The Financial Role of the United Kingdom

The United Kingdom (UK) plays a leading role in European and world finance and remains attractive to money launderers because of the size, sophistication, and reputation of its financial markets. Although narcotics are still a major source of illegal proceeds for money laundering, the proceeds of other offenses, such as financial fraud and the smuggling of people and goods, have become increasingly important. The past few years have witnessed the movement of cash placement away from banks and mainstream financial institutions as these entities have tightened their controls and increased their vigilance. The use of bureaux de change, cash smugglers (into and out of the UK), and traditional gatekeepers (including solicitors and accountants) to move and launder criminal proceeds has been increasing. Also on the rise are credit/debit card fraud and the purchasing of high-value assets to disguise illegally obtained money. Additionally, the Internet increasingly provides criminals with a variety of money making opportunities and methods to launder funds. 218 Money Laundering and Financial Crimes The UK Threat Assessment conducted by the Serious Organized Crime Agency (SOCA) estimated the annual proceeds from crime were between £19 billion (approximately $32 billion) and £48 billion (approximately $80 billion) with £25 billion (approximately $42 billion) representing a realistic figure for the amount laundered each year. Offshore center: No Free trade zones: Yes The UK has five designated Free Zones in which non-European Union (EU) goods are treated as outside the customs territory of the EU for the purposes of import duties until the goods are released for free circulation. Import VAT and excise duty are also suspended until the goods are removed to the UK market or used or consumed within the Free Zone. The Free Zones are located in Liverpool, Prestwick, Port of Sheerness, Southampton, and Port of Tilbury. Criminalizes narcotics money laundering: Yes Criminalizes other money laundering, including terrorism-related: Yes The Proceeds of Crime Act (POCA) of 2002 consolidates and expands pre-existing legislation criminalizing money laundering. POCA covers all crimes as predicate offenses. It also creates a new criminal offense, applicable to all regulated sectors, of failing to disclose suspicious transactions. Criminalizes terrorist financing: Yes (Please refer to the Department of State's Country Reports on Terrorism, which can be found here: https://www.state.gov/s/ct/rls/crt/) The Terrorism Act of 2000 criminalizes terrorist financing. Additionally, the Terrorism (United Nations Measures) Order 2006 and the Al-Qaida and the Taliban (United Nations Measures) Order 2006 provide the Treasury with designation authority. The Counter-Terrorism Act of 2008 (CTA) came into effect on November 27, 2008. Schedule 7 of the CTA gives the Treasury additional powers to act against terrorist financing and money laundering. Know-your-customer rules: Yes The Money Laundering Regulations of 2007 implement in part the EU's Third Money Laundering Directive and include an obligation to establish and maintain appropriate and risk-sensitive policies and procedures relating to customer due diligence measures and ongoing monitoring, reporting, record keeping, and risk assessment. Covered entities include credit and financial institutions, auditors, accountants, tax advisers and insolvency practitioners, independent legal professionals, trust or company service providers, estate agents, high value dealers, and casinos. Bank records retention: Yes Pursuant to the Money Laundering Regulations of 2007, relevant persons must retain transaction records and identity verification documents for at least five years. Suspicious transaction reporting: Yes Business sectors subject to formal suspicious transaction reporting (STR) requirements include attorneys, solicitors, accountants, real estate agents, and dealers in high-value goods, such as cars and jewelry. Sectors of the betting and gaming industry that are not currently regulated are being encouraged to establish their own codes of practice, including a requirement to disclose suspicious transactions. In fiscal year 2008, 210,524 STRs were filed with the UK Financial Intelligence Unit (UK FIU).

Large currency transaction reporting:

The UK government considered the feasibility of a fixed threshold currency transaction reporting system, but made a policy decision not to introduce such a system.

Narcotics asset seizure and forfeiture:

UK legislation, most notably the Serious Crime Act of 2007 which consolidates existing laws on forfeiture and money laundering, provides for the confiscation of laundered property which represents proceeds from, instrumentalities used in, and instrumentalities intended for use in the commission of money laundering, terrorist financing, or other predicate offenses, and property of corresponding value. The UK has in place four different schemes for confiscation and recovery with regard to proceeds of crime: confiscation following a criminal conviction, civil recovery, taxation, and seizure-forfeiture of cash.

Narcotics asset sharing authority:

The UK is able to share confiscated and forfeited assets with other countries that have assisted operations to bring the confiscation to fruition. The UK has authority to share up to 50% of the proceeds of confiscation, net of costs. The UK can share with other countries on an ad hoc case-by-case basis. Cross-border currency transportation requirements: Yes The Control of Cash (Penalties) Regulations of 2007 provides for penalties for failing to declare movement of cash amounting to €10,000 (approximately $14,500) or more into and out of the European Community. Cooperation with foreign governments: Yes The UK cooperates with international anti-money laundering authorities on regulatory and criminal matters. U.S. or international sanctions or penalties: No.

Enforcement and implementation issues and comments:

Businesses in the UK that are particularly attractive to money launderers are those with high cash turnovers and those involved in overseas trading. Illicit cash is consolidated in the UK, and then moved overseas where it can enter the legitimate financial system, either directly or by other means such as purchasing property or trade goods. Because cash is the mainstay of the illicit narcotics trade, traffickers make extensive use of money transmission agents (MTA), cash smuggling, and alternative remittance systems such as hawala to transfer money and value from the UK.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

A Mutual Legal Assistance Treaty (MLAT) between the US and the UK has been in force since 1996, and the two countries signed a reciprocal asset sharing agreement in 2003. There is a memorandum of understanding (MOU) in force between the U.S. Immigration and Customs Enforcement and HM Revenue and Customs. The U.S. Department of Treasury's Financial Crimes Enforcement Network also signed a MOU with the UK in 1995 and regularly exchanges information with the UK FIU.

International agreements:

The UK is a party to various information exchange agreements with countries in addition to the United States. Authorities can share information or provide assistance to foreign jurisdictions in matters relating to money laundering or other financial crimes without need for a treaty. While the UK legislative framework does not require MLATS, the UK has signed treaties with over 30 countries in order to execute requests. The UK is a party to: 220 Money Laundering and Financial Crimes • the UN Convention for the Suppression of the Financing of Terrorism - Yes • the UN Convention against Transnational Organized Crime - Yes • the 1988 UN Drug Convention - Yes • the UN Convention against Corruption - Yes The UK is a member of the Financial Action Task Force (FATF). Its most recent mutual evaluation can be found here: https://www.fatf-gafi.org/dataoecd/55/29/39064399.pdf

Recommendations:

The United Kingdom has a comprehensive AML/CFT regime. The UK should continue its active participation in international fora and its efforts to provide assistance to jurisdictions with nascent or developing anti-money laundering/counter-terrorist financing regimes.

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