At one time in the dim and distant past, it probably seems like there was no compliance officer role, and the only thing anyone performing anything like it was to ensure your business got paid and was not ripped off itself.
Now it seems like the anti-money laundering (AML) role has been extended and added to, with a steadily growing list of matters creating potential compliance problems. AML has become “all crimes” and takes in tax evasion offences and overlaps with terrorist financing and proliferation financing. Then there are other matters, which may or may not have a direct financial aspect, as well as the concern that you may be fine with your own jurisdiction’s laws but might fall foul of others’. And you still have to ensure you get paid.
As a rudimentary test, try to jot down as many of the various regimes and requirements that might apply as you can. The following list is my attempt at doing so.
|AML – drug trafficking||since 1987 in the UK under the Drug Trafficking Offences Act 1987|
|AML – “all crimes”||in the UK, for many crimes from 1988|
|AML – tax evasion||foreign and domestic. It used to be the rule in English law that one did not recognise the need to enforce another state’s tax laws or collect tax on their behalf). In 1998, the G7 countries called for international action to enhance the capacity of AML systems to deal effectively with tax related crimes. In 2010, the OECD adopted a new OECD Recommendation to facilitate co-operation between tax and other law enforcement authorities to combat serious crimes and in 2012 FATF revised its recommendations to include tax crimes in the list of predicate offences to money laundering.|
|Trade-based money laundering (TBML)||a huge and all too often overlooked problem|
|Trade-based financial crime||a term to take in more than just TBML|
|Countering terrorist financing (CTF or CFT)|
|Cross-border cash controls||since 2007 in the EU, and including cash movements between the UK and the Crown Dependencies; with a €10,000 threshold and being expanded to things other than simply cash|
|Export controls||tangible (i.e. goods) and intangible (e.g. software and technology), cultural items, precursor chemicals etc|
|Import controls||as well the obvious (e.g. illegal drugs, firearms etc), there are restrictions involving endangered species (CITES), timber etc|
|Trade control licensing of trafficking and brokering||in some cases, with extra-territorial effect under UK law
|Human rights abuse overseas||under the “Ruggie” principles or “Magnitsky” laws|
|Bribery and corruption||foreign and domestic. In 1994, the OECD adopted a Recommendation for countries to take effective measures to deter, prevent and combat the bribery of foreign public officials in connection with international business transactions. In the UK, the Bribery Act 2010|
|Modern slavery||foreign and domestic; including bans on the import of goods made using forced labour|
|People smuggling and human trafficking||there are differences: smuggling of those who want to travel, and trafficking of those under coercion. Also people can be trafficked within a country, not just across borders|
|Proliferation and countering
proliferation financing (CPF)
|to counter the spread of WMD and their delivery systems|
|UN sanctions||trade embargoes and economic sanctions, including asset freezes and prohibitions on making funds available; they used to involve only a handful of countries but now cover many – and also extend to terrorism and proliferation as well|
|EU sanctions||ditto, both backing UN measures or initiated by the EU itself; these too also now extend to terrorism and proliferation and to human
|US sanctions||they might not have any legal effect in your country, but you better not ignore what OFAC says – and don’t forget the SEC, CFTC, FinCEN and the rest, and hope your World-Check or C6 service is up to date|
|Gambling activities||which may be lawful in the UK (if licensed), but unlawful where seeking or accepting punters in other jurisdictions|
|Illegal investment activity||which may be merely unauthorised or outright scams, such as Ponzi schemes, pyramid selling, insider dealing, boiler room fraud etc|
|Rough or blood diamonds||involving uncertificated diamonds from illegal mining and/or conflict zones; certification being under the Kimberley Process|
|Counterfeit goods||including “illegal whites” cigarettes; and distinguishing counterfeit from parallel imports of genuine but “grey” goods, which may be permissible|
AND FROM THE PERSPECTIVE OF OFFICIALS…
Another point is: can one expect a VAT official, or someone from a regulator assessing the compliance (to a variety of requirements) of a TCSP, to spot all potential irregularities or just things that do not add up when they fall outside their range of knowledge, or the purpose of their visit? Even if they do, and even if they record it in their visit report, can one expect that it is passed on, evaluated and end up with the appropriate department, agency or officer – be it within or without the jurisdiction?
There is an obvious need for awareness training on a wide front – the visiting official may be the only contact with the business for a considerable period and/or the only official with sufficient access to people and information to spot something amiss. Then their organisation must recognise the need to record and evaluate any information, which may be well outside the scope of that organisation’s role(s), and to be able to pass it on to the appropriate body. There needs to be a legal and structural framework for this to happen, as well as a willingness to do so. There also needs to be reassurance for officials involved that what they do does not breach confidentiality or data protection provisions – with a clear code of practice, backed by legislation if necessary, providing clarification for the officials, and backing for them if challenged by any business affected, providing comfort to the official and the organisation if the code is followed. Furthermore, the training and guidance to the staff would have to make it clear that it is a purpose of the individual and the organisation to report and pass on information, intelligence and suspicions.
20th July 2018
 Predicate offences are those crimes underlying money laundering or terrorist finance activity. For example, drug-related offences were the original money laundering predicate offences, with the proceeds of the drugs offence being laundered.
 The Channel Islands and the Isle of Man.
 Chemicals used, or capable of use, in the production of illegal drugs or explosives.
 And Isle of Man law. See https://www.gov.im/media/814275/notice-279t-man-trade-control-licensing-2-jul-18.pdf
 See Shearman & Sterling’s July 11th update for a recent update on US sanctions: https://www.shearman.com/-/media/Files/Perspectives/2018/07/Sanctions-Round-Up-Second-Quarter-2018-LT-071118.pdf?la=en&hash=18647DCE93AFDCFCA0D0EA34B85E1534E44BE3EA