Business secretary Sajid Javid promises to reduce bureaucratism on money laundering

Cumbersome rules that cost customers and banks time and money but do not actually stop money launderers and terrorists could be axed, business secretary Sajid Javid says, under a new assault on red tape in the finance sector.
Rules to stop the transfer of ill-gotten gains have tightened in recent years following a spate of high-profile scandals such as HSBC’s failure to stop laundering by Mexican drug dealers using its accounts.
However, those tighter rules have also harmed some innocent customers. Some have found themselves cut off from bank accounts or payment services because they are associated with unstable countries such as Somalia, while others have had to pay fees to prove their identity to their bank or investment firm.
“We are committed to saving businesses a further £10bn in red tape to help create more jobs for working people, boost productivity and keep our economy growing,” said Mr Javid, who is himself a former financier and used to work at Deutsche Bank.
“This new review is about making sure the rules we have to protect our strong financial services industry from abuse are not unintentionally holding back new and existing British business. I want firms to come forward and tell us where regulation is unclear or its enforcement ineffective.”
The call for evidence from the Department for Business, Innovation and Skills is open until October 23, and seeks to hear from banks and their customers if there are cases of the rules being disproportionate and heavy handed. Ministers also want to see any examples of better systems from around the world.
Banks hope that the threat of enormous fines will be reduced in instances where lenders can show they worked hard to meet competing goals of stopping illegal activity while also serving the vulnerable customers who the government wants to help.
A particular concern is incoming rules on politically exposed persons, shortened to PEPs in the sector’s jargon.
While this traditionally covered politicians in countries with high levels of corruption, new EU rules could expand this to all politicians in the UK and their families.
“This sometimes runs a little contrary to common sense,” said Chrisol Correia, director of global anti-money laundering at LexisNexis Risk Solutions.
“For example, this will mean that at the point of entry to a bank, the son or daughter of an MP will initially have the same risk weighting as the governor of an oil rich province from an unstable emerging economy – the bank will have to treat them initially the same way, when they clearly pose different levels of risk,” he said.
“That will be quite demanding on customers, and it is a large population, covering elected officials, civil servants, senior members of the judiciary and military, and also their family members.”
Those customers and their banks will all have to spend far greater amounts of time applying for accounts, which means resources will not be free to allocate to the riskiest customers, he said, and could result in higher costs for ordinary customers across the bank.
One problem for the government is that the British authorities may not easily be able to adjust rules and guidelines which are set at a global or European level. In addition, UK banks must abide by differing rules on the ground in the different countries in which they operate - particularly the US, which enforces its finance rules rigorously, covering anyone who settles dollar transactions through the US even when the parties involved in the tranfer of funds are based in other countries.

NBC’s Monica Dean and Voice of San Diego’s Liam Dillon talk about why campaign money laundering is a problem

The laws are clear; people are only allowed to give a specific amount of money directly to political candidates. For races in San Diego, for example, the limit is $1,050. When people try to go around the law and stream more cash into political campaigns, it’s called money laundering.
Last year, the city found two associates of Jose Susumo Azano Matsura laundered $8,000 this way to District Attorney Bonnie Dumanis’ unsuccessful 2012 mayoral campaign. The city also found the owner of NK Towing in Vista illegally used the names of four of his employees to donate $2,000 to Dumanis’ campaign.
Right now, city and state investigators are looking into whether tow company owners laundered money to campaigns supporting Dumanis and four other local politicians over the past six years. If proven, it could represent the largest effort by an industry to illegally influence San Diego political campaigns in more than a decade.
On this week’s San Diego Explained, NBC’s Monica Dean and Voice of San Diego’s Liam Dillon set up at a local laundromat to tackle the issue of campaign money laundering and talk about why it’s a problem.

India, US sign agreement to share info on tax evasion

India and the US on Thursday signed a tax information sharing agreement under a new US law, Foreign Account Tax Compliance Act (FATCA), that will bolster efforts towards automatic exchange of financial information between the two nations about tax evaders.

The agreement will cover automatic sharing of information on bank accounts as well as financial products like equities, mutual funds and insurance and is aimed at fighting the menace of black money stashed abroad. Coming within months of India becoming a signatory to the OECD pact on automatic information sharing, the government's efforts at getting names of those with illicit wealth stashed abroad will get a leg up.

With the agreement in palace, from September 30, banks, mutual funds, insurance, pension and stock-broking firms will report their Indian client details to the United States which will be shared with authorities here. It was delayed due to observations made by the Supreme Court earlier as in absence of the pact, all remittances to India would have faced a 30% withholding tax, impacting inflows to exporters as well as households.

"We as a country see it as a great breakthrough and significant development in India-US cooperation in handling offshore tax evasion which also impacts money laundering and other aspects which we call in India the problem of black money," revenue secretary Shaktikanta Das said. US has so far signed pacts with 110 tax jurisdictions to implement FATCA.

Foreign Account Tax Compliance Act

FATCA, along with the Automatic Exchange of Information (AEOI) agreement, which will come into play from 2017, "will ensure that all the tax related information, all the financial information are available with us from 2017," he said.

Tax experts said that the agreements may result in more burden on financial entities and may result in some modifications to the KYC requirements. "FATCA creates a new compliance burden on the Indian financial institutions. With FATCA and common reporting standards (under OECD pact), they will be required to be geared up to exchange tax information of more than 60 countries. This calls for changes to customer on-boarding documents, systems, processes and reporting compliances. Fresh Capital Flows into equity and debt markets, with most countries now sharing information and subject to other commercial factors, may depend upon the tax exemptions given in source country and the total tax outflow for the investor," said Bahroze Kamdin, partner at consulting firm Deloitte Haskins & Sells.

"We are expecting detailed guidelines to be issued soon by the finance ministry... it will have an impact on KYC requirements for financial institutions and also require them to provide additional reports," added Basant Shroff, partner at EY India.