The below Parliamentary question was asked by Charles Walker on 2016-04-12.
To ask the Secretary of State for Defence, if he will identify for the purpose of Article 3(9)(F) of the Fourth EU Money Laundering Directive which ranks in the armed services will be classed as high-ranking.
Mark Lancaster
The Fourth EU Money Laundering Directive seeks to prevent the financial and certain non-financial sectors from being used for money laundering (the conversion, by various means, of the proceeds of crime into apparently ‘clean money’) and terrorist financing (the provision or collection of funds used to carry out any terrorist offences).
In addition to the financial sector, the directive applies to certain non-financial sectors including lawyers, notaries, accountants, estate agents, providers of gambling services, trust and company service providers, and to all providers of goods when payments are made in cash in excess of €15,000.
The directive introduces additional requirements and safeguards (‘enhanced due diligence’) for situations posing a higher risk of money laundering and terrorist financing, for example, trading with correspondent banks situated outside the EU. Amongst those additional requirements is a broader definition of Politically Exposed Persons (PEPs).
Those subject to the directive are required to:
Identify and verify the identity of their customer (‘customer due diligence’) and of the beneficial owner (person(s) who ultimately owns or controls the customer on whose behalf a transaction is being carried out, e.g. in the case of a company, the owner of a sufficient percentage of the shares or votes), and to monitor their business relationship with the customer,
Report suspicions of money laundering or terrorist financing to the public authorities
Ensure that personnel are properly trained and that appropriate internal preventive policies and procedures are set up.
The Ministry of Defence (MOD) is not a financial institution nor does it fall into the non-financial sector organisations identified by the Directive, and it is not a provider of goods where payments are made in cash in excess of €15,000.
The responsibility of implementing the requirements of the Directive is for the financial sector and the non-financial sectors identified by the Directive and not the MOD.
The new Directive gives additional guidance in dealing with those risks and issues relating to corrupt activities. As with all legislation it cannot differentiate between those nations, sectors and institutions that are more or in the UK’s case, less corrupt. What this Directive attempts to do is give those organisations and sectors at risk of money laundering and terrorist finances the ability to make their own judgements as to what they deem as a high risk person (PEP) or transaction. Whilst ambassadors, chargés d’affaires and high-ranking officers in the Armed Forces are included in the Directive as PEP’s, the financial institutions in particular will assess their individual risk. In some countries the military are involved and in some cases run the political and governing systems, this makes them a significant corruption risk. The UK, its ambassadors, chargés d’affaires and high-ranking officers carry a lesser risk than some others; it is therefore unlikely that the extended Directive will affect them. But the interpretation of the Directive is for the financial and certain non-financial sectors to interpret.
The MOD takes its responsibility to prevent, detect, deter and investigate fraud (including corruption, money laundering and terrorist financing) very seriously and has undertaken detailed risk assessments to identify its risks, where needed implementing additional preventative and detective controls and undertakes due diligence on its suppliers.
Transparency International publishes a Government Defence Anti-Corruption Index based on 77 indicators which assesses the existence, effectiveness and enforcement of a nation’s ability to manage the risk of corruption including money laundering.
The UK MOD scored an ‘A’ (very low corruption risk) in the 2015 index, the only country to achieve this in the G20 and NATO as well as being one of only two in the world to achieve this.
Transparency International attributed the ‘A’ to the UK MOD having strong anti-corruption systems underpinned by effective independent oversight mechanisms.
