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Financial crime

Regulators are keen to enhance both the prevention and detection of financial crime, covering money-laundering, fraud, sanctions evasion and bribery among other issues.

International and European Union regulatory developments

The European Commission (EC) published a proposal on revisions to the Market Abuse Directive (MAD II) in October 2011. MAD II was published in the form of both a directive and a regulation and gives regulators more investigatory powers, increases transaction reporting requirements and increases sanctions available to regulatory authorities. The scope of MAD has also been extended to cover new markets, trading facilities and OTC financial instruments.

In the US, the Foreign Account Tax Compliance Act (FATCA) was passed into law in March 2010 and will come into effect from 2013.  Under FATCA, Foreign Financial Institutions (FFIs) that fail to obtain and report information regarding US customers and beneficial owners to the Internal Revenue Service (IRS) will face a 30% withholding tax. In July the US Treasury and IRS issued guidance outlining the phased implementation timeline for FATCA, most notably the deadline for implementing the withholding provisions has been extended to January 2014.  FFIs will also have until June 30, 2013 to register with the IRS.

UK regulatory developments

In the UK, the FSA has recently consulted on a financial crime guide for firms; the guide consolidates existing requirements and incorporates the findings from two thematic reviews published on the same date (June 2011), regarding mortgage fraud and banks’ management of high money laundering risk situations. The guide also contains self-assessment questions and examples of good and bad practice to assist firms in meeting current requirements. The FSA is expected to publish feedback in Q4 2011. Additionally, in October 2011 the Office of Fair Trade (OFT), published a code of practice for visits to businesses under the Money Laundering Regulation (2007). In September 2010 the Ministry of Justice (MoJ) published draft guidance on the Bribery Act “adequate procedures” for systems and controls, which came into force on 1st July 2011. The Act introduces a new strict liability corporate criminal offence of failing to prevent bribery, with firms that are found to have failed to prevent bribery potentially being liable for an unlimited fine. In December 2011 the British Bankers Association (BBA) published a guidance on compliance with the Bribery Act. The report contains amongst other recommendations for the UK banking sector on corporate hospitality, gifts and promotional expenditure. The BBA is expected to undertake further work on bribery and corruption risks during 2012, including issues surrounding corrupt Politically Exposed Persons (PEPs).

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