£300bn of suspect funds in London reveals farce of FATF’s 2018 UK assessment

Transparency International UK’s report into £300bn of suspect funds in London reveals farce of the recent Financial Action Task Force’s UK assessment

Introduction

Transparency International UK (TI UK) is the UK chapter of the international non-governmental non-profit organisation dedicated to ensuring UK and Global society is free from corruption.

The Financial Action Task Force (FATF) is an intergovernmental organisation founded thirty years ago by G7 member countries to combat money-laundering (ML) and terrorist financing (TF). Approximately every ten years FATF conducts an assessment of its members’ approach to combating ML and TF and produces a Mutual Evaluation Report (MER). FATF’s most recent MER on the UK was published in December 2018.

The Transparency International UK report

Today’s TI UK report reveals what everyone in the UK has known for years: that the UK and, in particular the London property market and private schools, are a magnet for the ‘washing’ of illicit funds. The numbers are still pretty staggering though, with 421 houses worth £5bn and money funnelled through 327 private schools.

What makes TI UK’s assessment even more galling is that as recently as December 2018 FATF declared:

‘The UK routinely and aggressively identifies, pursues and priorities ML [money-laundering] investigations and prosecutions…’.

This now looks like a highly questionable conclusion given the paucity of money-laundering prosecutions in the court system at present. TI UK’s report goes on to outline that 17,000 shell companies were used by 582 UK firms/individuals to move suspect funds into the UK.

The FATF December 2018 assessment was this:

‘The UK is a global leader in promoting corporate transparency and has a good understanding of the ML/TF risks posed by legal persons and arrangements.’

Observations

For the UK government and agencies contributing to the National Economic Crime Centre (NECC), which include NCA, SFO, FCA, CoLP, HMRC and CPS, the TI UK report is clear evidence that the FATF UK MER of December 2018, was a whitewash. The written statement that John Glen, the Economic Secretary to the Treasury, made to the house about the FATF UK MER on 10 December 2018 now has a particularly hollow ring:

‘ The UK received the highest rating possible in four out of the eleven areas of the report, and received a rating of ‘substantial’ in a further four areas. In particular, the report highlights the UK’s efforts on:

• Taking significant steps to understand and coordinate the UK’s response to the threat of illicit finance, including publishing two National Risk Assessments in 2015 and 2017….
• Aggressively investigating and prosecuting money laundering, with over 1,400 convictions a year, and adopting new tools such as Unexplained Wealth Orders….
• Preventing the misuse of companies and trusts, and acting as a global leader by adopting a public register of company beneficial ownership and a register of trusts with tax consequences…’

While the recent success the NCA has had with Unexplained Wealth Orders is rightly referenced and is to be applauded it is difficult to credit the FATF praise for the UK’s approach to the misuse of companies, with the figures in the TI UK report. As a wet September has given way to an even wetter October 2019, to misquote a favourite aphorism of Private Eye, the UK has become a ‘shady place for shady people to do business’.