UK banks expand influence as financial-crime rules reformed

[LONDON] A raft of global banks including HSBC Holdings Plc and Morgan Stanley were among those added to a UK task force that aims to set strategy for fighting financial crimes in the country, giving the industry more influence over its own regulation.

While details were scant, the task force promised in a statement Friday to improve the use of data to bust fraudsters and money launderers, reform reporting of suspicious transactions and establish a new regime for crypto-assets. The group includes law enforcement, government officials and businesses that estimate such crimes cost the UK an estimated £37 billion(S$63.05 billion) a year.

HSBC and Morgan Stanley join Barclays Plc, Lloyds Banking Group Plc and Banco Santander SA on the Economic Crime Strategic Board, which first met in January. The panel's other new members are Royal Bank of Scotland Group, Standard Chartered Plc and Nationwide Building Society. Legal associations are also represented.

Transparency campaigners immediately criticized the additions, pointing out the potential conflict of interest banks had when it comes to designing money-laundering and fraud rules.

"We have serious concerns that this plan has been conceived, developed and overseen by a board that is heavily dominated by the U.K.'s big banks and their lobbying body, U.K. Finance," Sue Hawley, the policy director of campaign group Corruption Watch, said. "This is akin to putting fossil fuel companies in charge of climate charge policy and gives the banks an unfair say over how economic crime policy is developed."

A slew of high-profile frauds and incidents related to cyber-security have come to light in the UK recently. In the past three months alone, the financial regulator fined Standard Chartered for poor controls on money laundering and a Lloyds unit for failing to report a vast fraud. The regulator also published its final report into how RBS drove many small business clients into bankruptcy. Those companies are now back at the top table.

"Economic crime in all its guises threatens our security and prosperity and leaves a trail of victims in its wake," Home Secretary Sajid Javid said in the statement. "We've made progress in the fight to stop criminals profiting from their offending - but we must go further."

While the group pledged to "overhaul the approach to tackling economic crime," it only won a commitment from banks to contribute £6.5 million toward the effort.

The plan also made no mention of changes to a law enabling regulators to prosecute big businesses for criminality. Unlike with bribery and tax evasion, a company can only be prosecuted for fraud, if it can be shown that what is known as a "directing mind" knew about the alleged wrongdoing. This has to be someone who is sufficiently senior. The Serious Fraud Office, which prosecutes top-tier economic crime, has asked for the law to be strengthened for years.

In May 2018, a judge dismissed an SFO case alleging that Barclays defrauded investors on the bases that the prosecution was unable to show that the directing mind was involved in the alleged wrongdoing.

BLOOMBERG