The Criminal Finances Act passed into UK law on 27th April 2017. It aims to improve the UK’s ability to combat financial crimes – most notably money laundering, corruption, tax evasion and terrorist financing. The Act will do this by creating new powers to help law enforcement agencies and the private sector investigate and tackle these crimes.
The changes to the UK’s anti-money laundering and counter-terrorist finance regime can be summarised as follows:
Money laundering – Part 1, Chapter 2
The Criminal Finances Act will make amendments to the Proceeds of Crime Act 2002 and brings in three new powers to improve the quality of money laundering investigations:
- Section 10: Power to extend moratorium periods
- It will now be possible to extend the moratorium period of investigating Suspicious Activity Reports (SARs) by 186 days after the close of the initial 31 day period. Allowing the authorities the time they need to investigate more complex cases.
- Section 11: Sharing information in the regulated sector
- Companies who operate in the regulated sector will now be able to share information when one party believes the other has information they need to determine if an entity they deal with is committing money laundering. If information is exchanged, then both parties must jointly submit a Joint Disclosure Report of their activities to the FCA, explaining the reasoning behind the sharing of information and whether there is cause for further investigation.
- Section 12: Further information orders
- If “further information” is required from an entity as part of establishing whether a party is committing money laundering or part of a pre-existing investigation, the courts can issue a Further Information order. This will require the subject of the order to divulge any relevant information to the inquiry. A maximum fine of £5,000 can be issued by a magistrates court if the entity does not comply with the order.
Terror finance – Part 2
This Act will make amendments to the Terrorism Act 2000 and the Anti-Terrorism, Crime and Security Act 2001 to bring in a suite of new counter-terrorist financing measures and powers:
- Section 35: Disclosure of information
- The Act will enable the making of disclosure orders in connection with investigations into terrorist financing offenses
- Section 36: Sharing of information with the regulated sector.
- Companies who operate in the regulated sector will be able to share information when one party believes the other may have information they need to determine whether or not an entity they deal with is committing a terror financing offense or where they may have identified terrorist property, its movement or use. If information is exchanged, then both parties must jointly submit a Joint Disclosure Report of their activities to a constable.
- A period of 28 days is given for which these reports must be produced after the information is shared.
- Section 37: Further information orders
- If further information is required as part of a pre-existing investigation or as part of establishing whether a party is committing a terror financing offense or whether the property of a terrorist may have been identified, moved or used the courts can issue a Further Information Order. This requires the subject of the order to divulge any relevant information they may have. A maximum fine of £5,000 can be issued by the magistrates court if the entity does not comply with the order.
- Section 38: Forfeiture of terrorist cash
- The Act expands what constitutes as “terrorist cash” to include gaming vouchers, fixed value casino tokens and betting receipts.
- Section 39: Forfeiture of certain personal (or moveable) property
- The Act will now make it possible for the property of terrorists which is “moveable” to be confiscated, this can be anything of value which can be used for terrorism, was acquired through terrorism or is part of the resources of a prescribed group.
- Section 40: Forfeiture of money held in bank and building society accounts
- For the first time the Act will allow UK law enforcement agencies to confiscate funds held in bank and building society accounts, which previously were immune from being seized.
- Sections 41, 42 and 43: Extension of powers in financial investigations
- The Met police force will have to issue accreditation to special Counter-Terrorism Financial Investigators who will be specifically dealing with counter-terror finance investigations. The Act will make it an offence to assault these officers or obstruct their investigations.
What are the impacts of the Criminal Finances Act?
The Criminal Finances Act, which will most likely come into force in September, will strengthen the fight against financial crimes like money laundering and help improve the integrity of the UK financial system.
Closing loopholes regarding the seizing and forfeiture of terrorist cash in moveable property, banks and building society accounts will go far to squeeze the assets of designated individuals. The inclusion of gaming tokens and betting receipts in the definitions of terrorist cash will also be effective in closing down these as a value store for terrorist funds.
The improvements to information sharing will help regulated firms clear the fog around some money laundering and terrorist financing practises that use the formal financial sector. For compliance teams, this Act makes significant progress in setting up clear channels and processes to share information, safe in the knowledge that they are legally protected. This move to improve information sharing channels through legislation is a growing trend within global AML/CTF regime reform and could influence any upcoming reform to the USA’s Bank Secrecy Act (BSA).