Anti-money laundering policies and procedures are, at the best of times, unlikely to engender much interest from directors and principals of financial services and investment firms. A minimalist position is often adopted to ensure there is some tangible evidence that the identity of clients is checked e.g. by requesting a copy of their passport and a bank statement for individuals (as “retail clients”) or a copy of the incorporation certificate and a bank statement for companies (that may either be a “retail client” or “professional client”).

At a recent seminar organised by Scotland Yard’s SCD6 Economic and Specialist Crime team, it was explained that their AML investigations are targeted at errant and corrupt individuals including seemingly professional investors into hedge funds and other investment vehicles. In these investigations, the view is that AML officers who have diligently followed relevant and up-to-date policies and procedures are unlikely to be charged unless e.g. there is proven intention to deceive and/or obstruct.

This contrasts with the position of the Financial Crimes Enforcement Network of the US Treasury Department which, on 30 October 2008, formally withdrew its once proposed rules for hedge funds to comply with the Patriot Act’s requirement for every financial institution to establish a program to combat money-laundering.

Michael Wheelhouse, a senior director of Sindicatum Holdings Limited was, on 29 October 2008, fined by the FSA an initial sum of £25,000 for not fulfilling his responsibilities as the company’s MLRO satisfactorily; these responsibilities are set out in Principle 7 of APER. He failed to take reasonable steps to implement adequate procedures for verifying the identity of the Firm’s clients; failing to ensure that the Firm adequately verified the identity of a significant number of its clients; and failing to ensure that the Firm kept adequate records to demonstrate that it had verified the identity of a significant number of its clients. Guilt was admitted during the investigation and the Stage 1 discount of 30% reduced this to £17,500.

Despite being a “corporate advisory firm” with no “retail client” business, the company itself was deemed to be culpable by virtue of a Principle 3 breach and failing to take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems. In particular, in breach of SYSC 3.2.6R. It was fined an initial sum of £70,000 which was reduced to £49,000. The seriousness of the charges caused the FSA to appoint Matthew Banham, a highly experienced barrister from the chambers of Nine Bedford RowThe