As the murk grows, the UK rows back on money laundering checks

Updated with Cayman-related news.

From Global Witness, a new report entitled Banks and Dirty Money: How the financial system enables state looting at a devastating human costIt’s got plenty of detail, but one eye-catcher is their look at the largest penalties given for money-laundering or sanctions violations.

See if you can spot the UK's biggest ever fine

UK vs. USA: With a magnifying glass, see if you can spot the UK’s biggest ever fine

In the U.K. the maximum slap on the wrist penalty is £8.75 million (about US$13.5 million).

In the U.S. it’s $8.9 billion. That’s Billion with a ‘b’. We’ve put this comparison into a handy graph, below.


We have long gone on about the UK’s extreme laxity in all things to do with probity, enforcement, crime, financial regulation and so forth. Wall Street is godawful enough – but that’s nothing compared to London (and don’t miss the strange new curiosity at the end of this blog that we’ve just been told about.)

All this is part of a business model, aptly described last year by former U.S. regulator Bill Black in an article entitled UK Determined to Win the Race to the Bottom and Remain the Global Financial Cesspool. Britain, as he has often remarked, has won the regulatory competition in laxity.

Now here’s a Bloomberg article with a headline sure to bring joy to certain people in the picture at the top of this blog: U.K. Looks to Relax Money Laundering Rules to Help Businesses. As they note:

“The U.K. government said it will look to relax anti-money laundering controls as part of a plan to save British companies 10 billion pounds ($15.4 billion) over the next five years.”

The actual UK government proposals are here. Of course they spin it cleverly. This is to improve the “efficiency and effectiveness” of the money laundering regime,

as part of the government’s Cutting Red Tape review programme.”

James "chainsaw" Gilleran, then OTS director, said the agency's goal was to allow institutions "to operate with a wide breadth of freedom from regulatory intrusion."

James “chainsaw” Gilleran, then OTS director, said the agency’s goal was to allow institutions “to operate with a wide breadth of freedom from regulatory intrusion.”

Cutting red tape is one of the weasel terms of deregulation. (Who could be in favour of “red tape”?) This ideological claptrap is reminiscent of the work of “Chainsaw Gilleran” at the Office of Thrift Supervision in the United States, who in 2003 took out a real chainsaw and brandished it against a pile of papers wrapped in red tape, just to drive the point home. The result of this and other deregulatory binge-fests was the worst financial crisis since the Great Depression.

We have a serious blog about this in the works, which we’ll publish today or tomorrow. But for now, back to the latest UK government announcement:

“Businesses have expressed concerns that current guidance, rules and proof of identity requirements can be unnecessarily cumbersome and complicated.”

“Cumbersome” is another one of those weasel words. And this is of course rather dishonest: when they say “businesses”, they want us to think of small businesspeople toiling away when of course they essentially mean “big banks backstopped by taxpayers.”

There is a bit of honesty in their next statement, though, which we’ll put in bold:

London: “a great cesspool into which all kinds of criminals, agents and drifters are irresistibly drained.”
– Sherlock Holmes

“The government wants these rules to protect the country and safeguard the UK’s world leading financial services industry, without putting disproportionate burdens on legitimate businesses or those companies that use their services.”

“Safeguard the financial services industry.” Read “protect our rich chums in the big banks.”

Unfortunately there are no real details in the current proposals (though see some details about existing rules here): just this broad declaration of intent.  Those who know the ancient ways of the City of London all know what this means. And latest news from the Cayman Islands, where they appear to be rowing back on all their earlier promises to boost transparency, is just confirmation of what appears now to be happening.

Memories of the last global financial crisis are fading, the new government doesn’t have to worry about elections for a long time, and let’s not worry too much about the looting of poor countries. Let the party continue!

A last note – something that seems to be symptomatic of the wider sickness.

Esteemed gentlemen who don't like money laundering checks

Esteemed gentlemen who don’t love money laundering checks

The curious tale of the UK financial ombudsman

Our attention has been drawn to a story by an anonymous writer which ran on Open Democracy in May, and doesn’t seem to have garnered huge attention. It’s about the UK’s Financial Ombudsman Service (FOS), which was originally set up to provide a speedy and cheap way to resolve disputes between financial companies and their UK customers without having to go to court.

The Financial Ombudsman is a body which, according to a rather interesting report by an esteemed Queen’s Council, is not properly governed by English law: as a former Chief Ombudsman put it:

“We do not have to pretend to ‘find’ what the law is. We unashamedly make ‘new law’.”

In practice, this means that it is free to ignore what it wants to ignore. And that will mean, true to City of London form, tending to leave the big fish alone. As an investigative journalist put it:

“We have a number of other watchdogs here in the UK apart from the FOS, which operate in exactly the same way. They come down very hard on minor offenders and shy away from pursuing the real criminal organisations that have huge bank accounts and the very best legal teams. They never articulate it as such, even in private. That’s why it’s so hard to uncover”.

And it continues:

“The FOS may look  like an official body invented to defend the King’s gullible and unsuspecting customers, but the reality is that it’s funded by the very financial institutions whose knuckles it claims to rap. Moreover, those who receive the most complaints (i.e. the High Street banks) are the ones who contribute the most to the FOS’s funding. It’s a very cosy relationship, to say the least.”

Yet, it seems to be a case of “carry on regardless”. Politicians who are approached to investigate the FOS tend to ignore the request, or make no more than a token effort which soon fades away. HM Treasury sends out an apparently standard email claiming that the FOS is “independent” and effectively cannot be touched. When asked who then is responsible, there is no further response.”

Curious. We haven’t investigated this last matter in any depth, but we will seek the time to do so.

Endnote 1: We’ve just come across this statement from Rowan Bosworth-Davies, a former UK financial sector detective, who has seen it all:

“The majority of those who work in the major global banks have become corrupted by their remuneration, and their immunity from accountability, and have become little more than unrepentant organised financial criminals.

I am on record in many places saying that I do not believe that these institutions could return the level of revenues and achieve the targets they are set, without committing wholesale criminal offences, of theft, fraud, false accounting, forgery, insider dealing and wholesale market manipulation.

I have been roundly condemned by the institutions themselves who dislike the fact that a former Fraud Squad detective like myself will so openly denounce them for being the criminal mafias that they are.

I do so because these institutions appear to make no effort to put their houses in order, despite repeated fines for criminal misbehaviour. The latest fines imposed on the industry just join a long queue of other fines imposed for previous criminality. Despite all the evidence, as yet, no-one has been sent to prison for any of these criminal forays.”

Endnote 2: coming soon, a look at offshore London, the tax havens and the next financial crisis.

 


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About The Author

Nicholas Shaxson is a journalist and writer on the staff of Tax Justice Network. He is author of the book Poisoned Wells about the oil industry in Africa, published in 2007, and the more recent Treasure Islands: Tax havens and the Men who Stole the World, published by Random House in January 2011. He lives in Berlin
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