The National Crime Agency has recently announced that there will be a "day of action" conducted by the National Economic Crime Centre (the "NECC") partners to target money service businesses ("MSBs") at risk of being exploited by criminals.
The NECC and MSBs
The NECC brings together various law enforcement agencies, government and regulatory bodies in a coordinated response to serious organised crime, including money laundering. Although the NECC sits within the National Crime Agency, it also includes representatives of the Serious Fraud Office, the Financial Conduct Authority, City of London Police, HM Revenue and Customs ("HMRC"), the Crown Prosecution Service and the Home Office.
Launched in October 2018, the NECC was created to deliver a step change in the UK's response to economic crime and to drive the UK Government's five year Anti-Corruption strategy, which seeks to preserve the UK’s status as “one of the safest and cleanest places in the world to do business". The Government's Serious and Organised Crime Strategy 2018 subsequently confirmed the NECC as the national authority for the UK's operational response to economic crime. It is designed to harness intelligence gathered by its partners and their capabilities in order to identify and prioritise the most appropriate type of investigation and thereby ensure maximum impact.
The NECC has always had a particular focus on MSBs. The nature of the industry (which trades in high volumes of cash that can be transferred around the globe quickly and converted into other denominations/currencies) makes MSBs an attractive prospect to a broad spectrum of criminals seeking to launder money.
The industry is also viewed by the NECC as being vulnerable to exploitation by organised crime groups who may use MSBs to, for example, launder money generated from the sale of illegal substances or to fund terrorism. The 'cleaning' of money from illegal activities is fundamental to operations of organised criminals and the disruption of such activities is a key priority of the NECC.
What should MSBs expect?
In its press release announcing the "day of action", the NCA has explained that officers of HMRC and City of London Police will be visiting every MSB in the City of London. The press release also states that some 90 businesses will receive educational visits by the joint teams in order to highlight the risks posed within the sector.
The visits appear to be the latest wave of governmental activity in relation to MSBs. As part of a crackdown commenced in June 2019, HMRC made a number of arrests, seized over £100,000 in cash and issued a record fine of £7.8m to Touma Foreign Exchange Ltd for not complying with the anti-money laundering regulations.
The success of that action will have only increased the NECC's appetite to dig further into the MSB industry. While some of the visits are being billed as "educational", it is likely that they will also be used to gather further intelligence on the inner workings of the MSB industry.
What action should MSBs take?
Aside from those complicit in committing offences, MSBs may become involved in money laundering unwittingly or as a result of negligence. Whatever the nature of the involvement, MSBs should expect NECC partners to be extremely thorough and aggressive when conducting their investigations given money laundering is so critical to organised crime and terrorist financing. It is vitally important that MSBs obtain appropriate legal advice as early as possible should they become embroiled in a money laundering investigation.
Given the amount of increased activity from the authorities and the day of action announced by the NECC, businesses would also be well-advised to review their current anti-money laundering policies and procedures to ensure that they are fully up to date and remain fit for purpose. MSBs are encouraged to test their current anti-money laundering procedures for potential vulnerabilities (ideally using an external third party) and make any required enhancements as soon as possible.
Bird & Bird has specialist expertise in this area and experience of advising MSBs implicated in allegations of money laundering or penalised for breaches of the anti-money laundering regulations. If you have any money laundering issues that you would like to discuss, please do contact a member of our team.