REG Reviews
REG Reviews – November 2021
1st November 2021
REG Reviews
1st November 2021
This month we look at the NatWest money laundering case, growing concerns for the Insurance industry and a “Ghost” broker jailed in Cambridge.
Read this along with our usual update from REG and the REG Tech sector.
National Westminster Bank Plc (NatWest) pleads guilty at Westminster Magistrates’ Court to criminal charges brought by the FCA under the Money Laundering Regulations 2007. These regulations require certain firms, including those regulated by the FCA, to ensure they have adequate anti-money laundering systems and controls to prevent money laundering.
The FCA alleged that NatWest had failed to monitor suspect activity by Fowler Oldfield, a Bradford-based jewellery wholesaler, which deposited £365m over a five-year period, including £264m in cash. The 122-year-old gold dealer was shut down after a police investigation in 2016 into what was alleged to be “an extremely sophisticated” money laundering operation.
The bank could expect a “very large” fine of more than £170m, possibly multiplied by up to 200 per cent. The exact level of the fine will be determined by a judge when the bank is sentenced at Southwark Crown Court in early December.
Early in December REG Technologies hosted its first Networking Event since Covid restrictions began. It was great to be back meeting our connections face to face in our new Lime Street office. Thank you to those who attended, from the positive response we are sure you had a great time!
To make sure you don’t miss out, please contact info@reg.uk.com if you would like to receive details of future events.
Harbour underwriting has partnered up with one of Scotland’s top brokers GS Group to provide after-the-event (ATE) insurance to Scottish law firms.
Both firms have stated they recognise the need for ATE insurance especially due to post-Brexit and post-pandemic commercial disputes. Recently, solicitors’ professional obligations in England and Wales have changed, now advising the client about the availability of after-the-event insurance.
Furthermore, strict rules apply when a solicitor provides a client with recommendations for an insurance contract. It is suggested solicitors only advise this if they have analysed several insurance contracts available on the market.
According to professional services firm PricewaterhouseCoopers (PWC), the three biggest concerns for insurers worldwide are crime, regulation and technology. These results come from PWC’s biennial insurance banana skins report which was based on 607 responses from 47 territories, including 91 UK respondents.
Crime was highlighted as the largest threat global insurance industries will face over the next two to three years. Respondents seemed to highlight their worries regarding the underestimation of potential costs of cyber crime when writing policies.
The report identified the rise of regulatory risk as the second largest concern for global insurance professionals, driven by the implementation of measures such as Solvency II and IFRS 17. The most visible factor found by the report were concerns over the volumes of new rules being implemented which naturally are accompanied by costs and compliance burdens which respondents believed hinder innovation and competition.
Lastly, the third greatest threat to the global insurance industry was identified as the need for business and technology modernisation. Respondents shared the view that many sector players are disadvantaged with old business models and poorly equipped IT infrastructures that cannot handle the fast pace and changing demands of the industry. Opposingly, insurtechs were generally seen by respondents as quick to react to digital demands.
During market research carried out by REG Technologies we found that over 50% of firms don’t have an automated processes to manage counterparty risk. With the insurance market due to its complexity, products and structure providing an ideal opportunity for criminals to launder money, it is key that insurers, brokers, and MGAs understand anti money laundering regulations. The whitepaper provides a simple breakdown of what REG customers are required to do to avoid noncompliance penalties. AML really can be as easy as 123!
To read our whitepaper: https://reg.uk.com/aml-three-letters-made-simple/
A man in the city of Cambridge has been sentenced and jailed at Cambridge Crown Court for offering fake insurance broking services to Polish nationals living in the UK.Responsible for this is Marek Complak, 51, of Almond Grove, Bar Hill, Cambridge, who set up false or invalid car insurance policies presenting himself as a broker for multiple well-known insurers. This is known as ‘ghost broking’.
With both his fluent Polish and English speaking abilities, Marek targeted UK-based Polish communities using the alias “David Brooker” to set up invalid car insurance policies whilst also ‘employing’ unknown agents to find more people to lure. The fake broker was arrested by City of London Police’s Insurance Fraud Enforcement Department (IFED) following multiple reports to the UK’s national fraud and cybercrime reporting centre – Action Fraud.
The ghost broker has been sentenced to two years and six months in prison for his ghost broking activities.
The FCA have voiced their concerns regarding the failure of understanding on behalf of brokers regarding the “fair value” product governance rules.
Fair value is interested in how firms design, sell and review their products to ensure they meet the needs of their customers. Upon reviewing the updated rules, findings showed that indeed some firms made good progress in understanding existing rules and guidance on product governance and value issued in 2018 and 2019 as well as against temporary guidance on product value, issued in response to Covid-19 last year. However, many firms have been found to not comply with the FCA’s standards with a lack of preparation for enhancement of the rules which commenced 1st October 2021.
To find out more and see how REG can help follow: https://reg.uk.com/let-us-assist-with-fcas-fair-value/
In a new report on cybersecurity risks, analysts at Fitch Ratings point out that ransomware in particular is becoming a “growing concern“ for the (re)insurance industry.
Fitch sees attacks as continuing to increase at an alarming rate for several reasons, including the potential for financial payouts, increased availability of tools to commit cybercrime, limited criminal enforcement to date and a growing digital footprint. While cybersecurity risk often falls under the rubric of “nonfinancial” risk, analysts at Fitch believes there is a very real and growing financial impact that re/insurers should be aware of.
In last month’s REG Reviews we reported National Westminster Bank Plc (NatWest) pleaded guilty at Westminster Magistrates’ Court to criminal charges brought by the FCA under the Money Laundering Regulations 2007.
Now for the first time the FCA has pursued criminal charges for money laundering failings fining NatWest £264.8 million.
Between November 2021 and June 2016 NatWest failed to monitor suspect activity by Fowler Oldfield, a Bradford-based jewellery wholesaler, which deposited £365m over a five-year period, including £264m in cash.
Some of the bank’s employees, who were responsible for handling these cash deposits, reported their suspicions to bank staff responsible for investigating suspected money laundering, however no appropriate action was ever taken.
Suspicion was raised when significant amounts of Scottish bank notes were deposited throughout England, deposits of notes carrying a prominent musty smell, and individuals acting suspiciously when depositing cash in NatWest branches.
In addition, the bank’s automated transaction monitoring system incorrectly recognised some cash deposits as cheque deposits.
Due to the above Fowler Oldfield was able to deposit up to £1.8 million in cash per day with NatWest.
A separate investigation by West Yorkshire Police has led to 11 people pleading guilty to charges relating to the cash deposits and three cash couriers being charged.
A further 13 individuals are awaiting trial at Leeds Crown Court on 25 April 2022 in relation to the activities of Fowler Oldfield.
Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA released the following statement:
“Anti-money laundering controls are a vital part of the fight against serious crime, like drug trafficking, and such failures are intolerable ones that let down the whole community, which, in this case, justified the FCA’s first criminal prosecution under the Money Laundering Regulations”
Early in December REG Technologies hosted its first Networking Event since Covid restrictions began. It was great to be back meeting our connections face to face in our new Lime Street office. Thank you to those who attended, from the positive response we are sure you had a great time!
To make sure you don’t miss out, please contact info@reg.uk.com if you would like to receive details of future events.
