The UK National Risk Assessment on Money-Laundering and Terrorist-Financing

The first step in tackling any problem is to admit you have got one. On this basis, the National Risk Assessment on money-laundering and terrorist-financing (NRA) should be applauded for its frank and honest admission of the scale of the threat facing the UK. The NRA states that ‘the same factors that make the UK an attractive place for legitimate financial flows can make it attractive for money laundering’. Admitting that the UK is exposed to higher domestic and international risks than most other countries due to its position as a global financial centre is a good starting point, and is the first step in the long journey towards a joined-up approach to tackling the problem.

Credit Where Credit is Due

The NRA should also receive credit for recognising some clear weaknesses and identifying the priorities to be included in the government’s Anti-Money Laundering Action Plan, which will emerge later this year. The most pressing of these is to fill the substantial intelligence gaps which the NRA admits were evident in the drawing up of the document. Whilst these knowledge gaps are perhaps surprising given the high priority attributed to money-laundering in government strategies over the past decade, finally setting out the scale and nature of these gaps is a starting point.

Furthermore, the NRA rightly highlights the inconsistencies in the anti-money laundering (AML) and counter-terrorist financing (CTF) supervisory landscape, noting that a regime of twenty-seven different supervisory organisations who oversee the compliance of the ‘regulated sector’, with some sectors covered by multiple supervisors, is no longer fit for purpose. The NRA particularly highlights the thirteen different supervisors for the accountancy sector as a vulnerability. The lack of a consistent approach could certainly leave less well supervised sectors vulnerable. The current Better Regulation Executive review of the AML and CFT supervisory regime should be seen as an opportunity for consolidation.

The NRA should also be congratulated for recognising that the private sector holds a wealth of data and intelligence that could help in the fight against money-laundering and terrorist-financing.   The document proposes expanding on the work of the Joint Money Laundering Intelligence Taskforce (JMLIT) – a trial programme of information exchange with the banking sector – to increase public–private dialogue. This is to be welcomed; the challenge will be to clarify appropriate information-sharing gateways between the public sector and private sector. Only by offering clear legal comfort, in the form of less ambiguous information-sharing gateways, will progress be made in this respect.

Inconsistencies and Challenges

However, there are some inconsistencies within the NRA and some of its analysis can be challenged. Firstly, the link between some of the risk ratings and a firm intelligence base is, in places, lacking. For example, in relation to the accountancy sector, the NRA states that ‘intelligence gaps exist in law enforcement’s understanding of “high end money-laundering” involved in this sector.’ However at the same time the NRA states that the money-laundering risk associated with the sector is high. This may appear ambiguous. Similar assertions are noted for the legal sector.

The disconnect between these two statements has been picked up by these sectors and publicly challenged. This lack of a common and agreed understanding of the risk landscape between the public and private sectors undermines the intention of the NRA and is something which must urgently be addressed. This is particularly pressing given the forthcoming 2018 evaluation of the UK’s AML and CTF regime by the Financial Action Task Force (FATF), which will focus heavily on the extent to which the UK’s response is driven by a common understanding of risk.

Furthermore, the NRA highlights that ‘the law enforcement response to money laundering has been weak for an extended period of time. It has not been a priority for most local police forces’. It notes that enhancing the law-enforcement response to money-laundering, co-ordinated by the National Crime Agency’s Economic Crime Command, is a priority. Whilst this may have been achievable in previous years, the stringent budget restraints facing the police in the coming spending review dictate that ruthless prioritisation will be necessary. Ensuring money-laundering is prioritised in the face of these cuts will prove challenging, unless this is made a key performance indicator for the police.

Despite these points, the document is a welcome admission that the UK must raise its game if it is to achieve the prime minister’s promise that ‘there is no place for dirty money in Britain’ . At the very least it will act as a positive benchmark from which to measure progress and a much-needed catalyst for change.

Helena Wood is an independent consultant on criminal justice policy, specialising in AML and the proceeds of crime, with over a decade of experience working with and within UK law enforcement institutions.