingston Crown Court, all four pleaded guilty and were sentenced to a total of 11 years and 10 months in prison. Kevin Gee of the NCA said: “By targeting money launderers the NCA can be a real thorn in the side of organised criminals and cause major disruption to their plans.”

Billionaire F1 boss faces money laundering charges

Vijay MallyaVijay Mallya, a billionaire Indian beer tycoon, is alleged to have fled India five years ago when his airliner, Kingfisher Airlines, failed, leaving millions in unpaid loans, bills and wages. Vijay has denied the charges, saying “I did not flee from India and neither am I an absconder”. He has currently been released on Bail and is awaiting a new hearing.

Help prevent money laundering in your organisation

In many money laundering cases, a bank, law firm or accountant could well be assisting in money laundering without even knowing. Understanding how to limit the risk of money laundering can not only save your organisation vast sums in fines, but can also protect your organisation’s reputation. It is therefore imperative for staff to undergo the appropriate training on the topic. VinciWorks offers a suite of anti-money laundering courses that have recently been updated to be in line with the Fourth Money Laundering Directive. We also have a free mini course on the Fourth Money Laundering Directive that can be downloaded either as a PowerPoint presentation or in SCORM format. You can download the course here.