News Analysis – ‘Mr Big’ gets an easy ride.

Most financial institutions are failing to report suspicious financial transactions, hampering the fight against money laundering, a parliamentary committee was told last week.

Responding to corruption queries from the international development select committee, the head of the National Criminal Intelligence Service told MPs that only 49.9% of the UK’s banks had informed the NCIS of suspicious dealings.

But of all the institutions in the financial sector, banks have the highest reporting rate. In the accounting sector, a mere 0.58% of the nation’s accountancy firms had submitted reports. Only 33 of the 840 insurance companies issued reports and 57 of 12,500 for solicitors.

John Abbott, NCIS director-general told the committee that criminals regularly tapped the skills of lawyers and accountants to launder money.

‘There are a whole host of activities of solicitors and accountants that bring them into contact with the movement of money,’ said Abbot.

The organisation’s economic crime unit works closely with accountants and solicitors to raise the level and quality of financial reports, but it is disappointed that the number of submissions received remains low.

Last month the OECD called on the accountancy profession to play a key role in the fight against international fraud. In its report on bribery and corruption the OECD urged accountants to use their skills to unravel criminal schemes.

The report concluded that the responsibility for detecting fraud resides with company management, but auditors should be sufficiently sceptical and ensure detection if there was any material effect on financial statements.

Out of 14,500 reports of suspicious transactions received by NCIS’ economic crime division in 1999, 78% came from just 10 banks, representing 39% of the total number of disclosures received by the unit, according to the NCIS’ report.

NCIS is concerned over the insignificant number of banks that submit reports on dubious transactions, since it is thought high street banks in particular are targeted by criminals to launder their proceeds.

Abbott said NCIS is currently investigating why a large number of financial organisations were not submitting reports. He was answering the international development committee’s questions on the role British financial institutions play in laundering the proceeds of criminal activities in emerging economies.

The economic crime arm of NCIS received in excess of 14,000 suspicious financial transaction reports each year, as well as over 5,000 requests for information from UK and foreign investigators. This is a small increase on 1998 figures.

A recent Accountancy Age /Reed Personnel Big Question survey revealed nearly one in five UK businesses had been hit by fraudsters in the last 12 months.

Figures released this month by KPMG recorded a total of 50 cases involving £174m from January to September this year, compared with 53 cases involving £500m recorded in the same period last year.

This month the Home Office praised NCIS’ efforts, urging the harmonisation of money laundering legislation and the pooling of resources of the nation’s law enforcement agencies.

Charles Clarke MP, Home Office minister, said: ‘The centrepiece of the fight against criminal assets will be the establishment of the new National Confiscation Agency, which will have a statutory role to ensure criminal assets are targeted wherever they come to light. This will ensure for the first time that the ‘Mr Bigs’ will not be able to distance themselves from the crimes of gangs while enjoying the profits. We are firmly behind CIS in tackling the menace of organised crime.’

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