6 December 2005
BBA Financial Crime Conference
Opening Comments
1. It’s a pleasure to be here this morning, addressing the British Bankers Association for the second time in the space of a month.
2. Today, I want to talk about the need for partnership in anti-money laundering and counter-terrorist finance, and about the benefits to us all of this – and of our better regulation agenda.
3. Let me also reiterate the thanks I gave you all at your annual conference last month. I – and my colleagues within the Treasury, the government and law enforcement – are deeply grateful for all your hard work to combat money laundering and terrorist financing.
4. Let’s make no bones about this – the government is truly committed to this fight. After all, money laundering not only poses a serious threat to the integrity of our financial system – it makes crime pay and it funds greater crime, including terrorism.
5. People sometimes fail to appreciate the importance of this struggle – what some see as lightweight, white collar crime. Well, none of us should forget that the flip side of each money laundering offence is an act of criminality. That criminality – from organised crime through to terrorism – has an effect on our entire society. On our businesses, on our kids, on our people in general and their quality of life.
Pre-Budget Report
6. Now, many of you will also be aware of our Pre-Budget Report, launched yesterday by Gordon Brown.
7. We announced many facts and figures. And on the refining and development of our Anti Money Laundering and Counter Terrorist Finance strategy, Gordon confirmed yesterday that we will report back in March.
8. So let me take this opportunity now to convey to you directly our thanks, and to recognise the specific work of the BBA – and each of the banks represented here today, not to mention your staff.
Global Context
9. These are issues that pose very real threats for us all, not to mention a large responsibility for each of us to bear.
10. A responsibility made all the clearer in an age of relentless globalisation – where the positive values of international co-operation and genuine multi-lateralism are exemplars of modern day life.
11. In an age of economic interconnectedness and 24/7 communications, our task in dealing with financial crime often seems ever harder. But we must set this into context.
12. Financial services do not operate in a vacuum. Looking at the industry, the message is impressive. Your sector generates around 5% of our total output – and contributes a trade surplus of over £15 billion per year.
13. And this supports a wide range of high value sectors – from law through to accountancy and consulting, where the UK is a global leader.
Partnership
14. Now, globalisation makes possible a whole range of activities, and financial services do well from these, as do our citizens. But how do we deal best with this complex, compelling and positive world?
15. How do we reconcile the tough and much needed action against financial crime in an age of great interdependency – ensuring that honest citizens can still access the technology and services that your businesses provide?
16. Partnership is the key, and proper engagement is one of the underlying principles of our anti-money laundering strategy, published in last October.
17. We promised to ensure effective consultation on new proposals, and followed through recently, with the level of engagement with industry on negotiations in Brussels for the third EU Directive on money laundering.
18. This ensured we understood what you and other sectors needed. It helped inform negotiations – and it gave us evidence based examples that helped secure vital aspects like the risk based approach in the new directive
19. And this partnership approach will continue. We are pleased that the Financial Action Taskforce, which sets international standards on anti-money laundering and counter-terrorist finance, is now committed to greater engagement with industry.
20. One example of this is a Taskforce meeting taking place later this week between governments and representatives from the banking and securities sector.
21. Another is the work of the FSA’s working group on ID, which we welcomed. In this, industry, law enforcement, the regulator and government departments worked together to ‘de-fuse’ the issue of customer identification.
22. So I re-iterate – this partnership must continue for the regime to be effective.
Joint Money Laundering Steering Group
23. Clearly, the public sector has a pretty good idea of what we need to do in the fight against crime. So do you. We need to reduce the harm of crime on our society and economy.
24. But the difference between successful, effective action that punches hard and straight, and an ineffectual round of red tape is simple – it’s about making sure the actions taken are both effective and proportionate. That it tackles the problem without unduly hindering firms and customers.
25. That’s why we’ve made our legislation high level – capturing the broad thrust of what must happen, allowing the detail to be worked out in industry produced guidance, and in your case that produced by the Joint Money Laundering Steering Group.
26. We’re engaged on the details of this with industry, helping the Group to ensure that such guidance is both practical and effective.
27. And to get that right – to see it properly followed by practitioners – means we will tackle money laundering issues at their roots.
28. For this reason, it’s hard to underestimate the vital contribution to the regime that guidance can make. I certainly know you find it valuable in deciding how best to meet legal obligations and in developing best practice.
Proportionality
29. So let me welcome the Group’s guidance re-draft, reshaping it as a more risk-based endeavour.
30. Clearly the regime has to be proportionate to be effective – but so too, a risk-based approach is required as part of the third EU Directive on Money Laundering. It also means that firms are making better use of the resources available to them to counter money laundering.
31. Let me also support the move to make this guidance more sector-specific. Financial services constitute a diverse industry – and different controls are appropriate for different sectors.
32. For example, what might be too prescriptive in one situation because of a low risk presented, might well be under prescriptive in another.
Benefits of the Regime
33. Now, there is little doubt that the Anti Money Laundering regime itself provides a new tool to target and deter criminals.
34. This relates to all criminals, including at level one, such as low-level drug dealers, and it is making a real difference to communities too.
35. And there is evidence that the environment for criminal finance is getting tougher.
36. The 2003 Money Laundering Regulations widened the regulated sector to include accountants, lawyers, casinos and estate agents to ensure that criminals seeking to by pass the controls implemented by the banking sector could not be easily bypassed
37. And I know bank staff are now more aware of the warning signs when a person is depositing unusually large amounts of cash.
38. Again, working together to counter criminal activity, and narrow ever further the methods available for financial crime.
39. More widely, we do well with Anti Money Laundering measures in knock on ways – not least through protection of the financial system from wider contamination – which we all benefit from.
40. And as I said earlier, that means targeting our efforts for maximum impact, and drawing in the expertise and knowledge from a range of stakeholders – if only to preserve proportionality.
41. It is vital that everyone involved – industry, government, law enforcement – continue to work together to maximise our opportunities to make the system work better.
42. So let me say again – the measures taken to address money laundering must always be proportionate to the risks posed – but by making them so, we will ensure more effective, punchier action.
Cutting Red Tape
43. Clearly, this industry does much to help – and we see the need for government to be more proportionate in turn, wherever possible.
44. That’s why I and my colleagues are committed to reducing the overall bureaucracy that business faces, and to fostering a more efficient form of regulation in general.
45. That means ensuring regulation is proportionate and that it is well focused – as with dealing with financial crime.
46. Following the Hampton Report published alongside the last budget, we’re working to put risk-based enforcement at the heart of our regulatory system.
47. We believe that regulators’ resources and inspection activity should be strengthened in the areas where the risks are greatest. There should be no inspection of businesses without a reason. The number of forms businesses still have to fill must be reduced, if only through greater sharing of data between regulators.
48. This is all underway, and it will transform the relationship between business and government, lifting some of the burden to let industry focus on those regulations that are most vital – like counter terrorist and anti-money laundering efforts.
Closing Remarks
49. And as we face up to the challenges of globalization that is ever more important. As we take action – in partnership – to deal with financial crime in all its guises, so too we will ensure the health and vigour of this sector.
50. It’s been a pleasure to speak today – and I look forward to seeing the results of this model partnership in the months and years to come.
51. Thank you.