Donald Toon of the National Crime Agency has said he is alarmed by
the number of homes registered to complex offshore corporations - some
of which have been bought with laundered money.
He added that the inflows are big enough to be responsible for driving London property prices artificially high.
The Treasury has received a £150 million windfall in the past three months from a tax on properties purchased by companies, trusts and investment funds, rather than individuals, thus supporting Mr Toon's claim, and demonstrating that Government doesn't care enough about this problem to stop the inflow of free money to the Treasury!
Mr Toon has been reported saying: 'I believe the London property market has been skewed by laundered money. Prices are being artificially driven up by overseas criminals who want to sequester their assets here in the UK.'
Hundreds of billions of pounds are laundered in the City every year, according to the National Crime Agency, and investigations are intensifying into the matter.
Mr Toon added: 'Prices of high end property are being artificially driven up by the desire of overseas criminals to sequester their assets here in the UK. What they are doing is distorting the market.
Anonymous front companies in the UK are at the heart of an investigation into one of Europe’s biggest money-laundering operations, allegedly forming part of a conspiracy to make $20bn (£12.5bn) of dirty money look legitimate. The funds are believed to have come from major criminals and corrupt officials around the world wanting to make their ill-gotten cash appear “clean”, so they can spend it without suspicion.
At least 19 UK-based front companies are under suspicion. The scandal highlights how lax corporate rules have made this country an attractive destination for global organised crime. The secrecy company directors are entitled to under UK law is also hindering attempts to identify the “Mr Bigs” behind the scam.
An investigation by The Independent and the Organised Crime and Corruption Reporting Project, an NGO, has identified dozens of firms in a global web spreading from Birmingham to Belize.
The scam appears to have gone on for four years before being shut down in May by investigators in another of its main centres – the former Soviet republic of Moldova.
Vasile Sarco, an investigating officer in Moldova, told The Independent: “This money was routed from Russia, but the companies incorporated in Britain were instrumental to transit the funds.”
He has sought help from UK organised crime police to help track down the British end of the operation.
These investigations are merely a small snapshot of the kinds of scams which are being perpetrated to enable foreign dirty money to find a ‘clean’ home.
But why go to such lengths when all that is required is the opportunity to buy property ‘off-plan’, in London. Vast sums of money are being imported into the UK to pay for flats and properties, many of which not even been completed yet. The purchasers are largely from the Far East, particularly Hong Kong, and there is no information available to identify the provenance of the money.
This is what is causing such concern to Donald Toon and his team.
The transfer of the funds are being facilitated by dishonest and egregious Estate Agents and Solicitors who are deliberately flouting the laws and regulations designed to require greater transparency of the funds being made available; and the money flows into and out of global banks who couldn’t care less about the provenance of the money, as HSBC so glibly proved to the world with their Mexican drug money laundering operations.
How has this ludicrous state of affairs been allowed to arise, particularly when we have some of the most Draconian anti-money laundering laws and regulations in the world?
Our laws were implemented in 1994, together with a compendious volume of regulations, which were designed to provide institutions subject to the legislation with a framework upon which they could begin to build a compliant anti-money laundering policy and procedure set.
There was one major and ridiculous failing with this procedure. No agency was tasked with the job of supervising and enforcing the new rules and regulations, and without a continuous process of surveillance to ensure compliance the new laws didn’t have a hope in hell of being complied with.
The Regulations were a compendious set of requirements which would enable the philosophical underpinning of the new legislation to be put into action, but as no law enforcement agency or regulatory body was willing to take on the oversight of the new regime, the entire lot just fell into misuse.
When the new laws were first introduced, there was major consternation expressed by the financial services industry, and the Government tasked the National Criminal Intelligence Service to provide a series of public workshops to inform and advise practitioners of the meaning of the new regulations, and for a short period of time, they were heavily oversubscribed.
I know this because I was one of the major contributors to the workshops, and spent some months running two workshops a day, lecturing bankers and other practitioners. It was very obvious that they were all very concerned about the new laws because they contained penal sanctions, and there was huge outrage expressed at the likelihood that practitioners might face prison sentences for doing what they had traditionally done for years.
We spent many hours, days and weeks explaining that no-one need fear a prison sentence if the relatively simple laws and regulations were complied with effectively. These merely required practitioners to ensure that they knew who their customers were and to be able to share with police their addresses if necessary. The other requirement was that they should make disclosures of financial transactions over which they entertained any suspicions as to the provenance of the money being handled. There were other regulations dealing with the requirement to train staff in the rules and regulations dealing with money laundering, but frankly, none of them were onerous in the least.
My law enforcement colleagues and I were at a loss to understand why there was so much consternation expressed at what, to us, was such a simple requirement.
Once the banks and financial institutions went back to work, they quickly discovered that no-one bothered them to ensure that the Money Laundering laws were being adhered to, and within a matter of a few months, the regulations became virtually totally ignored.
In a report I was asked to compile for H.M.Treasury in September 1998, four years after the laws were first introduced, I was asked to focus on the degree of compliance with the money laundering laws as demonstrated by typical City practitioners.
“...Throughout my interviews with financial practitioners, it became clear that the terms of the Money Laundering Regulations were being openly flouted.
Adherence to the ‘know your customer’ rules; identification procedures; record keeping procedures, and to a greater or lesser extent, the training and education regulations, were at best adhered to in skeletal theory; at worst, they were completely ignored.
Throughout my interviews, the same phrases kept re-appearing from those I interviewed.
‘These laws can not be that serious, no-one bothers to enforce them’! (LIFFE market local).
‘I can’t remember anyone asking me to show them any evidence of my client identification procedures. It’s as if they don’t want to know’! (Futures trader with small specialist broking company).
‘I think if somebody went to prison, we’d all sit up and take notice. But the fact is that nobody wants to see London lose its place in the world market, and they certainly aren’t going to start worrying about a bit of funny Russian money coming in’! ( LIFFE floor trader).
‘I do ask to see evidence of client identification, but if I am told that the introducing broker has done his homework, as long as someone is happy to sign off on that, then it's none of my concern. I don't get paid to turn away business'’ (Medium-sized broker’s compliance officer).
‘If the regulators started getting heavy with us about the regs, we’d comply a bit better. Not a lot though, because they are all crap! As it is, SFA don’t give a f***! They never ask to see the paperwork, all they care about is seeing the right signatures on the right forms. Most of them are so dumb, they wouldn’t know what they were looking at, anyway’. (Young desk trader in a busy futures’ dealing operation).
‘Of course I am laundering money. I’ve got to be. Nobody does these kinds of trades in this time scale, and at these volumes, and loses as much money as some of these guys do, without having a reason for doing it. Anyone can get on the wrong end of a trade, from time to time, but you make damn sure you don’t make the same mistake again. These guys are just moving around huge sums of other people’s cash, and they are willing to pay for the privilege’. (Forex dealer in a small private client firm).
‘Look, if anyone asks me, I’ll deny I said this to you on a stack of bibles, but what do you think we do for a living. Someone wants to move some money, and I am there to help them. It doesn’t happen all the time, most times we’re just taking positions. Anyway, all this stuff you are asking cannot be that important, even the regulators don’t ask about it’. (Same Forex dealer)
What became abundantly clear in the interviews was that there was a general acceptance that the Money Laundering Regulations were not only not being enforced, but that those with responsibility for their regulation, in the minds of the interviewees, the SFA (FSA), did not seem to care about their enforcement. Whether or not the SFA (FSA) accepts that it does have regulatory responsibility for the enforcement of the provisions of the Money Laundering Regulations, the market and those it regulates in other areas believes it has such a responsibility!
Since those days, the money laundering laws were routinely ignored by regulators, until, in the end, the FSA and now the FCA have been literally forced to start taking notice of the need to start putting some muscle into the regulation of the financial market with regard to funny money, but frankly, it is already too late.
The anti-money laundering regime has been flouted for too long. Under Gordon Brown, the regulatory agencies were encouraged to adopt a hands-off stance while engaging in a ‘regulation light’ or ‘soft-touch regulation’ regime. This meant that in order to please their political masters, financial regulators left the financial sector very much to itself to get on with business, because ‘Wee Gordy’ and his bullyboy sidekick, Ed Balls liked the money that was pouring in to the Treasury from the City.
The effect was to allow (encourage) London to gain a reputation for allowing any kind of funny money to find a safe home, and thus all kinds of black and criminal money has flooded into the City.
Stephen Barclay MP believes the City of London has become the favourite place for the world's dishonest officials to hide stolen money, but he was only repeating the words of former oligarch, Alexander Lebdev who, at a Cambridge Financial Crime Conference, openly described London as the laundry of choice for the world’s organised criminals.
The City of London’s status as a favourite place for the world’s dishonest officials to hide stolen money will remain a stain on the UK’s reputation, despite a long-awaited government anti-corruption plan.
Stephen Barclay, a Conservative MP, who worked in senior anti-money-laundering roles at the Financial Services Authority (FSA) and Barclays Bank before entering parliament in 2010, said the plan did not address flaws in the UK’s financial system that allow crooked officials from foreign countries to hide ill-gotten gains in London’s banks.
The MP said a series of official reports from the 1990s to the present had shown banks were not tackling money laundering adequately. “Money-laundering officers need to be senior figures with sufficient clout to turn down high-risk, highly lucrative clients [suspected of money laundering], but too often responsibility is passed down the decision tree.”
He stressed he wasn’t bashing the banks, which he believes face a system of costly regulatory compliance that leads them to spend millions on ineffective controls, such as running background checks on grannies, rather than high-risk, wealthy foreign clients moving large sums of money through the UK. Financial institutions also have little support from cash-strapped law-enforcement agencies, meaning “the banks are almost fishing in the dark”.
“When there is a high-risk multimillion pound transaction, the bank files a suspicious activity report, but 93% of the reports are never read,” he said.
Some of these fears were echoed in a recent report by the Financial Conduct Authority (FCA), the successor to the FSA, which found significant weakness in anti-money-laundering controls, following an investigation into 21 banks. The FCA declined to name the banks, (which makes the whole exercise utterly futile) but said the investigation was focused on small private and retail banks, rather than well-known high street names.
More than half of the banks the FCA visited had not assessed money-laundering risk, while six were deemed to be seriously weak. One London-based branch of an overseas bank had opened an account for a client who had been charged with 107 counts of money laundering. Another bank reported a clean bill of health for a customer, when a Google search showed an African government committee had alleged they were guilty of corruption in the privatisation of state-owned companies.
Another bank officer, with the job of stopping the flow of illicit funds, told the regulator he did not see the point of trying to find out the source of wealth for “politically exposed persons”, an official category in money-laundering law referring to senior government officials that banks are obliged to run checks on. Several money-laundering officers left their jobs following the FCA investigation.
Between £23bn and £57bn of stolen money is laundered through London each year, according to an estimate made by the City regulator in 2013. Barclay said the UK anti-money-laundering regime was flawed because government investigators did not have enough time to carry out detailed checks on suspicious transactions in UK bank accounts. “If you only have 38 days [the legal maximum] to prove in court that these are corrupt funds and corrupt officials in the home country don’t want to cooperate, you can imagine how difficult it is to prove corrupt assets.”
A spokesperson for the Treasury, which drafts the anti-money-laundering rules, said: “The UK has a comprehensive anti-money-laundering regime and we are committed to ensuring our financial system is a hostile environment for illicit finances...”
When the complacency in that particular piece of breathtaking Treasury whabble-babble is dissected, it is easy to see why London has become the world’s centre for dirty money laundering, and why the Government just couldn't care less!
He added that the inflows are big enough to be responsible for driving London property prices artificially high.
The Treasury has received a £150 million windfall in the past three months from a tax on properties purchased by companies, trusts and investment funds, rather than individuals, thus supporting Mr Toon's claim, and demonstrating that Government doesn't care enough about this problem to stop the inflow of free money to the Treasury!
Mr Toon has been reported saying: 'I believe the London property market has been skewed by laundered money. Prices are being artificially driven up by overseas criminals who want to sequester their assets here in the UK.'
Hundreds of billions of pounds are laundered in the City every year, according to the National Crime Agency, and investigations are intensifying into the matter.
Mr Toon added: 'Prices of high end property are being artificially driven up by the desire of overseas criminals to sequester their assets here in the UK. What they are doing is distorting the market.
Anonymous front companies in the UK are at the heart of an investigation into one of Europe’s biggest money-laundering operations, allegedly forming part of a conspiracy to make $20bn (£12.5bn) of dirty money look legitimate. The funds are believed to have come from major criminals and corrupt officials around the world wanting to make their ill-gotten cash appear “clean”, so they can spend it without suspicion.
At least 19 UK-based front companies are under suspicion. The scandal highlights how lax corporate rules have made this country an attractive destination for global organised crime. The secrecy company directors are entitled to under UK law is also hindering attempts to identify the “Mr Bigs” behind the scam.
An investigation by The Independent and the Organised Crime and Corruption Reporting Project, an NGO, has identified dozens of firms in a global web spreading from Birmingham to Belize.
The scam appears to have gone on for four years before being shut down in May by investigators in another of its main centres – the former Soviet republic of Moldova.
Vasile Sarco, an investigating officer in Moldova, told The Independent: “This money was routed from Russia, but the companies incorporated in Britain were instrumental to transit the funds.”
He has sought help from UK organised crime police to help track down the British end of the operation.
These investigations are merely a small snapshot of the kinds of scams which are being perpetrated to enable foreign dirty money to find a ‘clean’ home.
But why go to such lengths when all that is required is the opportunity to buy property ‘off-plan’, in London. Vast sums of money are being imported into the UK to pay for flats and properties, many of which not even been completed yet. The purchasers are largely from the Far East, particularly Hong Kong, and there is no information available to identify the provenance of the money.
This is what is causing such concern to Donald Toon and his team.
The transfer of the funds are being facilitated by dishonest and egregious Estate Agents and Solicitors who are deliberately flouting the laws and regulations designed to require greater transparency of the funds being made available; and the money flows into and out of global banks who couldn’t care less about the provenance of the money, as HSBC so glibly proved to the world with their Mexican drug money laundering operations.
How has this ludicrous state of affairs been allowed to arise, particularly when we have some of the most Draconian anti-money laundering laws and regulations in the world?
Our laws were implemented in 1994, together with a compendious volume of regulations, which were designed to provide institutions subject to the legislation with a framework upon which they could begin to build a compliant anti-money laundering policy and procedure set.
There was one major and ridiculous failing with this procedure. No agency was tasked with the job of supervising and enforcing the new rules and regulations, and without a continuous process of surveillance to ensure compliance the new laws didn’t have a hope in hell of being complied with.
The Regulations were a compendious set of requirements which would enable the philosophical underpinning of the new legislation to be put into action, but as no law enforcement agency or regulatory body was willing to take on the oversight of the new regime, the entire lot just fell into misuse.
When the new laws were first introduced, there was major consternation expressed by the financial services industry, and the Government tasked the National Criminal Intelligence Service to provide a series of public workshops to inform and advise practitioners of the meaning of the new regulations, and for a short period of time, they were heavily oversubscribed.
I know this because I was one of the major contributors to the workshops, and spent some months running two workshops a day, lecturing bankers and other practitioners. It was very obvious that they were all very concerned about the new laws because they contained penal sanctions, and there was huge outrage expressed at the likelihood that practitioners might face prison sentences for doing what they had traditionally done for years.
We spent many hours, days and weeks explaining that no-one need fear a prison sentence if the relatively simple laws and regulations were complied with effectively. These merely required practitioners to ensure that they knew who their customers were and to be able to share with police their addresses if necessary. The other requirement was that they should make disclosures of financial transactions over which they entertained any suspicions as to the provenance of the money being handled. There were other regulations dealing with the requirement to train staff in the rules and regulations dealing with money laundering, but frankly, none of them were onerous in the least.
My law enforcement colleagues and I were at a loss to understand why there was so much consternation expressed at what, to us, was such a simple requirement.
Once the banks and financial institutions went back to work, they quickly discovered that no-one bothered them to ensure that the Money Laundering laws were being adhered to, and within a matter of a few months, the regulations became virtually totally ignored.
In a report I was asked to compile for H.M.Treasury in September 1998, four years after the laws were first introduced, I was asked to focus on the degree of compliance with the money laundering laws as demonstrated by typical City practitioners.
“...Throughout my interviews with financial practitioners, it became clear that the terms of the Money Laundering Regulations were being openly flouted.
Adherence to the ‘know your customer’ rules; identification procedures; record keeping procedures, and to a greater or lesser extent, the training and education regulations, were at best adhered to in skeletal theory; at worst, they were completely ignored.
Throughout my interviews, the same phrases kept re-appearing from those I interviewed.
‘These laws can not be that serious, no-one bothers to enforce them’! (LIFFE market local).
‘I can’t remember anyone asking me to show them any evidence of my client identification procedures. It’s as if they don’t want to know’! (Futures trader with small specialist broking company).
‘I think if somebody went to prison, we’d all sit up and take notice. But the fact is that nobody wants to see London lose its place in the world market, and they certainly aren’t going to start worrying about a bit of funny Russian money coming in’! ( LIFFE floor trader).
‘I do ask to see evidence of client identification, but if I am told that the introducing broker has done his homework, as long as someone is happy to sign off on that, then it's none of my concern. I don't get paid to turn away business'’ (Medium-sized broker’s compliance officer).
‘If the regulators started getting heavy with us about the regs, we’d comply a bit better. Not a lot though, because they are all crap! As it is, SFA don’t give a f***! They never ask to see the paperwork, all they care about is seeing the right signatures on the right forms. Most of them are so dumb, they wouldn’t know what they were looking at, anyway’. (Young desk trader in a busy futures’ dealing operation).
‘Of course I am laundering money. I’ve got to be. Nobody does these kinds of trades in this time scale, and at these volumes, and loses as much money as some of these guys do, without having a reason for doing it. Anyone can get on the wrong end of a trade, from time to time, but you make damn sure you don’t make the same mistake again. These guys are just moving around huge sums of other people’s cash, and they are willing to pay for the privilege’. (Forex dealer in a small private client firm).
‘Look, if anyone asks me, I’ll deny I said this to you on a stack of bibles, but what do you think we do for a living. Someone wants to move some money, and I am there to help them. It doesn’t happen all the time, most times we’re just taking positions. Anyway, all this stuff you are asking cannot be that important, even the regulators don’t ask about it’. (Same Forex dealer)
What became abundantly clear in the interviews was that there was a general acceptance that the Money Laundering Regulations were not only not being enforced, but that those with responsibility for their regulation, in the minds of the interviewees, the SFA (FSA), did not seem to care about their enforcement. Whether or not the SFA (FSA) accepts that it does have regulatory responsibility for the enforcement of the provisions of the Money Laundering Regulations, the market and those it regulates in other areas believes it has such a responsibility!
Since those days, the money laundering laws were routinely ignored by regulators, until, in the end, the FSA and now the FCA have been literally forced to start taking notice of the need to start putting some muscle into the regulation of the financial market with regard to funny money, but frankly, it is already too late.
The anti-money laundering regime has been flouted for too long. Under Gordon Brown, the regulatory agencies were encouraged to adopt a hands-off stance while engaging in a ‘regulation light’ or ‘soft-touch regulation’ regime. This meant that in order to please their political masters, financial regulators left the financial sector very much to itself to get on with business, because ‘Wee Gordy’ and his bullyboy sidekick, Ed Balls liked the money that was pouring in to the Treasury from the City.
The effect was to allow (encourage) London to gain a reputation for allowing any kind of funny money to find a safe home, and thus all kinds of black and criminal money has flooded into the City.
Stephen Barclay MP believes the City of London has become the favourite place for the world's dishonest officials to hide stolen money, but he was only repeating the words of former oligarch, Alexander Lebdev who, at a Cambridge Financial Crime Conference, openly described London as the laundry of choice for the world’s organised criminals.
The City of London’s status as a favourite place for the world’s dishonest officials to hide stolen money will remain a stain on the UK’s reputation, despite a long-awaited government anti-corruption plan.
Stephen Barclay, a Conservative MP, who worked in senior anti-money-laundering roles at the Financial Services Authority (FSA) and Barclays Bank before entering parliament in 2010, said the plan did not address flaws in the UK’s financial system that allow crooked officials from foreign countries to hide ill-gotten gains in London’s banks.
The MP said a series of official reports from the 1990s to the present had shown banks were not tackling money laundering adequately. “Money-laundering officers need to be senior figures with sufficient clout to turn down high-risk, highly lucrative clients [suspected of money laundering], but too often responsibility is passed down the decision tree.”
He stressed he wasn’t bashing the banks, which he believes face a system of costly regulatory compliance that leads them to spend millions on ineffective controls, such as running background checks on grannies, rather than high-risk, wealthy foreign clients moving large sums of money through the UK. Financial institutions also have little support from cash-strapped law-enforcement agencies, meaning “the banks are almost fishing in the dark”.
“When there is a high-risk multimillion pound transaction, the bank files a suspicious activity report, but 93% of the reports are never read,” he said.
Some of these fears were echoed in a recent report by the Financial Conduct Authority (FCA), the successor to the FSA, which found significant weakness in anti-money-laundering controls, following an investigation into 21 banks. The FCA declined to name the banks, (which makes the whole exercise utterly futile) but said the investigation was focused on small private and retail banks, rather than well-known high street names.
More than half of the banks the FCA visited had not assessed money-laundering risk, while six were deemed to be seriously weak. One London-based branch of an overseas bank had opened an account for a client who had been charged with 107 counts of money laundering. Another bank reported a clean bill of health for a customer, when a Google search showed an African government committee had alleged they were guilty of corruption in the privatisation of state-owned companies.
Another bank officer, with the job of stopping the flow of illicit funds, told the regulator he did not see the point of trying to find out the source of wealth for “politically exposed persons”, an official category in money-laundering law referring to senior government officials that banks are obliged to run checks on. Several money-laundering officers left their jobs following the FCA investigation.
Between £23bn and £57bn of stolen money is laundered through London each year, according to an estimate made by the City regulator in 2013. Barclay said the UK anti-money-laundering regime was flawed because government investigators did not have enough time to carry out detailed checks on suspicious transactions in UK bank accounts. “If you only have 38 days [the legal maximum] to prove in court that these are corrupt funds and corrupt officials in the home country don’t want to cooperate, you can imagine how difficult it is to prove corrupt assets.”
A spokesperson for the Treasury, which drafts the anti-money-laundering rules, said: “The UK has a comprehensive anti-money-laundering regime and we are committed to ensuring our financial system is a hostile environment for illicit finances...”
When the complacency in that particular piece of breathtaking Treasury whabble-babble is dissected, it is easy to see why London has become the world’s centre for dirty money laundering, and why the Government just couldn't care less!
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