London remains a safe haven for “dirty money” as criminals exploit Britain’s eagerness to attract foreign investment, according to one of the UK’s top law enforcers.
Graeme Biggar, the director-general of the National Crime Agency’s National Economic Crime Centre, told Financial News that it’s still “too easy” for criminals to launder money in London despite the government’s efforts, such as imposing sanctions for illicit financial transactions.
“It [money laundering] is not as easy as it used to be. But it’s still a little too easy to do it.” Biggar said.
The UK government launched the NECC in 2018 to fight economic crime. Members include the Serious Fraud Office, the Financial Conduct Authority, the Home Office and the City of London Police, among others.
Money laundering costs the UK more than £100bn a year, according to the National Crime Agency.
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“There are a number of financial centres around the world and money laundering happens in all of them. London is one of the biggest financial centres in the world. Unsurprisingly, it happens a lot here,” Biggar said.
“But one of the reasons it is one of the largest financial centres in the world is the approach to regulation that we have had historically,” he added. While a flexible, pro-business approach has helped build the City’s stature, he argued, “in some areas that’s gone too far. We need to draw it back to stop [money laundering] happening.”
In July, London was branded a “laundromat” by a scathing parliamentary report into Russian influence in Britain that claimed the capital is being used to funnel illegal funds.
Responding to the 50-page report, the government said: “The government is clear that tackling illicit finance and driving dirty money and money launderers out of the UK is a priority.”
In its “Economic Crime Plan” launched last year, the government admitted “the abuse” of the UK financial system and corporate structures to launder money has harmed the country’s reputation.
Biggar said: “At the moment it is all too easy to to set up a company and mask who actually owns it. The number of companies being set up is quite clearly well beyond the number of actual companies that could possibly need to exist in the UK. That is well known internationally, and so people do use London to enable their money laundering.
“We are pretty keen to encourage investment generally into the UK. But for those where it is on the basis of crime, we really don’t want that dirty money here,” he added.
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The FCA has cracked down on anti-money laundering failures among banks and other financial institutions.
The markets watchdog fined Commerzbank £38m in June this year for its failure to make the necessary anti-money laundering checks over a five-year period. This was the third-largest fine ever imposed by the FCA over procedural inadequacies in this area.
Last year, Standard Chartered was fined $1.1bn (£842m) by US and UK authorities over allegations of poor money-laundering controls and breaching sanctions against countries including Iran.
The first half of 2020 saw global anti-money laundering fines handed out by regulators hit $706m compared to 2019’s full-year-total of $444m, according to a report by consultancy Duff & Phelps published in August.
The study found four key areas for repeated offences: customer due diligence, anti-money laundering management, suspicious activity monitoring and compliance monitoring and oversight.
Nick Bayley, head of UK regulatory consulting at Duff & Phelps, said in the report: “Interestingly, looking at the key AML failings that are identified by regulators, we see the same areas being sanctioned again and again. This is consistent for regulators across the globe, and also over the past five years.”