Stephen Platt:: “I would rate Mauritius Grade C+ for money laundering”

Stephen Platt, one of the world’s most experienced practitioners in the conduct of regulatory investigations relating to financial crime, was in Mauritius for a master class in Anti Money Laundering organised by Temple Professionals. In an interview with News on Sunday, he elaborated on the situation of money laundering prevailing in the region and how Mauritius can address this issue. 

Money laundering is becoming a real issue across the globe. Is the situation alarming?
It has been a pressing issue for a long time. Despite international and national efforts to curtail it, the problem is in fact getting worse. There is a real concern amongst the international community that countries need to do more by bringing more prosecutions against financial institutions that don’t take effective steps to prevent it. That’s the key metric by which jurisdictions are now being judged. As such, financial institutions really need to consider how they can strengthen their control environments through, for example, the implementation of new technologies that can improve customer screening and risk rating. RiskScreen is one of those technologies.

What are the risks associated with it?
Well, the risks to an institution include regulatory action, criminal prosecution and reputational damage. For Mauritius, there is a very real risk of its reputation being harmed. The key to the ongoing success of your finance industry lies in demonstrating a strong national commitment to preventing financial crime.

There is a general perception that the African region is where money transits easily right now. How far do you agree with this perception?
I’m afraid that I do agree with it but the same can be said about many other parts of the world – the Italian mafia use the UK for example because it’s so easy to buy UK real estate. I have seen so many examples of criminal money being laundered with impunity through the African region. The fundamental difficulty lies in financial institutions having weak anti-money laundering control environments and regulators with insufficient resources to supervise and enforce adequately.

Criminals abuse financial institutions not only by laundering criminal property but also in helping them to commit the crimes that generate that property and by secreting the laundered property through ownership structures.

How do you rate Mauritius in terms of money laundering activities?
If Mauritius was a student, I’d give it a Grade C+. Not the best but certainly not the worse. It needs to demonstrate more commitment by bringing prosecutions against financial institutions that launder criminal money or which fail to have in place adequate anti-money laundering controls. Too many institutions continue to manage AML risk on excel spreadsheets, which is very disappointing in 2017 when the technologies exist to enable businesses to manage risk dynamically and in real time.

What are the common patterns of money laundering seen today?
The methods are evolving all of the time - as new financial services and products emerge, so criminals identify ways of exploiting them. Criminals abuse financial institutions not only by laundering criminal property but also in helping them to commit the crimes that generate that property and by secreting the laundered property through ownership structures. Unfortunately there is too much focus on classic money laundering vulnerabilities and not on the way in which financial institutions can be used in the facilitation of crimes such as bribery and corruption and tax evasion.

What challenges does that create for people who are investigating cases for money laundering?
Sophisticated laundering schemes can be difficult to uncover but I have to say that it never ceases to amaze me how easy it still is for criminals to launder money through financial institutions. When I examine customer files on behalf of regulator, I frequently identify very basic errors in customer screening and due diligence. Those errors can make it very difficult for such businesses to justify why they were not suspicious of the customers concerned and that can lead to accusations that they facilitated criminality.

What do you find to be the most misunderstood part of basic anti-money laundering legislation?
The regulations requiring AML procedures to be in place! Many directors of financial institutions don’t understand the exact nature of the requirements that have to be followed. In consequence, they don’t hold the compliance functions to proper account and they don’t demand accurate and detailed management information from them. Without accurate data, board decisions are flawed. That weakness is compounded by incompetence. Given all the scandalous conduct that has been revealed in the international banking sector, it’s high time that much more stringent requirements are used in assessing the fitness and propriety of directors. The UK’s senior Management regime is a small step in the right direction but most jurisdictions have not followed suit.

We have seen the emergence of crypto-currencies. Is this new trend for illegal activities?
Yes. It is the new front in the war against money laundering.

Worldwide, trillions of corrupted money is in circulation but still governments and authorities are unable to take actions. Why so?
They can take action. The question is do they want to? Knowing that capital is mobile is a very powerful dynamic and there is an understandable concern that if a jurisdiction takes tough action against the financial services sector the larger and more systemically important financial institutions will pack up and leave for less hostile environments. That can be politically unpopular. It’s complicated but regulatory capture is a definite factor everywhere but particularly in small centres with a disproportionately high percentage of GDP generated by financial services. Various countries including Mauritius have adopted laws and regulations such as Foreign Account Tax Compliance Act (FATCA). How can we ensure that organisations or cooperates are complying with the laws?  Supervise them appropriately and take action against those businesses that are non-compliant.

What is according to you, the best way to combat money laundering?
Well, whatever industry has been doing to date hasn’t worked because we continue to see the same old scandals despite all of the money invested in AML. Industry has spent a lot of money on increasing headcount but not on addressing fundamental underlying data weaknesses. So the answer lies in utilising new technologies to digitise customer data, put it on a single platform and use it to dynamically risk assess customers and benefit from real time alerts so that businesses can take timely action before problems develop into scandals that damage the reputation of Mauritius.