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Financial crime remains at the top of the regulatory agenda across the globe. As responses to the pandemic stabilise, and following some high-profile global incidents, regulators face renewed pressure to manage financial crime more effectively through robust supervision and enforcement.

In the October 2021 edition of the City Library’s Compliance Officer Bulletin, our business crime, regulatory and cybersecurity lawyers explore the latest developments in anti-money laundering (AML) and financial crime in a series of articles, including:

  • Reviewing the EU and UK AML regime proposals: What firms need to know. On 20 July 2021, the European Commission presented a package of legislative proposals establishing a new framework for the EU’s AML regime. Shortly after, on 22 July 2021, HM Treasury (HMT) issued both a call for evidence and consultation on reforms to the UK’s AML framework. This article explores the proposals from the Commission and HMT in more detail, and sets out considerations for UK firms.
  • Emerging themes in the DPA landscape. The guidance on Deferred Prosecution Agreements (DPAs) published by the Serious Fraud Office (SFO), and recent DPAs entered into with the SFO, provides a pathway for companies to follow should they identify criminal conduct in their company which could cause the company itself to be held criminally liable. This article considers the DPA landscape by examining the SFO’s guidance and looking at some themes we have identified from the recent DPAs entered into with the SFO.
  • Developments on the Cum-Ex dividend scandal. Cum-Ex trading (also known as dividend arbitrage) is a practice that involves complex trading prior to dividend payments enabling multiple parties to claim refunds for withholding tax that has only been paid once. In essence, shares are sold or swapped (often temporarily) prior to a dividend payment in order to produce two tax refunds on one set of shares. It is estimated that between 2002 and 2012 European tax authorities were deprived of approximately EUR 55 billion through Cum-Ex trades. In this article we explore litigation and enforcement developments in the UK relating to the Cum-Ex scandal.
  • Cyber risk in financial services. The last two years have seen a significant increase in cyber attacks, particularly ransomware, supply chain attacks and attacks attempting to take advantage of COVID-19, with financial institutions often the target of these attacks. While financial institutions are subject to more stringent legal and regulatory requirements than many sectors, at the same time, there is a lack of consistency on approach between jurisdictions, with an overlapping patchwork of legislation and guidance from regulators. This article considers some of the key current cyber risks for financial institutions, the approach of regulators to those risks and mitigating strategies, and upcoming expected legislative changes.
  • A guide to spotting — and stopping — authorised push payment fraud. For many businesses, the COVID-19 pandemic has caused a squeeze on finances, a reprioritisation of resources, absence of key staff, more home working and pressure on financial and compliance controls. In short, the pandemic has helped create a perfect environment for fraud. One of simplest and most devastating frauds that can be committed against a business is the so-called authorised push payment (APP) fraud. This article explains APP fraud and provides recommended practices for businesses to minimise the risk of becoming a victim.
  • US AML developments: US Anti-Money Laundering Act of 2020. The US AML regulatory framework is slated for a number of significant changes under the US Anti-Money Laundering Act of 2020 (AMLA), which became law in the US earlier this year as part of the National Defense Authorization Act for Fiscal Year 2021. AMLA includes the most significant changes to the US AML regime since the enactment of the USA PATRIOT Act of 2001 by requiring the Treasury’s Financial Crimes Enforcement Network to take action to modernise its regulations in an effort to address evolving risks to the security of the US financial system. This article discusses a number of key AMLA provisions.
  • The Quincecare duty of care: Where are we now? Under the Quincecare duty of care owed by banks to customers, a bank must refrain from executing a payment instruction if and for as long as it has been “put on inquiry” by having reasonable grounds for believing that the instruction is an attempt to misappropriate the customer’s funds —a bank may be exposed to a negligence claim if it executes instructions in circumstances when it should have refrained from doing so under the Quincecare duty. This section examines some of the key developments emerging from recent cases concerning the Quincecare duty and goes on to consider what practical steps banks can take to mitigate potential risks arising from the duty.

The Bulletin was first published by the City Library and Thomson Reuters, now available to download.

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Author

Philip Annett is a partner with the Financial Services Regulatory team in Baker McKenzie's London office. He has an in-depth knowledge of working with the UK regulators, having previously been a senior lawyer in the Enforcement Division at the Financial Conduct Authority (FCA), where he led some of the regulator's highest-profile enforcement cases, and was recently seconded to the Bribery and Corruption Division at the Serious Fraud Office.

Author

Henry Garfield is a senior associate in Baker McKenzie's Dispute Resolution department based in London. Henry's practice focuses on fraud, asset tracing, internal investigations and business crime. He also undertakes general commercial litigation. Henry has just completed an 11 month secondment to the Serious Fraud Office, during which he was the Case Lawyer on an investigation into a £60 million fraud. The investigation involved unravelling trust and company structures in several offshore jurisdictions and has recently resulted in two individuals being charged with fraud and forgery offences.

Author

Terry Gilroy is a partner in the New York office of Baker McKenzie and a member of the Compliance and Investigations Practice Group. Prior to joining the Firm in 2018, Terry served as Americas Head of the Financial Crime Legal function at Barclays. Terry advises businesses and individuals on white collar and financial crime issues and has significant experience conducting investigations relating to compliance with the US Foreign Corrupt Practices Act (FCPA) and related bribery and corruption statutes, economic sanctions regulations as administered by the US Department of the Treasury's Office of Foreign Assets Control (OFAC), and the Bank Secrecy Act and related anti-money laundering (AML) regulations and statutes. Terry spent six years on active duty in the United States Army as a Field Artillery officer.

Author

Paul is head of cybersecurity in the UK and a key member of our wider data protection team. For 15 years, Paul has guided clients through all types of major data security incidents as well as complex technology and data disputes. Paul pioneered an award-winning data breach and dark web scanning tool which was the first product of its kind in the legal market.

Author

Amy serves as the Co-chair of Baker McKenzie’s North American Financial Regulation and Enforcement Practice, which provides our clients with a full range of regulatory advice and enforcement counseling. Previously, Amy has served as chief litigation counsel at the US Securities and Exchange Commission's (SEC) Philadelphia regional office and managed a team of lawyers overseeing a wide variety of enforcement matters and investigations.

Author

Jennifer L. Klass serves as the Co-chair of Baker McKenzie's Financial Regulation and Enforcement Practice in North America. Jen is an experienced investment management lawyer with particular focus on investment adviser regulation and the convergence of investment advisory and brokerage services. She regularly represents clients before the US Securities and Exchange Commission (SEC), both in seeking interpretative guidance and in managing examination and enforcement matters. Jen is a leading practitioner in digital investment advice and the use of FinTech in the asset management industry. Jen provides practical advice that is informed by her experience as Vice President and Associate Counsel at Goldman, Sachs & Co., where she represented the asset management and private wealth management businesses.

Author

Mark Simpson is a partner in the Financial Services & Regulatory Group in the London office where he practices in the areas of financial regulation, financial crime, and regulatory investigations. He is a member of the Firm's EMEA Financial Services & Insurance Steering Committee, as well as its Global Funds and FinTech Groups. He participates actively in industry bodies including the Alternative Investment Managers Association. He has authored a number of articles and other publications, most notably acting as a general editor of and contributor to the International Guide to Money Laundering Law and Practice, and A Practitioner's Guide to the Law and Regulation of Financial Crime.

Author

Charles Thomson is a partner and solicitor advocate in Baker McKenzie’s Dispute Resolution Practice Group in London. He co-manages the Business Crime Unit, and is part of the Financial Institutions Disputes, Contentious Trusts and Compliance and Investigations Groups. Charles joined the Firm as a trainee in 2002, and concurrently spent three months on secondment as a judicial assistant at the Royal Courts of Justice in the Civil Appeals Division. A solicitor advocate since 2007, Charles appears as an advocate in all Higher Courts in England and Wales. Chambers and Legal 500 both commend Charles for his legal practice. Charles is also listed as a Rising Star in Litigation by Legal Week.

Author

Kimberly Everitt is a Knowledge Lawyer in Baker McKenzie London office.

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