UK enforcement agencies target 'corrupt' money service businesses – Money transmitter receives record GBP7.8 million fine for anti-money laundering breaches

On 4 September 2019, HM Revenue and Customs (HMRC) published a press release announcing a record GBP7.8 million fine imposed on the West London money transmitter Touma Foreign Exchange Ltd (Touma). This followed a separate month-long crackdown on Money Service Businesses (MSBs), which were suspected of being used for money laundering purposes. This operation was led by the Central Specialist Crime unit of the Metropolitan Police and HMRC, with the participation of the Financial Conduct Authority (FCA).

Record GBP7.8 million fine for money laundering breaches

HMRC found significant failings of Touma to comply with Anti-Money Laundering (AML) rules. These included breaches of rules relating to risk assessments and associated record-keeping; policies, controls and procedures; fundamental customer due diligence measures; and adequate staff training. According to HMRC's findings, these breaches took place between June 2017 and September 2018.

In addition, Touma's founder was found to have failed to satisfy the fit and proper test to serve as an officer of Touma. Therefore, on 20 May 2019, he was banned altogether from performing any future managerial positions in businesses regulated under the AML regulations.

The July raids on MSBs

The fine was announced following the July 2019 joint crackdown by the Metropolitan Police, HMRC and the FCA on a number of MSBs who were suspected of being involved in money laundering operations.

An MSB is an entity that transfers money, cashes cheques or converts currencies. MSBs may be performing so-called money remittance regulated services, in which case they are regulated by the FCA, including for AML purposes. MSBs have been long identified as easy-access points for organised crime organisations to convert illicit gains and property into legitimate assets capable of being moved out of the UK. According to the Metropolitan Police, MSBs are often used by crime organisations to launder proceeds of serious crime, such as drug trafficking.

More than 12 warrants were executed against suspected MSBs across West London during the July raids. The investigations found a number of breaches of money laundering rules by MSBs. It was also revealed that several MSBs were operating without having been registered with HMRC for AML purposes, as they should. The relevant entities will face the appropriate penalties and sanctions, which may involve criminal action. On 12 July 2019, a London man was given a suspended jail sentence for illegally trading as an MSB without being registered with HMRC.

Further investigations have resulted in similar findings, with the Metropolitan Police seizing GBP100,000 in liquid cash on 3 July 2019 from individuals who were intending to process that money through an unregistered MSB.

HMRC officers have also conducted investigations into five high-risk MSBs and have since started civil proceedings against four of them for exposed failings in establishing stringent AML safeguards.

Furthermore, the UK enforcement agencies made 40 premises visits, reminding MSBs in London of their obligations under the AML framework. The new joint force initiative has led to the publication of specially designed educative leaflets, which were delivered to all 9,000 MSBs in London, highlighting money laundering risks and outlining ways of tackling them.

The approach of the joint enforcement agencies signals a greater shift in the movement towards collaborative efforts in the prevention and diminution of money laundering within the UK.