Anti-money laundering, finding a better way

Whilst the headlines following release of the Bailiwick of Guernsey’s Financial Intelligence Service (FIS) Annual Report talked of ‘record numbers’ and ‘8 consecutive years of growth’ in Suspicious Activity Reports (SARs), delving a little deeper and cutting through the ‘stuff’, the story is a little different.

74% of those were from eGambling/eGaming firms (1821 or 59% from one firm alone!), 96% of these were reported to 2 or more agencies at the same time.

Excluding these SARs, the headlines might be rather different and a decline in some parts.  Most striking of all perhaps is that, whilst there are very many statistics and ‘inputs’ the only evidence on the impact on these reports e.g. illegal acts identified/prevented, are 3 case studies.

The report provides little insight into the decisions around “consents” which is a key question often raised by industry caught in the middle.  This is exasperated as there is no provision for appeals, other than a Judicial Review, against a decision of the Head of the FIS, for example, to refuse to give consent for a payment.  This sets the FIS, and its successor, the newly created FIU with its increased resources, in a unique position and potential unduly influence by external agencies wanting to influence the outcomes of their own actions. Now would seem an opportune time for a review into the governance structure by the Home Department.

On the flipside, we are seeing increased pressure on the personal liabilities of Money Laundering Reporting Officers (MLRO) and Money Laundering Compliance Officers (MLCO), to the extent that many are refusing to undertake these roles.  This is surely counterproductive, clearly it is the ultimate responsibility of the Directors of these companies to ensure compliance and that due regard to the rules & regulations is taken. Increased personal penalties for the MLRO/MLCO will simply drive the best candidates to other roles and weaken efforts to improve compliance.

My colleague, Simon Walker, wrote in January of the need for boards to see the FIS as equal ‘stakeholders (read here). Ironically however, the FIS itself lists many other stakeholders, primarily law enforcement counterparts, before a catchall ‘other stakeholder’ which presumably includes industry.

Hopefully this is merely presentational.

Clearly, it is in all of our interests to prevent the use of our jurisdictions for illegal activities. I for one very much hope that the newly created MLRO Forum can bring all stakeholders together to find a more effective way to achieve this.