AML AROUND THE WORLD
Information sharing:
Light from the black hole
T
he regulated sector commits much
in the way of resources to compliance, but many firms complain that
the information flow is one way, and that
they never see the results of their efforts.
How is that being resolved in the U.K.?
Progress in information/intelligence gathering
The various anti-money laundering
(AML) statutes and regulations of recent
years include a significant aim—to wrest
information from the regulated (primarily financial) sector, which assists in the
fight against crime, money laundering and
terrorism. By making use of the interface
between the public and the established
financial systems, much has been done to
make life difficult for those intent on committing financial crime and abusing those
systems. The suspicion reporting regimes
that have evolved in the U.K. are responsible for making available large amounts of
intelligence, irrespective of whether or not
they have led directly to prosecutions or
even investigations.
“Big picture” involves more than
transaction monitoring
The 3rd EU Money Laundering Directive,
which is almost entirely enshrined
in United Kingdom law by the Money
Laundering Regulations 2007, encourages
member states to lean toward the reporting
of suspicious activity rather than transactions, an approach already adopted by the
U.K. Suspicious Transaction Reporting
(STR) generally involves the use of reporting thresholds, and/or concentration on
the actual transaction, i.e., its origin,
destination and method (cash, etc.). This
approach is inefficient for a number of reasons. Thresholds merely induce launderers to ensure that they enter the markets
below the stated level and spread their
forays among different service providers.
It also means that many reports are
made unnecessarily, because they are in no
way actually suspicious, just big, and a lot
of time is wasted. Focusing on the single
transactions, rather than the bigger picture
of the actual activity of the customer, may
conversely mean that some transactions
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that do not appear suspicious in themselves get ignored, while they are actually
significant within a pattern of behavior
that should arouse suspicion.
The greater efficiency of the Suspicious
Activity Report (SAR) regimes, where the
transaction, the account activity and the
account holder are all considered together,
is difficult to deny. The added imperative
of the Directive and the 2007 Regulations
to apply a risk-based approach (RBA) to
due diligence and account monitoring
activity means that even more reports
are made by staff and compliance officers
adopting a “belt and braces” approach or
perhaps more cynically, covering their
backs against the possibility of prosecution for failing to report activity to the
U.K. authorities.
How information has been evaluated
and distributed
The overall consequence of these developments is that there is a whole lot of data
held by the Financial Intelligence Units
(FIUs). The United Kingdom FIU, housed
at the Serious Organised Crime Agency
(SOCA) in London, received more than
220,000 SARs between October 2006 and
September 2007 (The Suspicious Activity
Reports Regime Annual Report 2007:
SOCA). Trained staff then evaluated these
reports, first by digital methods, and then,
if any were of concern, entered them onto
the FIU database. Those disclosing information in key areas, such as terrorism
and corruption, were sent directly to the
appropriate specialist police units, while
the rest were made available for investigation by accredited officers in forces and
other agencies around the country that
have access to the database.
The ELMER advantage
The benefit of this system is that reports
containing genuinely suspicious activity can be appropriately handled. It also
makes a lot of other intelligence available
for interrogation when required, intelligence that may provide invaluable evidence of associations between suspects
under investigation or in the aftermath of
November / December 2008
a terrorist incident. The database thus has
both a proactive and a reactive function.
Its very presence, as a repository of SARs,
themselves a serious obstacle in the path of
the financial criminal of whatever shade,
is a deterrent, or at least cause for thought.
Its raison d’être is to identify criminal
behavior in those dealing with criminal
property, and many investigations have
been initiated by SARs. The reactive function occurs when financial investigators
run details of their suspects and associates
through it and obtain important details
provided by the suspects as customers of
the regulated firms. The database, known
as ELMER, is regularly interrogated by
investigators dealing with serious conventional crimes as well as terrorism.
Database invaluable, but not a panacea
It is not a perfect tool, however, and like
most tools, care must be taken to use it
properly. Various reports have been made,
most notably on the Financial Action Task
Force (FATF/GAFI) Web site, that SARs
contributed to the identification of one of
the suicide bombers, Jermaine Lindsay,
who attacked London in July 2005. That
claim was incorrect, as no SAR had been
submitted, and the action described was
normal bank investigation of the running
up of unauthorized debt on an account. In
actual fact, none of the financial behavior
of any of those involved in the attack could
in any way be expected to find its way into
a SAR. The amounts were minimal, and
the behavior not unusual for young men
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