New National Strategy in Fight Against Money Laundering and Terrorism Financing

By Chiva Arthurs, Associate Advocate, Gough Law

On 24 March 2016, the Isle of Man Government published a new national strategy which sets out its updated stance on anti-money laundering and countering the financing of terrorism (AML/CFT).

The updated strategy arises out of a national risk assessment completed in respect to the Manx public and private sectors during the course of 2014 and 2015. Such assessments are recommended by the Financial Action Task Force and are intended to inform Governments, policy makers and directly influence the efficient allocation of resources. The 2014/15 assessment identified various goals and actions necessary to increase the effectiveness of the current AML/CFT framework.

Far from sitting on the national risk assessment’s findings and awaiting the publication of the strategy document before taking remedial steps, the Isle of Man has been working hard over the past few years to address the concerns identified in the national risk assessment.

For example, the assessment found that a risk of money laundering and terrorism financing arose from the nature of the non-retail financial business conducted on the Island. Much of this business takes place via intermediaries, and it was deemed that this may assist in obscuring the identity of, and dealings with, the ultimate client. As such, businesses may unwittingly become involved in the money laundering layering process (a process used to disguise proceeds of crime as clean money).

However, perhaps not surprisingly considering the Island’s proactive approach, such concerns have already been addressed to some extent – not least by the introduction of the Designated Businesses (Registration and Oversight) Act in October 2015, which represents a major development in the Island’s AML/CFT framework.  The introduction of the AML/CFT Code 2015 has also assisted the Island’s efforts in creating a solid AML/CFT framework.

The 2014/15 risk assessment also found that domestic authorities could be more effective in following up domestic involvement in international cases.  This includes streamlining the sharing and dissemination of information and intelligence between the Island’s various authorities, but also with international partners such as Egmont and Interpol.  This has led to the launch of the Financial Intelligence Unit, a separate legal entity to the Financial Crime Unit, which will be able to prioritise intelligence gathering.  Consideration has also been given to the creation of an online reporting system for suspicious activity, and it is hoped that this will assist authorities in dealing with reports from local entities in a more coordinated and comprehensive manner which, in turn, may lead to the speedier detection of criminal activity.

On the whole, the national risk assessment concluded that the Isle of Man provides a high level of domestic cooperation, although, as with everything in life, there is always room for improvement. To the Isle of Man’s credit, action points identified within the risk assessment are already being addressed, and there is no doubt the Island’s hard work in this respect will be picked up by MONEYVAL in their forthcoming on site assessment visit to the Isle of Man (due to commence on 25 April 2016).

In light of the scandal which has engulfed Panama as a result of the affairs of prominent law firm Mossack Fonseca, the publication of the national risk assessment and national strategy could not have arrived at a more opportune time for the Isle of Man. From a PR point of view, it is expected that the Island’s commitment in respect of AML/CFT should assist it in distinguishing itself from offshore centres regarded as having dubious track records.

Whilst reputation is not everything, it certainly helps. The Isle of Man’s reputation as a transparent business centre is vital to its continued economic success and the Isle of Man Government has taken the opportunity to reiterate that it will not be used as a refuge for criminals and their activities. In a foreword to the national risk assessment, Chief Minister Alan Bell MHK writes of the Island’s “continuing commitment to uphold the highest international standards in protecting our economy against criminal abuse”.   The Chief Minister has further stressed that:

“As a recognised centre for international business and finance, the Isle of Man is home to many successful companies which have a significant presence around the world.   We are determined to protect the reputation and integrity of our business community by ensuring that the Isle of Man is not a place where criminals can find a welcome.”

The Island’s strong stance on AML/CFT will no doubt assist the global fight against money laundering/terrorism financing and ensure that the Isle of Man remains a trusted and transparent partner on the international stage.