NCA planning AML crack down on company formation agents – John Binns writes for GRC World Forums

NCA planning AML crack down on company formation agents – John Binns writes for GRC World Forums

BCL partner John Binns’ article ‘Blaming company formation agents misses the bigger picture about AML in the UK’ has been published by GRC World Forums.

Here’s an extract from the article:

Mention UK companies and money laundering to any reasonably well-informed observer, and two strong but apparently inconsistent associations instantly come to mind.

The first is that the UK has some of the strictest anti-money laundering (AML) laws, with strong requirements for regulated-sector businesses and professionals, including those that form companies, to make Suspicious Activity Reports (SARs) and to know your customer (KYC) checks and conduct customer due diligence (CDD), which are underpinned by criminal liability.

The second is that UK companies are a notorious plaything of choice for launderers, helping to layer the proceeds of serious criminality and, just as importantly, to indulge in ‘reputation laundering’ – adding an apparent sheen of respectability to what might otherwise be treated as suspiciously opaque structures.

That unhappy truth was reflected in the recent leak of FinCEN reports (the US equivalent of SARs) by the International Consortium of Investigative Journalists (ICIJ), which included references to the UK being a ‘higher risk’ country for money laundering.

Both of these are genuine trends, and of course, what may seem at first glance like inconsistency may be better viewed as a furious arms race, with the actions of determined launderers driving ever stricter and better-enforced regulation, aimed at the ‘gatekeepers’ of the UK’s financial system.

But the current debate about the role of company formation agents in tightening up the AML system provides a stark illustration of the potential flaws in that picture.

A patchwork of regulation

The starting point is that AML regulation in the UK applies to all businesses that incorporate companies for their customers, although their supervision is characteristically split between accountants’ and lawyers’ professional bodies, the Financial Conduct Authority (FCA) (for firms authorised by it), and HM Revenue and Customs (HMRC) (for the rest).

Concerns about the lack of coordination between supervisors are in the process of being addressed by a new Office for Professional Body AML Supervisors (OPBAS), which is itself housed within the FCA.

The UK government has enabled literally anyone, at home or overseas, to incorporate a company and register its details with Companies House (CH), with next to no checks at all

More importantly, that somewhat confusing patchwork of regulation is, from the perspective of those who wish (legitimately or otherwise) to incorporate a UK company, entirely optional. Keen to ensure that the use of limited liability vehicles for businesses here is as easy as possible, the UK government has hitherto enabled literally anyone, at home or overseas, to incorporate a company and register its details with Companies House (CH), with next to no checks at all.

 

This article was originally published by GRC World Forums on 26/02/21. You can read the full version on their website.

John Binns is a partner at BCL specialising in all aspects of business crime, with a particular interest in confiscation, civil recovery and money laundering under the Proceeds of Crime Act 2002 (“POCA”). His business crime experience includes representing suspects, defendants and witnesses in cases invoking allegations of bribery and corruption, fraud (including carbon credits, carousel/MTIC, land-banking, Ponzi and pyramid scheme frauds), insider trading, market abuse, price-fixing, sanctions-busting, and tax evasion. He has coordinated and undertaken corporate investigations and defended in cases brought by BEIS, the FCA, HMRC, NCA, OFT, SFO and others.