Money Laundering, why it happens, how it happens, how it affects housing associations and how to reduce the risks. Steve Mackle

Transcription

1 Money Laundering, why it happens, how it happens, how it affects housing associations and how to reduce the risks. Steve Mackle

2 Speech by the Economic Secretary, Ivan Lewis at the Joint Money Laundering Steering Group Conference 2006 Money laundering is about the most serious problems that modern societies face it is about drugs, it is about people trafficking and prostitution, it is about fraud, and it is about low level crime that makes people s lives a misery. We must be realistic about this money laundering is directly linked to these activities, and also funds further crime, including terrorism.

3 Money Laundering The process by which funds derived from criminal activity are given the appearance of being legitimate

4 How big is the problem? Accounts for about 2% to 5% of the world s GDP Wrecks economies Organised crime costs the UK 20 billion per year 3 billion moved out of the UK each year Laundering through the regulated sector of 10 billion each year

5 The rise of a money launderer Anti-social behaviour Petty crime/recreational drug use/street dealing in drugs/progression to higher level dealing locally High Value Goods/holidays etc Link to dealers in other cities Identify gatekeeper/property purchase

6 Cash intensive businesses/seek further professional assistance Drugs importation/diversification Front companies International business companies Clean funds return via commercial property and Corporate finance deals

7 Cannabis Farms Indoor cannabis farms, which can produce more than 500,000 of the drug each year, are appearing in residential streets throughout the country in unprecedented numbers. An emerging trend is to rent a room so that a housing estate may have mini farms spread across a number of properties.

8 Crack Use xxxxxxx Housing Association discovered that a high level of anti-social behaviour, including numerous visitors to the flats at all hours, was also occurring in addition to the drug use, causing residents considerable distress and nuisance. After police searched the area, two knives were found nearby on the road and in a garden, and 300 cash was found under a car.

9 Slave trade Police believe that a van, fitted with cages, was used to ferry young women between various brothels. The women were forced to work to pay off debts, and made to have sex with clients up to 12 times a day, charging between 60 and 120 a time.

10 KYC Police say "materials" were found that could have been from a bomb-making factory. Scores of residents were allowed back into their homes yesterday for the first time since 150 surrounding properties were evacuated at 11am on Tuesday. The flat is previously known to have been rented from the xxxxxx Housing Association by an Egyptian post-graduate student at xxxxx University.

11 Fraud in the sector Same vulnerabilities as any sector Targeted by setting up of false companies to perpetrate fraud Internal frauds Abuse of position of trust Acceptance of gratuities in return for orders Procurement fraud/corruption

12 Fraud Housing tenancy fraud can be conservatively estimated to have reduced available social housing for allocation in England by nearly 50,000 properties. Source Audit Commission Protecting the Public Purse

13 Property Purchase All property purchase is high risk Attractive to criminals seeking to clean up dirty money Shared ownership, right to buy and property sales all vulnerable

14 False Payslips These payslips will be printed using a high tech Dot Matrix printer, Security Payslip is a good quality payslip comes printed in a security sealed envelope with your address and To Date NI and Tax worked out on it

15 BIRDMOOR BUILDERS LTD, incorporated 04 March 2008 (order) CAFEDAY ESTATES LTD, incorporated 08 April 2008 (order) DECKSTONE ESTATES LTD, incorporated 08 April 2008 (order) EAGLESHEAD ESTATES LTD, incorporated 08 April 2008 (order) EDENCRAY PROPERTY LTD, incorporated 08 April 2008 (order) GLENDEW ESTATES LTD, incorporated 15 February 2008 (order) HUNTINGWOOD DEVELOPMENTS LTD, incorporated 08 April 2008 (order) SHARPWISE DEVELOPMENTS LTD, incorporated 08 April 2008 (order) VALLEYHILL BUILDERS LTD, incorporated 04 March 2008 (order) YELBURY PROPERTIES LTD, incorporated 08 April 2008 (order)

16 Nominated Officer/MLRO Sufficient authority Appoint a deputy Responsible for oversight of all aspects of the anti-money laundering regime Receiving reports internally and reporting to SOCA Needs thorough knowledge of risks and legislation

17 Staff Training Well trained staff are the front line safeguard to minimise money laundering risks. Must be made aware of the law in relation to money laundering and terrorist financing and have training in recognising and reporting suspicious activity. Regular updates Offence not to comply

18 Due Diligence The importance of KYC. Level of verification varies with risk depending on the nature of the transaction, the client and perceived risk of money laundering or terrorist financing. Do you know enough about the customer to be satisfied that the risks have been adequately assessed and you know who you are dealing with? Electronic service providers?

19 Ongoing Monitoring Specific requirement of regulations Ensure that information held is current and accurate. (DPA) Enables risks to be assessed on an ongoing basis, customers circumstances change. No due diligence-no deal and consider reporting to SOCA

20 Reporting System of internal reporting must be put in place Reports by staff to MLRO must be made as soon as practicable when they know or suspect or have reasonable grounds to know or suspect that a person is engaged in money laundering or terrorist financing. Failing to report is an offence. (5 years)

21 Record keeping Keep records for 5 years Records of customer ID Records of transactions Records of staff training Records of internal/external reports Must be easily accessible

22 Risk Assessment Formally document risk assessment process What are the risks to the business of the particular activity? Assess the activity e.g. Property sales high risk Assess the customer e.g. existing, new, profile of purchaser. Apply appropriate level of due diligence, ID, source of funds Ensure staff follow process

23 Internal Controls Establish and maintain policy and procedure Have a formal policy document which staff can understand and access easily Include a statement of values including management commitment to forestalling and preventing money laundering.

24 Management of Compliance Senior management responsibility to ensure systems are in place Regular review of all systems Assess staff training. Is it effective? Make necessary adjustments as needed. MLRO report to management at least annually. May not be 100% foolproof/ Learn from mistakes

25 AML Helpline