Speech: Home Secretary’s speech to the FCA’s Financial Crime Conference

via GOV.UK departments and policy – all updates http://bit.ly/2gcNCgN

Would you like a free copy of the latest FATCA, CRS and CDOT rule map?

New in this version:

Latest updates and changes, for example, on the new requirement to issue Client Notifications on or before 31st August 2017

Hyperlinks and QR codes for every citation. This means you can go immediately to any citation with one click

If you would like a free copy email me at: haydon@haydonperryman.com and put “Rule Map” in the subject line.


I am delighted to be here today and I am grateful for the opportunity to speak to such a distinguished and expert audience. An audience, too, with the power to make a real difference in the fight against crime.

This morning I would like to talk about economic crime. The threat it poses to the UK. The steps the government has already taken. And more importantly, to set out my ambition for the future, and the changes we need to make together, if the UK is to protect the integrity of its financial markets.

Since the 17th century, the City of London has been at the forefront of international trade and finance. The City has been central to forming Britain’s place in the world as a leader on free trade with an outward-facing, globalised economy that is open for business with the world.

The UK has the largest insurance industry in Europe and the third largest in the world. Twenty percent of the world’s foreign equity market is listed in London. London is the leading western centre for Islamic finance. And $2.4 trillion of foreign exchange turnover each day – 37% of global foreign exchange.

The scale of the UK’s financial services sector is envied across the globe but its size and exposure also means it is vulnerable to organised crime – to fraud, money laundering and corruption.

I am deeply concerned by claims that London is a major global money laundering centre.

Despite the billions that firms are spending on financial crime compliance, money laundering still poses a real threat both to the UK’s international reputation; and to the integrity of our world-leading financial sector.

In an increasingly competitive international marketplace, the UK cannot afford to be seen as a haven for dirty money.

Economic crime fundamentally threatens both the security and prosperity of our citizens, and the reputation of the UK as a good place to do business. And the government recognises it, rightly, as a national security threat.

The threat

The recent events at Tesco Bank is a stark example of what we face. Whilst a criminal investigation is underway and I cannot speculate on the details, it is clear that thousands of hard-working people have been affected.

Public confidence in our financial institutions is shaken by events such as this. The UK’s future security and prosperity depends on our ability to safeguard our digital information, data and networks at home and abroad.

One-eighth of the UK’s GDP comes from the digital economy and we have the second highest percentage of individual internet usage of any G7 economy. But the cyber threats we face continue to grow in scale and sophistication. And the effects of serious and organised crime are felt by many thousands of our citizens in their daily lives. On a conservative estimate, serious and organised crime costs the UK at least £24 billion each year.

Fraud has often been described as the Cinderella crime: in the shadows, overlooked. In reality fraud is a growing financial threat to individuals and businesses. The Office for National Statistics estimates there were 3.6 million fraud offences in the 12 months to June this year, over half of which were cyber-related.

Age UK has found that over half of people aged over 68 believe they have been targeted by fraudsters. Of those that lost money one-third lost in excess of £1,000.
But the young are vulnerable too. Research published in July shows that from 2014 to 2015, there was a 52% increase in identity fraud, targeting those under 30.

Fraud is now the most prevalent crime in the country.

While the scale of fraud is deeply worrying, it is the personal impact on victims that drives my commitment to root it out: hard earned life savings gone in an instant; business destroyed; vulnerable elderly people hounded in their homes – not knowing who they can trust.

Fraudsters profit when they can exploit the weaknesses in our system and the gaps that occur when we fail to work together.

Money laundering

Money laundering is also a critical enabler of crime – you can’t run a drugs empire without the money to buy the drugs that you go on to sell to some of the most vulnerable people in our community. Very significant amounts of street cash – the proceeds of the drugs trade and other elements of the black economy – are laundered in the UK each year.

A joint National Crime Agency and City of London Police investigation recently secured the conviction of a couple who ran a diamond trading business in London as a cover for their money laundering activities. They took massive sums of cash from organised criminal groups, and are thought to have laundered over £50 million in under 2 years.

What is more, it is only by being able to ‘cash out’ the proceeds of crime that organised criminals are able to gain the status in our communities afforded by the lavish lifestyles and control over others that they fund, often in stark contrast to the living standards of their hardworking and law abiding neighbours.

It is an obvious point, but it remains true: we need to demonstrate that crime does not pay if we are to prevent future generations from being drawn into that life of crime. The National Crime Agency estimates that up to £90 billion may be laundered in the UK each year. And the international subsidiaries of UK banks are exposed to money laundering risks in many other countries too.

For many good reasons, the UK is an attractive place to invest money. But the downside is clear. The UK is also attractive to criminals and the corrupt kleptocrats who steal billions from their own people– often some of the poorest people in the world – and launder it through the UK.

Take the case of Ao Man Long. Mr Ao was Secretary of Transport and Public Works in the Macao Special Administrative Region of China. He was convicted of corruption offences having amassed $100 million of assets. He hid it in offshore companies and in over 100 bank accounts in the UK and Hong Kong. Thanks to the hard work of our law enforcement agencies and the Crown Prosecution Service, Mr Ao’s assets in the UK – worth some £28 million – have now been confiscated and returned to the Macao authorities.

Corruption doesn’t only undermine trust in governments and institutions. It distorts markets and destroys economic growth. It fuels instability and terrorism and keeps organised crime groups in business. The National Crime Agency has placed money laundering in its top five priority threats, alongside the threats, for example, from cyber-crime and firearms.

We need a response that is commensurate to the scale of the threat posed by economic crime. We must make the UK a hostile environment for fraudsters and those seeking to move, hide and use the proceeds of crime and corruption. Government and law enforcement agencies cannot do that alone.

The government’s Serious and Organised Crime Strategy from 2013 was clear that it is only through partnership that we can reduce the threat posed to the UK and its interests by criminals.

That remains true in 2016, and nowhere is it more true than on economic crime. It is when we have a shared understanding of the threats we face; build shared capabilities; and act in concert against criminals, across the civil and criminal justice space that we will succeed in making the UK a truly hostile environment for those who abuse our financial system and victimise some of the most vulnerable in our society.

We should be proud of what we have already achieved in tackling economic crime.

On criminal finances, we have confiscated more criminal cash than ever before.
Over £1 billion recovered since 2010, and hundreds of millions more frozen and put beyond reach.

We have forged a new partnership between government, regulators, law enforcement agencies and the financial sector, exemplified by the Joint Money Laundering Intelligence Taskforce. Led by the National Crime Agency, and bringing together law enforcement, the FCA and a growing number of financial institutions, it has enabled the shared analysis of information and intelligence to prevent and detect money laundering. Its work has contributed to arrests, asset freezes, and the identification of over 2,000 suspicious accounts. Most importantly, it has created new levels of trust between participants, and is creating a new culture of collaboration against serious and organised crime. It is not yet the finished article; but it shows how new approaches, founded on public-private partnership, can make a difference.

In April this year we published an action plan for anti-money laundering and counter-terrorist financing that represents the biggest change to our regime in over a decade:

  • an enhanced law enforcement response, with new operational capabilities and tough new legal powers
  • reforms to the supervisory regime, to raise standards and better protect firms from the threat of money laundering
  • increasing our reach overseas, to tackle threats abroad that impact on the UK

We are already delivering on the Action Plan. The Criminal Finances Bill entered Parliament last month. It will significantly improve our ability to tackle money laundering, corruption, tax evasion and terrorist financing. Its content has been strongly influenced by our engagement with the financial sector over the last 2 years.

I know that many firms want to be able to share information more freely, so you can better understand and address the risks you face. I know that many firms are frustrated by the seeming lack of operational outcomes that result from the suspicious activity reports that you give to law enforcement agencies.

The bill will give firms immunity from civil and criminal liability when they share information directly with one another on money laundering and terrorist financing. Firms have told us that this is what they need for the Joint Money Laundering Intelligence Taskforce to work more effectively, and at scale. So that’s why we are legislating to provide that.

The bill will enhance the suspicious activity reports regime so that the courts can freeze funds for longer while law enforcement agencies gather the evidence needed to take action. This is critical in grand corruption cases where the evidence is often overseas and more time is needed if we are to disrupt the flow of criminal money.

The bill will also grant new powers to the National Crime Agency so that it can compel the provision of the information it needs to build the detailed intelligence picture on money laundering that both the public and the private sectors need in order to take effective action.

Firms have told us that they are frustrated that they have identified criminal funds that law enforcement agencies lack the powers to recover. So we are creating those necessary powers. These powers should also enable a much faster and more aggressive response to future suspicious activity reports.

We said at the London Anti-Corruption Summit in May that we were consulting on Unexplained Wealth Orders. Now we are getting on with that job and legislating to create them.

Transparency International, the leading anti-corruption NGO, has said that unexplained wealth orders will be “the most important anti-corruption legislation to be passed in the UK in the past 30 years” and that they will “make sure that the UK is no longer seen as a safe haven for corrupt wealth”.

They are an important new tool to tackle not just corruption but wider organised crime too. They will require individuals to explain the source of their wealth used to purchase a specific asset, such as property. If no satisfactory explanation is provided, the courts can make an assumption that the property in question is criminal property, and existing civil powers can then be used to recover it.

They send a powerful message that the UK is serious about rooting out the proceeds of overseas grand corruption; and that we are taking the necessary steps to end the UK’s reputation as a safe haven for stolen funds.


On that note, I would like to turn now to the anti-corruption agenda.

The London Anti-Corruption Summit was the first of its kind and I am proud that it stepped up global action to expose, punish and drive out corruption in all walks of life – bringing together world leaders, business and civil society to agree a historic package of options and actions.

The UK will continue its global leadership on this important issue and build on the far-reaching measures to tackle corruption in all its forms, including corporate secrecy, government transparency, the enforcement of international anti-corruption laws, and the strengthening of international institutions.

The UK has already made good progress on its own commitments.

Our public register of beneficial ownership information is now live: the first G20 country to do so. It allows anyone to find out who really owns or controls a British company, preventing tax evaders, fraudsters and terrorist financiers from hiding behind anonymous ‘shell companies’.


We are taking significant steps to tackle fraud and cyber-crime too.

In February this year we launched the Joint Fraud Taskforce – a public-private partnership to bring banks, law enforcement and government together to coordinate and strengthen our collective action against fraud.

In the first 6 months we have seen tactical successes:

  • thousands of bank accounts linked to fraud closed
  • a nationwide campaign targeting prolific fraudsters leading to several arrests
  • bank branches across London adopting new processes to better protect vulnerable customers

Furthermore, this government has invested in a new IT system for Action Fraud and the National Fraud Intelligence Bureau, the national reporting centre and intelligence function for fraud and cyber-crime.

This will provide it with the tools it needs to match the scale of the threat that we face. It will provide much greater analytical power, so that intelligence packages contain the right information so that local forces have the best chance to apprehend fraudsters and cyber criminals.

And it will give local forces the most accurate picture of the victim profile in their own area, so they can provide much needed advice to stop repeat victimisation, particularly where the elderly and vulnerable are targeted.

And most importantly the new system will ensure victims are no longer left in the dark following their report.

Cyber crime

As I have highlighted, there are close links between fraud and cyber crime.

At the start of this month, the government published the 2016 National Cyber Security Strategy, underpinned by the investment of £1.9 billion on cyber security over the next 5 years. And as part of the government’s approach, the new National Cyber Security Centre went live at the beginning of last month. The centre provides a single, central body for cyber security at a national level.

It will help make the UK the safest place to do business online and act as a bridge between industry and government, providing a unified source of advice and support on cyber security, including the management of cyber security incidents – a role it is currently fulfilling in providing direct assistance to Tesco Bank to manage the incident and identify any wider lessons for industry and government.

The National Cyber Security Centre is also leading on our active cyber defence programme. This is intended to tackle, in an automated way, a significant proportion of the cyber attacks that hit the UK. This means that the measures can start to address the threat at scale. It will not eradicate the problem but it will help to mitigate the impact of a significant proportion of these attacks.

We established the National Cyber Crime Unit in the National Crime Agency to lead operations to disrupt cyber crime and we are continuing to enhance their capabilities to investigate the most serious crime – as they are currently doing in leading the law enforcement response to the Tesco Bank incident.

Through the CyberAware campaign, we are encouraging the public, and small and medium enterprises, to adopt more secure online behaviour like using strong passwords, installing security software and downloading the latest software updates.

Ambition for the future

But let me look now to the future. For whilst we have made some good progress and taken some significant steps forward, we haven’t yet put a dent in the problem; the threat remains great; and there is very much more still to be done.

What then are my priorities for the future?

We will deliver the Criminal Finances Bill, with Royal Assent in the spring of 2017 with the powers commenced later that year. We will implement our action plan for anti-money laundering and counter terrorist financing, building the new law enforcement capabilities we need.

We will reform the suspicious activity reports regime, so that it works for law enforcement agencies and the private sector; so that it is founded on modern IT; so that it helps everyone to focus their efforts on the highest risks. I want the reforms to be co-designed by firms and law enforcement agencies.

We will continue to work with our partners in the US, Switzerland, UAE, Australia and Singapore to deliver their London Anti-Corruption Summit commitments on the creation of public-private information sharing partnerships. And we will explore opportunities for intelligence to be shared internationally, between these partnerships in key global financial centres.

Finally, we must continue to promote the ‘flag it up’ campaign, in partnership with the legal and accountancy sectors, to help professionals in those sectors spot the warning signs and protect themselves from being drawn into money laundering.

On fraud, I am similarly ambitious.

The Joint Fraud Taskforce has made an encouraging start. But I have asked the taskforce to turn their focus onto the strategic issues that will have real impact on the threat. This will include:

  • improving the national, regional and local law enforcement response to fraud
  • introducing a system to make it much easier for the victims of fraud to have their money repatriated
  • launching a very visible national fraud prevention campaign to provide targeted advice to protect members of the public
  • a new collective approach to better support victims of fraud

On corruption, we are committed to creating a new beneficial ownership register for overseas companies, which once in place will mean that they will not be able to buy property in the UK, or deliver government contracts, without submitting the necessary beneficial ownership information. This will ensure that these overseas companies are subject to the same level of scrutiny about their ownership as UK companies, and make it harder to hide behind complex company structures whilst profiting in the UK.

Similarly, the National Crime Agency is working to get the new International Anti-Corruption Coordination Centre operational by next April. It will be instrumental to tackling big multi-jurisdictional corruption cases, helping to find stolen assets and bringing those perpetrators to justice.

I began by talking about the scale of economic crime in the UK.

The recent Tesco Bank incident again serves to demonstrate that the private sector has a crucial role – and responsibility – in countering cyber-enabled fraud so that the UK is one of the safest places to do business online and the public are protected.

If we target the vast sums of money the financial services sector spends on compliance and make sure this money is used effectively, if we continue to develop the partnership between the private sector and government, and we develop world leading legislation to combat financial crime whilst continuing to develop the capabilities of our law enforcement agencies, then we will reduce the flow of dirty money into the city and cut off the funding streams to the fraudsters, money launderers and kleptocrats.

There is still so much to do. We have taken the necessary first steps but I want us all to go further and faster together.