In a recent speech, FCA Director of Enforcement and Market Oversight Mark Steward again made clear that the FCA is prepared to use its power to bring criminal proceedings for breaches of anti-money laundering (AML) obligations set out under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs 2017).
Mr Steward stated that it was time for the FCA to give ‘effect to the full intention of the Money Laundering Regulations which provide for criminal prosecutions’. While he expected that criminal prosecutions, as opposed to civil or regulatory action, would be brought in exceptional cases, he warned that the FCA ‘need to enliven the jurisdiction if we want to ensure [the power to bring criminal proceedings] is not a white elephant’.
In keeping with this approach, Mr Steward confirmed that the FCA is opening ‘dual track’ AML investigations, which may give rise to either criminal or civil proceedings. According to the FCA’s Anti Money Laundering Report (2017/2018) published in July 2018, it had around 75 live AML investigations as at that date. It is unclear how many of these are ‘dual track’ investigations.
Mr Steward’s speech comes in the context of ongoing debate around reform to UK law on corporate criminal liability (focused on the introduction of a broader ‘failure to prevent’ economic crime offence) and discussion around whether ‘failure to report’ offences under the Proceeds of Crime Act 2000 should be extended to corporates (see the Law Commission’s Consultation Paper on the SARs Regime). Combatting money laundering continues to be a priority for the FCA and other UK authorities, and we expect to see increased regulatory and criminal enforcement in this area.
As we look ahead to what could be the first FCA criminal prosecution for breaches of the MLRs 2017, Mr Steward indicated that the FCA may bring such a prosecution where it finds ‘strong evidence of egregiously poor systems and controls and what looks like actual money-laundering’. However, it remains unlikely that criminal prosecutions under the MLRs 2017 will become the norm for the FCA. In keeping with the spirit of the Enforcement Guide, we expect that the FCA will continue to discipline firms under the FCA Handbook where it identifies primarily systems and controls-related issues, even where there is no evidence of underlying money laundering activity.