Financial crime investigations had wrong focus

By by Adrian Darbyshire Twitter:@iomAdrian in Crime

Financial crime investigators have been focusing on the wrong thing.

That’s the view of Council of Europe inspectors whose report into the island’s ability to combat money laundering and the financing of terrorism, published last week, revealed some significant deficiencies.

As we reported last week, the Moneyval report praised the island for its high level of compliance with legislation, its understanding of vulnerabilities and its co-operation with other countries.

But it highlighted failings and listed a series of recommended actions that should be prioritised.

It says the Manx authorities should collect and maintain statistics on outgoing and incoming flows of funds in the financial sector.

There should be a reassessment of the risk posed by lawyers, the real estate sector and the quality of border controls - and a more detailed assessment of potential risks resulting from due diligence information provided to banks by trust and corporate services providers.

But perhaps the most significant area of concern was the resourcing of the Financial Crime Unit.

Moneyval’s inspectors concluded that the FCU needed to do more to investigate cases where the money being laundered was generated in another jurisdiction.

And they said that the newly-created stand-alone Financial Intelligance Unit should be more proactive in generating intelligence.

Speaking from his base in Strasbourg, a spokesman for the Moneyval secretariat told the Examiner: ’Yes, there are number of issues. But we need to distinguish between the FCU as an investigator and the FCU as an intelligence unit.

’Previously they were rolled up into one unit. However, a few weeks before our on-site visit a massive overhaul was conducted in order to create the Financial Intelligence Unit as a separate unit.

’They were not concentrating on the right thing. That’s something that the authorities agree with.’

He explained: ’One issue we had was that although the FCU has been successful in conducting investigations of money laundering, in our view this really didn’t reflect the risk the Isle of Man faces in view of the sort of business carried out there.’

In layman’s terms, money laundering is where the proceeds from criminal activity is put through the financial system so that it becomes clean and looks like it has legitimate origins.

It is not Moneyval’s role to gauge how big the problem of money laundering is - only to ensure that appropriate measures of an international standard are in place to prevent it, identify offences and prosecute the culprits.

And that could be a big ask for a small jurisdiction and a police force with limited resources and manpower that could find itself swamped if it is having to investigate multiple complex cases of money laundering involving companies based in a series of different countries - cases that can take many months, even years, to investigate.

The Moneyval spokesman said: ’The focus so far - and there had already been a shift before the on-site visit- was on the pursuit of money laundering cases taking place within the island where for example money was generated by drug traffickers. Which is good. But the Isle of Man is an international finance centre which serves a lot of non-resident customers. There are internationally recognised risks where a beneficial owner of a corporate structure is a non-resident.

’There is a risk that a beneficial owner might be a politically-exposed person whose proceeds of crime derived from corruption have been laundered through the corporate structure, which may have entities in different locations throughout the world and part of which might be situated in the Isle of Man.’

He added: ’The Isle of Man’s FCU has been relatively effective in conducting investigations into money laundering but when you dig deeper you find the focus is not in line with the risk profile.

’The authorities understand the risks there are, that part of the problem is that the focus is not in line with the risk profile. It is very positive the authorities have recognised these are important issues.’

The Moneyval spokesman said more resources needed to be put into investigating financial crime.

But he added: ’It is not enough to have resources, you need to have specialist resources as these sort of investigations are highly specialist.

’One positive is that the FCU co-operates with the UK authorities. A lot of business in conducted through the UK and the FCU receives a lot of assistance in conducting its investigations.’

And he concluded: ’With all good intentions something will always slip through the net. You can’t eradicate money laundering completely as criminals are always evolving their techniques. Things change and evolve.

’We will be following this closely and a number of reforms are already in train.’

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Manx born (formerl CV) · 194 days ago · Report

Really ET? So what % of our GDP is from customs and excise?

ET · 195 days ago · Report

Strangely enough Lyz the largest money stream into Manx coffers remains with Customs & Duty. A simple sales tax in the guise of VAT holds the entire economy together. A bit confidence sapping isn't it when you hear all the 'expertise' concerning how it should be spent, bearing in mind what little there actually is.

Lyz · 195 days ago · Report

The only way the island makes money is through Pensions, Compliance and Tax companies, everything is Compliance so they have made their own beds let them lie in them

Lyz · 195 days ago · Report

Well doesn't the island survive off non-resident customers, the island is full of Trust Companies. The island has little else to offer, non-resident money keeps it afloat not kosher businesses that you can see in the High Street

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