On March 28, The Times reported that London Metropolitan Police (Met) Commissioner Cressida Dick has cited money service businesses (MSBs) in London as the means by which drug gangs are exporting “crate-loads of dirty cash out of the country.”
In March 26 testimony before the United Kingdom Parliament’s Home Affairs Select Committee, Commissioner Dick stated that the approximately 9,000 MSBs in London “are not very well regulated. Huge amounts of cash are going through those institutions and most of it straight out of the country on crates.” She also testified that based on highly targeted testing that the Met had done over the previous three to four months, “[a] huge amount of that cash” appears “to be illegal finance and most of it comes from the drugs trade.”
In a separate statement, a Met spokeswoman said that “’[a]pproximately £2 billion is moved out of the country a month to places like the United Arab Emirates from MSBs and a lot of this is linked to criminality. When officers seize cash, paper trails often lead to MSBs’.”
Although the Met stated “that it had seized a record £95 million in cash last year using a range of tactics including freezing assets,” with the largest cash seizure to date being £1.3 million, Commissioner Dick said “that new laws and better enforcement were needed.”
Note: In formal terms, MSBs in the United Kingdom are already subject to regulation. Under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, a variety of MSBs must register with HM Revenue & Customs. MSBs subject to the Regulations include any business acting as a currency exchange office (i.e., a bureau de change), transmitting money or any representation of money by any means (i.e., money remittance), and cashing cheques payable to a customer (i.e., third-party check-cashing). In addition, money transmitters must be registered or authorized by the Financial Conduct Authority under the Payment Services Regulations 2009.
In practice, however, law enforcement authorities must deal with a vast number of MSBs across the United Kingdom. According to the Met, Great Britain alone has approximately 45,000 MSBs, compared to approximately 6,000 in France and 220 in the Netherlands. The Government is well aware of the money-laundering threat that this multiplicity of MSBs poses. One joint report by the UK Treasury and Home Office specifically warned about “control of MSBs by organised crime groups”
In light of these connections between MSBs and drug money laundering, AML compliance teams in United Kingdom financial institutions should pay close attention to all MSBs whom their institutions are banking, and see that their customer risk assessment frameworks are fully updated in light of current information about key AML trends. In particular, they should review their customer risk models on all MSBs they are banking, and be prepared to increase the frequency and the range of enhanced due diligence on any high-risk MSBs. At a time, when attention to AML enforcement is increasing in the United Kingdom, Europe, and elsewhere – only in part because of the continuing ripple effects of the Danske Bank scandal — no United Kingdom financial institution can afford to bend the rules or relax their oversight for any MSBs that are deemed to be high-risk customers.