As discussed in the context of SM&CR in another article, Mark Steward, Director of Enforcement and Market Oversight at the FCA, gave a speech on 4 April 2019 which covered a number of topics. One particularly crucial point is the FCA's (new) approach to investigating allegations of Money Laundering.
Mark Steward confirmed that the FCA will investigate alleged Money Laundering offences on a "dual track" basis, meaning concurrent civil and criminal investigations into a potential breach of the Money Laundering Regulations (MLR), at least during the investigation phase. The FCA has used this approach for a number of years in its investigations of alleged Market Abuse.
Whilst in practice this may seem like a sensible approach, we are concerned about the effect this may have on individuals. In our experience, the FCA can take years to investigate these matters, thus leaving individuals in limbo, potentially for years. This can have a profound personal effect on someone's physical and mental wellbeing. It can also leave people in a precarious financial position and potentially prevent the individual from obtaining new employment.
Accordingly, we hope the FCA starts to properly understand this concern and ensures that, in its legitimate pursuit of clean financial markets, it remembers that individuals are innocent until proven guilty. The FCA should better recognise the damage these investigations may have on people and take proper steps to minimise this. At the very least, it should ensure it completes investigations as expeditiously as possible and removes the threat of criminal charges at the earliest stage possible (where appropriate to do so).
Despite these concerns, individuals may derive comfort from the following:
- The FCA's decision to investigate on a criminal basis is not, necessarily, indicative that the FCA consider a criminal breach has taken place – it is just their standard approach; and
- Mark Steward noted that "in egregious circumstances" MLR failures can let down the whole community, which may justify a criminal charge. He further notes "I suspect criminal prosecutions, as opposed to civil or regulatory action, will be exceptional". Ultimately, this means a breach of the MLRs is not likely to lead to criminal charges, even if that prospect is 'kept on the table' during the investigation phase.
The FCA is under a lot of pressure to prove its mettle in enforcing the MLRs and we are aware of numerous ongoing investigations into AML failings. Running criminal investigations not only cranks up the pressure but also increases the exposure of Senior Managers with the threat of criminal sanctions.
If anyone would like to discuss this or Money Laundering Regulations in more detail, please contact Aaron Osborn.