News
January 28, 2020

UK Economic Crime Group: Enforcement Update

Newsletter

EXECUTIVE SUMMARY

In this edition of the UK Enforcement newsletter we provide an update on recent anti-corruption, fraud and bribery developments in the UK and Europe. We focus on enforcement actions by the Serious Fraud Office (SFO), Office of Financial Sanctions Implementation (OFSI), and the Financial Conduct Authority (FCA). We also look at a case in the European General Court regarding the European Commission's duty to provide reasons when calculating fines, and two cases which concern legal professional privilege in the context of investigations. We discuss the recent report on the SFO's approach to case progression, and the landmark agreement between the US and UK in respect of data sharing in criminal investigations. Finally we look forward to four areas in which Brexit may impact the UK's position as a key player in international enforcement.

In terms of enforcement, we consider:

  • The Dutch Public Prosecutor's investigation into ABN Amro;
  • The FCA's enforcement action against Tullett Prebon;
  • The SFO's closure of its investigation into LIBOR manipulation;
  • The most recent fine imposed by the OFSI;
  • Developments in the SFO's investigation into ENRC;
  • The conclusion of the SFO's investigation into Alstom and related overseas enforcement in the US; and
  • The latest Deferred Prosecution Agreement secured by the SFO.

We consider the following court decisions:

  • The EU General Court's criticism of the European Commission's 2013 imposition of a financial penalty against HSBC in respect of an interest rates derivatives cartel settlement; and
  • Two decisions of the High Court in respect of disclosure of privileged material one emanating from Tesco PLC's investigation of financial reporting irregularities, the other in respect of the SFO's investigation of ENRC.

In relation to legislative reform and government matters we report on the following:

  • The agreement reached by the US and UK on Access to Electronic Data for the Purpose of Countering Serious Crime;
  • Her Majesty's Crown Prosecution Service Inspectorate's (HMCPSI) report on the SFO's case progression capabilities; and
  • The effect of Brexit on the UK's use of European Arrest Warrants, its membership of Europol, its application of European money laundering rules, and the establishment of free ports.

ENFORCEMENT ACTIONS

Dutch investigation into ABN Amro

On 25 September 2019, the Dutch Public Prosecutor informed ABN Amro it was under suspicion of money laundering and financing terrorism for: reporting suspicious transactions late or not at all to the government's Financial Intelligence Unit, and by failing to carry out sufficient due diligence checks. Based on a report from the Dutch central bank (DNB), ABN Amro was ordered to review all five million of its private customers due to concerns of breaches in its compliance systems and monitoring of customers.

ABN Amro is the latest European bank to have had weaknesses exposed in their defences against criminal cross-border flows. In 2018 ING, the Netherlands' largest lender, received a record €775 million fine after hundreds of millions of euros were found to have been laundered. ING was also banned from signing new clients in Italy as a result of an investigation by local authorities. In the same year, Rabobank was fined $369 million by the US government for trying to cover-up hundreds of millions of dollars laundered by Mexican drug gangs.

In early 2019, ABN Amro pledged to spend an extra €220 million to strengthen its compliance procedures and has since reportedly tripled its total staff numbers in compliance, financial crime and anti-money laundering.

FCA enforcement action against Tullett Prebon

On 11 October 2019, the FCA fined broker Tullett Prebon Limited (Tullett Prebon) £15.4 million for improper conduct including failing to conduct its business with due skill, care and diligence, failing to have adequate risk management systems and for failing to be open and cooperative with the FCA.

Following an investigation, the FCA found that, between 2008 and 2010, Tullett Prebon's broker business had ineffective controls around broker conduct. This allowed brokers to provide lavish entertainment and to engage in improper trading, including "wash" trades. Wash trades involve no change in beneficial ownership and have no legitimate underlying commercial purpose, while producing brokerage fees for the company. The FCA found that senior management at the firm wrongly believed adequate systems and controls were in place, when in fact, systems and controls were not used or directed effectively. Moreover, obvious red flags of broker misconduct and opportunities to probe behaviours were missed.

Additionally, during the course of the investigation, Tullett Prebon failed to provide certain audio tapes requested by the FCA and provided an incorrect account in respect of the audio. As a result, the company was found to have failed to cooperate with the FCA. Tullett Prebon agreed to settle the matter and, as a result, received a 30% discount under the FCA's settlement discount scheme. Without the discount, the fine would have been £22 million.

Closure of the SFO's investigation into LIBOR.

On 18 October 2019, the SFO announced the closure of its seven-year investigation into LIBOR manipulation with no further charges to be brought. The SFO's investigation saw charges of conspiracy to defraud brought against 13 individuals with Peter Johnson pleading guilty to manipulating the US dollar LIBOR in October 2014, the first criminal conviction for a LIBOR offence in the UK. In July 2016 the same charges were brought against Jonathan Matthew, Jay Merchant and Alex Pabon with all three being convicted. The following year Tom Hayes was convicted on eight counts of conspiracy to defraud by the manipulation of Japanese yen LIBOR. Finally, between January 2016 and April 2017, six individuals were acquitted of manipulating yen LIBOR and two acquitted of manipulating US dollar LIBOR. Lord Mann who, as a member of parliament in the House of Commons served as chairman of the Treasury Select Committee and had publicly called for greater action against those responsible for LIBOR manipulation, responded to news of the SFO's closure of its investigation by expressing his concern that lessons would not be learned and that "the Libor scandal is being allowed to quietly slip into history."

OFSI's largest ever penalty for breaches of sanctions

On 28 October 2019, the Office of Financial Sanctions Implementation (OFSI) announced that it had imposed its third (and largest) ever penalty – £146,341 – on UK telecoms operator Telia Carrier UK Limited.

The level of penalty was significantly higher than OFSI has previously imposed in either of its other financial penalties (which concerned low-value breaches of financial sanctions linked to payments made through money exchange Travelex and Raphaels Bank contrary to the EU Egypt sanctions of 2011).

Telia Carrier UK Limited had, however, indirectly facilitated international telephone calls to SyriaTel, an entity designated under the EU's Syria sanctions regime. This resulted in the company repeatedly making funds and economic resources indirectly available to the designated entity over an extended period of time.

Telia Carrier UK Limited exercised its right to a Ministerial review of OFSI's proposed financial penalty, which was carried out by the Minister personally. Telia Carrier UK Limited provided further clarification of the nature of the transactions which was not available to OFSI when the original penalty was imposed. If it had been, this clarification may have changed OFSI's view of the case as it significantly reduced the assessed value of the breaches from an estimated £480,000 to approximately £234,000.

The announcement of this penalty followed the publication, earlier in October 2019 of OFSI's annual report, which revealed an 18% reduction in sanctions breach reports to the regulator. However, given the relative infancy of the organisation, it is perhaps too early to draw conclusions from annual fluctuations in enforcement reporting. The Regulator is still trying to build its reputation (and a base of cases from which companies can draw guidance) and to show itself to be a force to be cooperated with.

Alstom investigation developments

On 25 November 2019 Alstom's subsidiary Alstom Network UK Ltd. was fined £15 million and ordered to pay £1.4 million in costs following a 10-year SFO investigation. This related to corruption in securing a contract with the company running the Tunis Metro. Another subsidiary, Alstom Power Ltd., had pleaded guilty to bribing senior Lithuanian personnel in an attempt to win contracts to upgrade and refit a Lithuanian Power Plant. Alstom Power was fined £6.3 million, and ordered to pay nearly £11 million in compensation plus £700,000 in costs.

SFO Director, Lisa Osofsky said: "This sentencing brings to an end a case which involved cooperation from over 30 countries and concerned conduct across Europe and beyond. It shows that we will work tirelessly with law enforcement around the world to root out bribery and corruption."

In a company statement Alstom emphasised that the corruption happened 15 years ago and that it "is committed to being a leading company for the purposes of ethics and compliance, not only in France but also internationally."

Concurrently in the US, Lawrence Hoskins, a former Alstom S.A. senior executive, was convicted on six counts of violating the Foreign Corrupt Practices Act (FCPA). Although Mr Hoskins is a UK national who had never visited the US he was indicted with three counts of money laundering, and two counts of conspiracy for his role in a multi-million dollar bribery scheme. Although indicted in 2013 by the Department of Justice (DOJ) Hoskins did not stand trial until 2019 because he challenged the scope of the government's enforcement authority. The District Court agreed with Hoskins and ruled that he could not have conspired to violate the FCPA if he did not fall within a category of persons subject to direct liability. It also held that he could not have conspired to violate the FCPA in furthering corruption schemes because he was never physically present in the US during the relevant period.

The Second Circuit on appeal held that Hoskins could not be held criminally liable as a non-resident foreign national. However, the court held that he could be held liable if the government could show that he was acting as an agent for Alstom's US subsidiary while conspiring with others who then conducted prohibited acts while in the US The jury took one day to find Mr Hoskins guilty on this basis and he is due to be sentenced in January 2020. It remains to be seen whether the DOJ will be emboldened by this success and use it to seek to prosecute more foreign agents acting in concert with US principals.

In related activity, on 27 November 2019, following an investigation in cooperation with the SFO, the European Bank for Reconstruction and Development (EBRD) imposed a six-year debarment on GE Power Sweden AB. The investigation identified that from 2002, representatives of the company's predecessor (Alstom Power Sweden AB) conspired with another Alstom entity to pay Lithuanian government officials to manipulate, in the company's favour, technical specifications for works being carried out at a Lithuanian power plant. The project in question was one financed by donor funds administered by the EBRD.

The effect of the debarment (the longest the EBRD has imposed) is that GE Power Sweden will be ineligible to be a Bank Counterparty until 26 November 2025. In announcing the sanction, the EBRD's Office of the Chief Compliance Officer stated it will also submit the company's debarment to the World Bank, the African Development Bank, the Asian Development Bank, and the Inter-American Development Bank.

Güralp Systems Ltd's Deferred Prosecution Agreement (DPA) and individuals' acquittals

On 22 October 2019 the SFO secured a DPA with Güralp Systems Ltd (GSL), the SFO's sixth DPA to date. GSL is a UK-incorporated company that designs, manufactures and sells seismological instruments.

Details of the DPA were not immediately published due to reporting restrictions imposed by The Hon. Mr Justice William Davis in order to prevent prejudice to the trial of three people previously associated with GSL, whose trial commenced the day before the DPA was agreed.

Reporting restrictions were lifted on 20 December 2019 revealing that GSL had admitted conduct relating to commercial agreements with Dr Heon-Cheol Chi, a seismologist working in a government funded agency in the Republic of Korea. In return for payments from GSL, he had agreed to provide GSL improper competitive advantages over its business rivals. This included Dr Chi recommending GSL products to other public companies in Korea; advising GSL on pricing strategy and procurement practices; setting the Korean agency's technical specifications for seismic monitoring equipment to correspond with GSL's products; and providing GSL with details of confidential information from its competitors.

GSL will now be required to disgorge (within five years) improper profits of just over £2 million; comply with the SFO's investigation into individual suspects; and report to the SFO about its anti-corruption procedures. GSL was not separately fined, the judge acknowledging the fact of self-reporting, the cooperation that GSL had shown, and the fact that GSL would be unlikely to satisfy any penalty above the level of disgorgement ordered.

The DPA detailed how the corrupt conduct was carried out in the knowledge of the company's previous owner as well as its ex-Financial Director and ex-Head of Sales. However, despite the company admitting those facts, all three individuals were acquitted at their trial. Dr Chi, however, was tried and convicted in the US in 2017 of money laundering offences in respect of his receipt of more than $70,000 of corrupt payments from GSL. In August 2018, the DOJ closed its investigation into GSL and issued a letter of declination.

This is the second example of a DPA being secured by the SFO followed by the acquittal of the very individuals who were alleged to have caused the offending in question. This has caused some commentators to question the sense of a company making a swift self-report where it may later prove impossible for the SFO to secure convictions.

However, such criticism may be shortsighted, GSL's case is perhaps better seen as indicative of the very careful balancing of risks and facts that companies, such as GSL, who uncover possible corruption must navigate in determining whether and when to self-report. The fact that there was no separate penalty imposed against GSL (in part in order to prevent the company's dissolution), shows the flexibility British judges considering DPAs have in ensuring the interests of justice are met in the terms of the DPAs they are asked to approve.

COURT DECISIONS

European General Court rules HSBC's Euribor fine lacked reasoning.

On 24 September 2019, the European General Court (the Court) annulled the fine imposed on HSBC as a result of the European Commission's (the Commission) failure to provide sufficient reasoning. The Court also clarified the evidentiary requirements to establish a single and continuous infringement and the Commission's obligation to uphold a non-settling party's presumption of innocence in hybrid settlement procedures.

The judgment follows the Commission's December 2013 fine against a number of banks, for a total of €1.49 billion in respect of anti-competitive conduct in the Euro Interest Rate Derivatives sector. Several banks including HSBC withdrew from the settlement procedure and as a result received a statement of objections in March 2014 and an ordinary infringement decision in December 2016. HSBC appealed alleging that the Commission failed to provide adequate reasons for its fine calculation. The Court focused its analysis on the limited depth of the Commission's reasons and restated the Commission's obligation to provide reasons regarding the amount of the fine and its calculation method, to identify the gravity and duration of the infringement and explain the weighting and assessment of the factors taken into account.

The Court identified two ways in which the Commission failed to provide sufficient reasons. Firstly, the Commission's methodology had veered from the 2006 Fine Guidelines and that "it was essential that the statement of reasons in the contested decision should enable the applicants to verify whether the proxy chosen by the Commission may be vitiated by an error enabling its validity to be challenged and the Court to exercise its jurisdiction to review legality." Secondly, HSBC should have received an explanation as to how the Commission arrived at a factor that played an essential role in determining the ultimate fine amount.

The judgment serves to remind the Commission to give adequate reasons in explaining fine calculations especially where a case, such as this, demands such detailed reasoning.

Further privilege issue arises in ENRC's ongoing civil claim against the SFO

In March 2019, ENRC initiated a lawsuit against the SFO for costs that the Company had incurred during the SFO's eight-year bribery investigation into its operations. As part of this action, ENRC alleged that the SFO mishandled evidence and received privileged, leaked information from the company's lawyers, Dechert. In October 2019, the High Court gave Dechert permission to "forensically examine" documents belonging to ENRC, as the law firm seeks to prevent itself from becoming embroiled in these separate proceedings against the SFO.

The High Court granted permission for the law firm to look at "annotations" and "markings" on some documents that included reports covered by privilege prepared for ENRC by previous legal advisors in 2010. Dechert argued it had already seen these documents as part of its representation of the company, and that in any event, it was merely the "format and the form of the document" in which it was interested. It was hoped that examination of the documents would reveal how they came to be leaked.

Deputy Master Henderson observed, whilst acknowledging that his ruling may appear counter-intuitive against principles of legal professional privilege, "The documents are privileged but that doesn't prevent them [Dechert] from inspecting the documents by forensically examining their layout, any annotations and their visuals." 

Meanwhile, the SFO's investigation into ENRC continues. In December 2018, the SFO served Anna Machkevitch, the daughter of ENRC's part-owner Alexander Machkevich, with a Notice requiring her to produce documents. In June 2019 she was charged with failing to fulfil the requirements of the Notice and on 8 January 2020, stood trial at Hendon Magistrates' Court. Judgment is expected on 30 January 2020. Although she is currently the only person the SFO has charged in its investigation, in an earlier ruling denying Ms Machkevitch permission to judicially review the SFO's actions against her, The Hon. Mr Justice Supperstone revealed that Alexander Machkevitch is considered by the SFO to be a suspect in their investigation.

Tesco need not produce privileged notes from an interview with one of its lawyers to Claimants in ongoing shareholder claim

In an application within the claim brought by Tesco's shareholders, the company was at risk of being compelled to disclose notes from an interview with one of its senior lawyers conducted during its earlier false accounting investigation. The disclosure was sought because the Claimants argued that the interview notes taken by Tesco's external lawyers may show at what point, and in what level of detail Tesco was aware of the financial irregularities which led the company to admit to having misstated its profits.

At a hearing in November 2019, Tesco argued that attorney-client privilege prevented the document’s disclosure. However, shareholders claimed that the document was no longer confidential as it was referred to in court during the SFO's criminal proceedings in 2013. Tesco contested the application by arguing that even though the trial judge had been referred to and read part of the document, that did not make the entire document public or alter its confidential nature.

The Claimants contend that as a result of false accounting and misleading statements made by Tesco, they suffered major losses after the company's stock plummeted and that the interview notes would show the "nature and extent" of the wrongful practices that the company was aware caused the overstatements.

The Hon. Mr Justice Hildyard refused the application for disclosure, finding that, in this case and on the facts presented, confidentiality in the document had not been lost merely by the trial judge in criminal proceedings having been referred to some of its content.

Separately, despite having made an admission (in its Defence to the High Court claim) that its trading profits were overstated, Tesco applied, in a separate hearing in October 2019, to withdraw that admission. However, the application was refused by The Hon. Mr Justice Hildyard, partly on the basis that similar admissions had been made by the Company in representations made to the SFO when securing its Deferred Prosecution Agreement, and to the FCA in agreeing the terms of its Final Notice. This is of note given that it reminds practitioners that statements and admissions made in proceedings in one forum can have ramifications in other proceedings many years later.

The trial is due to commence in June 2020 with closing submissions to be made in October 2020.

LEGISLATIVE REFORM AND GOVERNMENT MATTERS

US and UK reach landmark data-sharing agreement, the first under the US CLOUD Act and UK Crime (Overseas Production Orders) Act

On 3 October 2019, the US and UK reached an agreement on Access to Electronic Data for the Purpose of Countering Serious Crime (the Agreement). Under the Agreement, law enforcement agencies in the UK and US will be able to apply to domestic courts for a production order for electronic data to be issued against a communications service provider in the other country.

Prior to the Agreement, UK law enforcement agencies had to rely on Mutual Legal Assistance Treaties (MLAT) which had been made with various jurisdictions including the US. Under the MLAT processes, the law enforcement agency would have to apply via a Letter of Request or Commission Rogatoire to the government of the relevant country for the production of data (as with requests for other investigative/prosecution material). That government would then review the request, seek a production order locally against the communications service provider, collect the data and then provide it to the requesting country's law enforcement agency. Because of the multi-stage nature of those processes, it can take months or even years to obtain data requested through traditional Mutual Legal Assistance procedures.

The Agreement is expected to expedite the process of obtaining electronic data, by allowing the production order to be issued directly against foreign communications service providers, reducing the number of steps required. Communications service providers include email providers, mobile phone networks, social media companies, and cloud storage services.

The Agreement was preceded in the US and UK by facilitating legislation. In the UK, the Crime (Overseas Production Orders) Act 2019 was enacted in February 2019, with certain provisions coming into force on 9 October 2019. In the US, the Clarifying Lawful Overseas Use of Data Act (the CLOUD Act) was enacted in March 2018. Both acts allow for the agreements of this type to be entered into with countries with equivalent levels of privacy, due process and respect for the rule of law. The Agreement is the first for either country and more are anticipated to give effect to the same processes in other jurisdictions. The European Commission conducted negotiations with the US towards the end of 2019 in relation to a potential agreement for cross-border access to electronic evidence for criminal matters.

Although the Agreement has been signed and published, it will not enter into force until March 2020, as the CLOUD Act requires a six-month review period by the US Congress. In the UK, the Agreement will need to be ratified by Parliament and to be designated under the Crime (Overseas Production Orders) Act 2019 by the Secretary of State, before coming into effect.

HMCPSI report on SFO case progression

On 8 October 2019, HMCPSI published a review of case progression in the SFO from the point of case acceptance to the decision to charge. This followed criticism of the SFO over its handling of cases resulting in HMCPSI setting up a "business plan" for inspection. Director of the SFO Lisa Osofsky supported the review saying: "The report is clear that, while the SFO is effective at what it does, there are further actions we can take to improve case progression. This is something I am committed to doing and the observations and recommendations made in the report will help us."

Six cases were randomly selected and examined, with inspectors speaking to case managers and staff, and reviewing key documents around casework governance and assurance. Among concerns raised was inconsistency in application with case managers proceeding in their individual manners. This impacted efficiency, by hampering new team members from getting to grips with cases and, where staff were reviewing several cases at one time, not allowing them to understand expectations.

Other concerns were the allocation of a case manager and team, and the significant delays in the processing of digital material by the digital forensic unit. In both instances, resourcing is an obvious issue. Although the SFO has made progress in processing backlogs of digital material, there has been a significant increase in the amount it has received. HMCPSI's review highlighted a disconnect between a case being accepted and a team allocated, noting that although there is a strategic and tactical coordination group, it does not "examine cross-team resourcing as the case has yet to be allocated to case teams when discussion takes place."

Since the last inspection in 2016 inspectors noted that major improvements had been made including the improvement of quality of investigative decisions as a result of communications with victims and witnesses in the early stage determination of a person's status as suspect, victim or witness.

In conclusion, seven recommendations were set out for the SFO:

  1. It should develop a resourcing model that takes into account staff skills and time available to progress cases effectively.
  2. It should review resourcing in an holistic manner to ensure equity across cases in allocation of the teams and skills and reconsider allocation of the case controller and team when it appears that cases are not being taken forward promptly after acceptance.
  3. It should review resourcing across divisions to ensure that resources are allocated according to case needs, and in such a way that when changes are required, there is as little disruption as possible to case progression.
  4. It should be clear about the use of independent counsel, including guidance for case controllers on their deployment and monitoring, and a mechanism for evaluating the value for money they provide.
  5. It should develop understanding across the casework divisions of the impact of seizures on the digital forensic unit, and the need to be proportionate in their demands and expectations of this unit. This should be accompanied by measures to significantly reduce the impact of current delays on case progression.
  6. It should consider how to improve the focus and delivery of training to support case progression, developing a programme of learning and development that delivers the core skills for effective case progression.
  7. Heads of Division should set and monitor key milestones in the investigation and prosecution of cases, and should enforce compliance with the operational handbook.

Brexit and its potential effects on enforcement

It is the British government's intention that the UK should leave the EU with a deal on 31 January 2020 (subject to approval from the UK and European Parliaments). After this date there will be a transition period of 11 months subject to any permitted extensions, after which the UK will cease directly to be bound by EU laws. What the legislative landscape will look like after that point will depend on what the UK is able to negotiate with the EU during the transition period. However, the following four issues have the potential to affect economic crime enforcement in the UK after Brexit.

The European Arrest Warrant (EAW), was implemented in the UK under the Extradition Act 2003. This enables predictable, swift and cost-effective extradition of individuals between European Member States. The EU's understanding that the UK would have to withdrawal from the EAW scheme was pointed out early in negotiations by the EU's chief Brexit negotiator, Michel Barnier. The UK government's proposal to deal with this was the enactment of the Law Enforcement and Security (Amendment) (EU Exit) Regulations 2019 (the Exit Regulations), which address a variety of criminal law issues including extradition. The Exit Regulations provide for the UK to revert to the European Convention on Extradition, a predecessor of the EAW framework. However, reverting to the old system is likely to be slower and less predictable than using EAWs. It also brings back an exception which allows countries to refuse to extradite their own nationals—a bar which the EAW system had eliminated between Member States. If the UK exits the EU with a deal, then the UK government will likely use the subsequent transition period to negotiate a new extradition agreement (or agreements) to put back in place an efficient system of extradition with EU countries. Describing the Extradition (Provisional Arrest) Bill, draft legislation intended to resolve this very issue, Prime Minister Boris Johnson said that it would make sure "a person wanted by authorities in a trusted country for serious crimes is arrested quickly." The Bill has passed its first reading before the House of Lords and continues to progress through the legislative process.

Europol was established in 1991 and acts across the EU to support law enforcement agencies to fight crime in areas as diverse as terrorism, fraud and intellectual property crime. It is expected that, upon the UK's exit from the EU, the UK will lose its seat on the Europol management board and its ability to lead joint operations. Although in recent comments the UK's Minister of State for Security confirmed he wished the UK to remain part of Europol, the mechanism by which that could happen has yet to be agreed. The UK could try to reach an agreement with Europol similar to that enjoyed by Denmark which, although part of the EU, has opted out of full membership and interacts extensively with Europol through a bespoke arrangement. However, the removal of its EU membership makes it more likely that the UK could achieve only a more limited level of engagement with Europol through operational agreements like those employed by, for example, Australia, Canada, Norway, or the US, which offer less management interaction and no direct access to Europol's central criminal information system.

Changes are also to be expected within the UK's mechanisms for implementation of EU-wide money laundering requirements. These must currently be applied directly into UK law, but this requirement will cease after Brexit. The UK was required, by 10 January 2020, to implement the EU's Fifth Money Laundering Directive (5MLD), enacted via the Money Laundering and Terrorist Financing (Amendment) Regulations 2019. However, the application of these Regulations rely on certain powers and responsibilities of EU institutions, meaning that a no-deal Brexit could render them inoperable. In February 2019 the Money Laundering and Transfer of Funds (Information) (Amendment) (EU Exit) Regulations 2019, were enacted aiming to ensure that the UK's money laundering Regulations still operate coherently if a no-deal Brexit occurs. The amended Regulations would grant the FCA the power to apply technical standards and ensure that the UK would interact with EEA member states identically with non-EEA countries.

On 14 October 2019 the Queen's speech made reference to the government's plan to "champion global free trade." This includes plans to develop up to ten "free ports" to promote free enterprise. A "free port" is an area within a country where national customs rules do not apply and alternate special rules on import, export and manufacture of goods operate. They aim to promote trade and economic growth, but the proposal has led to concerns that these ports could be a magnet for money laundering and tax evasion. The prime minister has championed their ability to attract business but concerns have also been raised that they could draw businesses away from existing hubs causing further socio-economic problems.

Although the UK government has put in place a number of measures to permit continuity of enforcement activity in the event of a no-deal Brexit, if (as is repeatedly promised) a deal with the EU is achieved this month, negotiations in the transition period (set to end on 31 December 2020) will be crucial to determine the UK's position regarding international enforcement matters. We will continue to monitor and report on developments in this area as these arise.

© Arnold & Porter Kaye Scholer LLP 2020 All Rights Reserved. This newsletter is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.

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