Financial crime remains at the top of the regulatory agenda across the globe. As responses to the pandemic stabilise, and following some high-profile global incidents, regulators face renewed pressure to manage financial crime more effectively through robust supervision and enforcement.
In the October 2021 edition of the City Library's Compliance Officer Bulletin, our business crime, regulatory and cybersecurity lawyers explore the latest developments in anti-money laundering (AML) and financial crime in a series of articles, including:
- Reviewing the EU and UK AML regime proposals: What firms need to know. On 20 July 2021, the European Commission presented a package of legislative proposals establishing a new framework for the EU’s AML regime. Shortly after, on 22 July 2021, HM Treasury (HMT) issued both a call for evidence and consultation on reforms to the UK’s AML framework. This article explores the proposals from the Commission and HMT in more detail, and sets out considerations for UK firms.
- Emerging themes in the DPA landscape. The guidance on Deferred Prosecution Agreements (DPAs) published by the Serious Fraud Office (SFO), and recent DPAs entered into with the SFO, provides a pathway for companies to follow should they identify criminal conduct in their company which could cause the company itself to be held criminally liable. This article considers the DPA landscape by examining the SFO’s guidance and looking at some themes we have identified from the recent DPAs entered into with the SFO.
- Developments on the Cum-Ex dividend scandal. Cum-Ex trading (also known as dividend arbitrage) is a practice that involves complex trading prior to dividend payments enabling multiple parties to claim refunds for withholding tax that has only been paid once. In essence, shares are sold or swapped (often temporarily) prior to a dividend payment in order to produce two tax refunds on one set of shares. It is estimated that between 2002 and 2012 European tax authorities were deprived of approximately EUR 55 billion through Cum-Ex trades. In this article we explore litigation and enforcement developments in the UK relating to the Cum-Ex scandal.
- Cyber risk in financial services. The last two years have seen a significant increase in cyber attacks, particularly ransomware, supply chain attacks and attacks attempting to take advantage of COVID-19, with financial institutions often the target of these attacks. While financial institutions are subject to more stringent legal and regulatory requirements than many sectors, at the same time, there is a lack of consistency on approach between jurisdictions, with an overlapping patchwork of legislation and guidance from regulators. This article considers some of the key current cyber risks for financial institutions, the approach of regulators to those risks and mitigating strategies, and upcoming expected legislative changes.
- A guide to spotting — and stopping — authorised push payment fraud. For many businesses, the COVID-19 pandemic has caused a squeeze on finances, a reprioritisation of resources, absence of key staff, more home working and pressure on financial and compliance controls. In short, the pandemic has helped create a perfect environment for fraud. One of simplest and most devastating frauds that can be committed against a business is the so-called authorised push payment (APP) fraud. This article explains APP fraud and provides recommended practices for businesses to minimise the risk of becoming a victim.
- US AML developments: US Anti-Money Laundering Act of 2020. The US AML regulatory framework is slated for a number of significant changes under the US Anti-Money Laundering Act of 2020 (AMLA), which became law in the US earlier this year as part of the National Defense Authorization Act for Fiscal Year 2021. AMLA includes the most significant changes to the US AML regime since the enactment of the USA PATRIOT Act of 2001 by requiring the Treasury’s Financial Crimes Enforcement Network to take action to modernise its regulations in an effort to address evolving risks to the security of the US financial system. This article discusses a number of key AMLA provisions.
- The Quincecare duty of care: Where are we now? Under the Quincecare duty of care owed by banks to customers, a bank must refrain from executing a payment instruction if and for as long as it has been “put on inquiry” by having reasonable grounds for believing that the instruction is an attempt to misappropriate the customer’s funds — a bank may be exposed to a negligence claim if it executes instructions in circumstances when it should have refrained from doing so under the Quincecare duty. This section examines some of the key developments emerging from recent cases concerning the Quincecare duty and goes on to consider what practical steps banks can take to mitigate potential risks arising from the duty.
The Bulletin was first published by the City Library and Thomson Reuters, now available to download.
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