De-risking – an epidemic?

I was talking to an estate agent. He was negotiating his exit from his current firm to set up on his own.

“All going smoothly?” I asked.

“Well, apart from the Bank.”

I assumed that the Bank was exercising caution over extending a loan to a new business.

“No, they are happy to lend me money, but I don’t need any. They won’t give me a client account. Something to do with money laundering.”

Client Accounts

If you want to be a registered letting agent, then you need a client account, so that you can keep money received from tenants, for landlords, separate from your own money, used to run the business. Eminently sensible, one might think. Certainly reassuring for landlords and tenants.

However, the virus that is de-risking is spreading. That anti money-laundering regulation be applied to estate agency seems logical and correct. Now, how a bank is considering that there is more risk with un-segregated funds than with segregated ones is a mystery. Surely there would be more transparency with separated monies?


It seems that we are seeing the trickle-down the de-risking that impacted Money Service Businesses (MSBs) over the last few years. This phenomenon has driven legitimate MSBs underground and out of business. There are legitimate, straight-forward businesses in the UK holding bank account in multiple European countries to protect themselves against sudden, categoric account closure. Madness.

Increasingly, there is acceptance that Banks are defending themselves not against money laundering risk but against regulatory risk. While American prosecutors wielding extra-territorial legislation dish out huge fines and pat each other on the back, the banks are quietly, ruthlessly withdrawing banking services for more and more sectors.

Surely, the world will turn, and these sectors will find ways to persist. Undoubtedly, in so doing, their dealings will be more opaque and quite probably this will be to the detriment of consumers.

Who knew that anti money laundering legislation was going to do that?

Your first defence against derisking is to have robust policies and procedures for anti money laundering. Get in touch for a free consultation. Maybe we can help.

When consensus fails.

I wrote here in thanks for the antics of “The Donald”, which served as a useful way of engaging an audience that otherwise was less than enthused by AML Compliance Training.

However, his new, combative approach to, well, pretty much everything, does undermine the concept of international consensus being at the core of the global fight against money laundering, terrorist financing and proliferation.

Or does it?

I argue that since 9/11 the US has been very open about ignoring everyone else. The Patriot Act established extra-territoriality, and as the NatWest 4 would attest, the Deferred Prosecution Agreement (DPA) is a powerful tool.

The US approach to financial regulation has always been “it’s our way, or the highway” and an emboldened EU seems keen to emulate approach, even if in opposition to the American stance.

Hence the curious position at the time of writing, with the US prohibiting trade with Iran as the EU promotes it.

Who would be an international financial firm these days?

Need some help navigating the complexity of international regulation? Give us a call.

Donald. Saviour of refresher training?

Next week, I am delivering refresher training to some counter-staff of a MSB.

At the start of the session, I ask the delegates for any real of concern or topics that they would like to see covered.

Almost certainly, I’ll be swept away by an onrushing tide of silence.

Let’s face it, few counter-staff are counting down the days until their AML refresher course.

To make things worse, I’m the last thing between these guys and a company-funded adult beverage or two.

Thank the Lord then, for the gift that is, “The Donald.” The orange-man’s current high-profile adventures almost make sanctions worth talking about. A couple of leading questions about North Korea and Iran, and I’ll soon have the delegates contributing, talking and possibly even laughing.

My job will be to harness this engagement and carry it through into explanation of PSD II, MLR 2017, and the coming joys of AMLD V and AMLD VI. As enthusiasm inevitably wanes, I will fall back on PEP’s, (guaranteed to wind up counter-staff), or failing that, the impact of Brexit on financial regulation.

Presumably, at some point, “The Donald” will be gone. Literally or figuratively. Less certain, but possible, is that somebody important will remark:

“This PEP thing. It really is useless, isn’t it? Shall we start again?”

Undoubtedly, such developments will be good for the world, but they will make designing and delivering engaging refresher training that little bit harder.


Engaging training? Would that benefit your company? Get in touch.

Compliance Frameworks for MSB

The very thought of a compliance framework can be enough to make a SME owner sigh.

Regulations are written to cover all sizes of entities, and it can be difficult to work out how they can be applied to a company with very few staff and no departments.

Nevertheless, regardless of size, every regulated entity must be compliant and able to evidence its compliance.

This needn’t be intimidating or difficult. Take anti money laundering, for example.

1. Have a policy. Write down what you are going to do and why. There is always guidance available and advice can be sought from trade associations as well as consultants.
2. Do a Risk Assessment. Work out where you business is at risk of being used for money laundering. Think about your products, your customers and your geography.
3. On the basis of your policy and risk assessment, write procedures. If the policy is ‘what?’ and ‘why?’, then the procedures are ‘how?’. How will your business manage and mitigate its risk?
4. Now you have a policy, a risk assessment and a set of procedures. Tell your staff about them. Train them. Make sure that they understand the policy. Make sure that they understand their responsibilities. At the end of the training, give them a test to check their understanding. Document the training and the test.
5. Every year, or if there is a significant change in your business, or the regulations, review everything from point 1 onwards, and document that you have done so.

All this documenting is your protection. If a regulator or a law enforcement agent is inspecting you, this is what makes them feel better.

Documenting evidence that you have real, living policies and procedures that are risk-based, that are understood by everyone in your business and that you review regularly.

Compliance doesn’t need to be complicated, difficult or intimidating.

If you want to talk through Compliance Frameworks and how to implement them, drop us an email, or give us a call for a confidential, free and, no obligation chat.

We’re happy to give free advice, or more if you want hands-on support.


More properly, the title is;

‘HM Revenue and Customs AML/CTF Thematic Review of anti-money laundering compliance in the Money Service Business.

The report in itself is worth reading, but my interest was piqued by the following;

‘Due to concerns that MSBs may be easily abused by criminals and terrorist financiers, some banks have withdrawn services from them as they do not wish to run the risk of regulatory action’.

Those pesky criminals and terrorist financiers; have they no respect for the law?

The review continues;

‘The FCA published a report on the drivers and impacts of de-risking, written by John Howell & Co. That report is available on the FCA website’.

It is, indeed available on the website. All 73 pages of it.

The report has contents, a glossary of acronyms and an introduction. Section 2 begins by setting the scene before moving onto the ‘Drivers of De-risking’.

‘Many banks told us that they needed to lower their overall risk ‘profile’ to realign their business and that they are paying closer attention to compliance since the global financial crisis. Further, we fear that de-risking is partly a result of the higher costs of compliance and the increased amount of regulatory capital now required, and partly a response to criminal, civil and regulatory actions. These include regulatory settlements, including Deferred Prosecution Agreements (DPAs), especially those reacted in response to AML/CFT failings.’

Abused by criminals and terrorist financiers, and culled by banks lowering their overall risks and cutting costs, who would be a MSB?

That apart, has all of this honest and diligent investigation moved MSBs forward at all?

In a word, No.

Whether it be the fear of crime, the fear of regulatory action, or simply good old fashioned cost/benefit analysis, the major clearing banks show no enthusiasm for banking the MSB sector.

Were it not so serious, it would be funny. Banks, regulators, law enforcement agencies and politicians are gathered in a virtuous circle, each pointing at the next one along.

In the meantime, proper, correct businesses are going to the wall, or underground.

I’m sure that the criminals and terrorist financiers must be devastated that these vulnerable MSBs that remain now operate only in the shadows.

ICT re-certification

In 2017, I bought another, unrelated, business

It has been, and continues to be, fun. The business has grown, made me laugh, and made me cry. In my experience, that’s a good sign.

I have still been working in consultancy, looking after some treasured, long-term, clients. I have been following the evolving compliance landscape (see, I still have the language) and marvelling at the ability of regulation to spawn regulation.

In April, I will completing a masterclass by International Compliance Training Ltd (ICT). Several years ago, I studied for diplomas in anti money laundering and then financial crime prevention. The experts were knowledgeable and generous with their time. The reading was extensive. The exam questions were hard. I felt genuine relief when I passed. So, when I got an e-mail inviting me to get re-certified, my heart sank. “There’s an expiry date?” I sighed.

Well, actually, there isn’t an expiry date, and nobody at ICT has suggested that there is, but there is a straightforward logic that says it is a good idea to keep up with what’s new.

On April 18th, I am going to complete a masterclass in anti money laundering and all being well will be re-certified. Afterwards, I’m attending the Fellows Dinner of  ICT’s sister organisation, the International Compliance Association (ICA), for I am, a Fellow. The day following, I will be attending the ICA annual conference.

Wow. By close of play on April the 19th, I am going to be spitting acronyms effortlessly and have compliance ice flowing through my veins.

Anybody else coming along? Say Hi. I’ll buy you a drink. (The code is, “The pineapple is in the submarine.”)

This year, I’ll be putting more focus into the compliance consultancy, seeking new clients and publishing more content here, on LinkedIn and Twitter.

If you are a MSB or another business that finds itself ‘in scope’ for money laundering regulation, give me a call, or drop me a line. There no charge for initial consultation. I’m more than happy to talk for free, in plain English.

No. Really. I am.

HMRC wants MSB Customer data

HMRC has issued a consultation document.

They are looking to extend the scope of existing powers to include MSBs. The data-gathering powers are used to help identify businesses that are evading tax.

In a nutshell, MSBs will be expected to provide regular ‘bulk’ data on customers and transactions.

The consultation document asks 11 questions of the industry.

I would strongly recommend that MSBs take this opportunity to read the document and put their concerns to HMRC either singly or through their trade associations.

Ebay. Am I missing something?

In a previous life, I must have been a magpie.

I only need to catch sight of a shiny new Apple gadget and I start experiencing palpitations. This week, I decided that I could not justify two Apple laptops.

So, I took a deep breath and typed eBay into my browser. I have used it before and frankly, found it all too much hassle.

I have some experience now. First thing was to buy a genuine Apple Box for my laptop. It just makes sending it so much easier. Someone had some, the feedback was good, so I took the plunge and bought a box. All good.

I took some photos of the laptop, read all the rules on selling on eBay, and opted for an auction only listing with a low starting bid. (The eBay recommendation) The auction runs for 7 days. On day one, I have received 12 emails from 8 ‘buyers’. Each of them wants to circumvent the auction and buy it direct.

Politely, I have pointed out that actually, I’m not allowed to do that. Some have got very upset with me.

I assume that my experience is not unique. It might well be normal. So, every seller is immediately and repeatedly approached by people who at best are looking for ‘a sweet deal’ and at worst are fraudsters.

Is that sustainable? Can eBay survive in 2016 and beyond?

Money Service Businesses and Banks

Here I posted about the torrid time Money Service Businesses were having hanging onto banking facilities.

The difficulties persist. Some businesses have closed, or reverted to older practices, keeping the flow of money hidden, out of the limelight.

This latter practice is a spectacular own goal, undoing decades of good work by law enforcement and regulators.

Other businesses have managed to convince their current bankers to continue to support part, or all of their business. Banks have taken perplexing positions. Some are happy to deal with foreign exchange, but not with money transfer. Some take the opposite view.

In the course of my work, I have come across one or two solutions that appear to be working. Some banks elsewhere in the EU are happy to take on some elements of MSB business. There are one or two banks here in the UK, who are prepared to look at each business individually. It is a measure of the world that we live in that I would jeopardise my relationship with these providers were I to name them.

Last week I was able to sit down with a client and his bank and have a sensible conversation about risk and how best to manage it. The bank was engaged, constructive and reasonable. Astonishing! I hope that this is an indication that common sense is returning.

Updated Website

We have reviewed our site and updated it. The theme and colour have remained the same – but the content has been updated.

For small businesses operating in the regulated or supervised sector, things are not getting any easier. Banks continue to be wary of dealing with MSBs, and the threats of money laundering and terrorist financing remain relevant and dealing with them can sap key management time. Solutions do exist though, for those prepared to think outside of the box. However businesses need to demonstrate to regulators, supervisors and partners alike that their policies, procedures and compliance management are up to scratch.

In terms of pricing, we have moved the entry point down, for those clients who are looking for help and support but are wary of senior consultant day rates. For £175 a month, clients can now pick up the phone or fire off an e-mail for ‘instant expertise.’

Why not get in touch? Perhaps we can be of service.