At the recent international anti-corruption summit three key changes for financial services providers were discussed. The Home Secretary has called these reforms, "the most significant change to the UK's anti-money laundering and terrorist finance regime in over a decade". But what will they mean for your business?
The most immediate risk is that financial services providers will be liable for their employees' complicity in fraud and money laundering. They will also face unlimited fines if they do not take "reasonable precautions" to prevent tax evasion.
This will give UK authorities the ability to fine institutions on an 'American scale' in financial crime and corruption cases.
All foreign companies purchasing or owning property in the UK will be required to register details of their ownership and control.
If a company does not comply with this requirement, it will not be able to buy UK property or bid for central government contracts.
This measure should increase market transparency. But, there is a risk that the market will become less appealing to investors whether foreign, domestic, legitimate or otherwise.
The advantage for lenders is that this measure should reduce the risk of losses through fraud. There may also be opportunities for lenders to work with regulators to build checks on ownership and control into their customer due diligence processes, to further reduce their risk profiles.
But the requirement is unlikely to mitigate the risk of individual mortgage mules.
Unexplained Wealth Orders (already available in Australia and Ireland) will require anyone suspected of purchasing property beyond their apparent means, to explain how they are able to afford it.
The aim of this measure is to reduce the flow of illicit funds into the UK property market, particularly in London where some 44,000 properties are owned by foreign investors. Nigeria's president Buhari has claimed that millions of pounds stolen by Nigerian officials have been embezzled in London, giving a feel for the scope of the problem.
It remains to be seen whether increased transparency will result in reservations within the investment community.
This change gives financial services providers the opportunity to mitigate the risk of account closures due to fraud and the disputes that inevitably arise during this process.
Public registers of company ownership
The UK, France, Kenya, the Netherlands, Nigeria and Afghanistan pledged to launch public registers of true company ownership.
Australia, New Zealand, Jordan, Indonesia, Ireland and Georgia announced initial steps towards similar arrangements.
The EU, Iceland, UAE and most of UK Overseas Territories and Crown Dependencies with major financial centres have agreed to automatically exchange their entire registries of beneficial ownership information.
The whole process of awarding public sector contracts in the UK will be visible to the public by October 2016. This will be piloted by the High Speed Rail 2 project.
The UK is partnering with government organisations in Afghanistan, Georgia, Tanzania, Kenya and Nigeria to strengthen their anti-corruption institutions, regulatory bodies and to improve budget transparency.
Recovering stolen assets
The creation of the Global Forum for Asset Recovery, with the first forum focusing on returning assets to Nigeria, Ukraine, Sri Lanka and Tunisia.
22 countries will introduce new asset recovery legislation, 14 will strengthen protections for whistle-blowers and 11 will review penalties for companies that fail to prevent tax evasion.
New Anti-Corruption Innovation Hub
A new Anti-Corruption Innovation Hub involving Mexico, France, Ghana, Georgia, Switzerland, Afghanistan, UAE, Indonesia, and Norway will connect social innovators and technology experts to tackle corruption.
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at June 2016. Specific advice should be sought for specific cases. For more information see our terms & conditions on www.TLTsolicitors.com