FATF-GAFI. Mutual Evaluation Report of the United Kingdom
Paris, 7 December 2018 - The United Kingdom has a well-developed and robust regime to effectively combat money laundering and terrorist financing. However, it needs to strengthen its supervision, and increase the resources of its financial intelligence unit.
The FATF hasconducted an assessment of the United Kingdom's anti-money laundering and counter terrorist financing (AML/CFT) system. The assessment is a comprehensive review of the effectiveness of the UK's measures and their level of compliance with the FATF Recommendations.
The UK is the largest financial services provider in the world. As a result of the exceptionally large volume of funds that flows through its financial sector, the country also faces a significant risk that some of these funds have links to crime and terrorism. This is reflected in the country's strong understanding of these risks, as well as national AML/CFT policies, strategies and proactive initiatives to address them.
The UK aggressively pursues money laundering and terrorist financing investigations and prosecutions, achieving 1400 convictions each year for money laundering. UK law enforcement authorities have powerful tools to obtain beneficial ownership and other information, including through effective public-private partnerships, and make good use of this information in their investigations. However, the UK financial intelligence unit needs a substantial increase in its resources and the suspicious activity reporting regime needs to be modernised and reformed.
The country is a global leader in promoting corporate transparency and it is using the results of its risk assessment to further strengthen the reporting and registration of corporate structures. Financial institutions as well as all designated non-financial businesses and professions such as lawyers, accountants and real estate agents are subject to comprehensive AML/CFT requirements. Strong features of the system include the outreach activities conducted by supervisors and the measures to prevent criminals or their associates from being professionally accredited or controlling a financial institution. However, the intensity of supervision is not consistent across all of these sectors and UK needs to ensure that supervision of all entities is fully in line with the significant risks the UK faces.
The UK has been highly effective in investigating, prosecuting and convicting a range of terrorist financing activity and has taken a leading role in designating terrorists at the UN and EU level. The UK is also promoting global implementation of proliferation-related targeted financial sanctions, as well as achieving a high level of effectiveness in implementing targeted financial sanctions domestically
The UK's overall AML/CFT regime is effective in many respects. It needs to address certain areas of weakness, such as supervision and the reporting and investigation of suspicious transactions. However, the country has demonstrated a robust level of understanding of its risks, a range of proactive measures and initiatives to counter the significant risks identified and plays a leading role in promoting global effective implementation of AML/CFT measures.
FATF adopted this report at its Plenary meeting in October 2018.
a) The UK has a robust understanding of its ML/TF risks which is reflected in its public national risk assessments (NRAs). National AML/CFT policies, strategies and activities seek to address the risks identified in the NRAs. National co-ordination and co-operation on AML/CFT issues at both the policy and operational levels has improved significantly since the last evaluation.
b) The UK proactively investigates, prosecutes and convicts a range of TF activity, in line with its identified risks in this area. A particularly positive feature of the system is the strong public/private partnership on TF matters. This is facilitated by the Joint Money Laundering Intelligence Task Force (JMLIT) which facilitates public/private information sharing including on TF and ML investigations.
c) The UK routinely and aggressively identifies, pursues and prioritises ML investigations and prosecutions. It achieves around 7 900 investigations, 2000 prosecutions and 1400 convictions annually for standalone ML or where ML is the principal offence. The UK investigates and prosecutes a wide range of ML activity. Investigations of high-end ML (a long-standing risk area for the UK) have increased since being prioritised in 2014. These cases generally take years to progress to prosecution and conviction and limited statistics are available on high-end ML investigations, prosecutions and convictions prior to its prioritisation in 2014. As a result, it is not yet clear whether the level prosecutions and convictions of high-end ML is fully consistent with the UK's threats, risk profile and national AML/CFT policies.
d) Another strong point of the system is that all entities within the FATF definition of financial institutions and all DNFBPs are subject to comprehensive AML/CFT requirements and subject to supervision. Supervisors' outreach activities, and fitness and proprietary controls are generally strong. Each supervisor takes a slightly different approach to risk-based supervision. However, while positive steps have been taken, there are weaknesses in the risk-based approach to supervision even among the statutory supervisors.
e) The UK has been a leader in designating terrorists at the UN and EU level, and takes a leading role promoting effective global implementation of proliferation-related TFS. The UK has frozen assets and other funds pursuant to its proliferation financing sanctions program and taken steps to increase the overall effectiveness of its targeted financial sanctions (TFS) regime, including through the creation of the Office of Financial Sanctions Implementation and the strengthening of penalties for breaching TFS.
However, minor improvements are required in relation to applying penalties for sanctions breaches, ensuring consistent application of TFS and communicating designations immediately. The UK has a good understanding of the TF risks associated with NPOs and has been effective in taking action to protect the sector from abuse. The UK also has a robust confiscation regime through which it can and does deprive terrorists of assets.
f) Available financial intelligence and analysis is regularly used by a wide range of competent authorities to support investigations of ML/TF and related predicate offences, trace assets, enforce confiscation orders and identify risks.
However, the UK has made a deliberate policy decision to limit the role of the UK Financial Intelligence Unit (UKFIU) in undertaking operational and strategic analysis which calls into question whether suspicious activity report (SAR) data is being fully exploited in a systematic and holistic way and providing adequate support to investigators. Additionally, while reports of a high quality are being received, the SAR regime requires a significant overhaul to improve the quality of financial intelligence available to the competent authorities.
g) 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. The UK has a comprehensive legal framework requiring all financial institutions and all DNFBPs to conduct customer due diligence and obtain and maintain beneficial ownership information in a manner that is generally in line with the FATF requirements. Beneficial information on trusts is available to the competent authorities through a registry of trusts with tax consequences in the UK. The information in the trust register is verified for accuracy, but the register itself is not yet fully populated. For legal persons, basic and beneficial ownership information is freely and immediately available to the public and all competent authorities through a central public register. This information is not verified for accuracy which limits its reliability. Authorities confirmed that beneficial ownership information, where held in the UK, was obtainable for investigative purposes in a timely manner via available informal and formal investigative tools, including JMLIT and the NCA s.7 gateway.