Understandably, following the events of September last year, steps were taken to enhance the economic fight against terrorism. Two main pieces of new legislation which have recently come into force are the Anti-Terrorism, Crime and Security Act 2001 and the Terrorism (United Nations Measures) Order 2001. These substantially increase the burden on financial institutions to make reports to NCIS and, importantly, separately to the Treasury. They will, in light of the requirements of the Money Laundering Regulations 1993 and the FSA Rules, require a degree of re-training of staff and a change to internal controls.
Anti-Terrorism, Crime and Security Act 2001
The Terrorism Act 2000, the majority of which came into force last year, replaced the Prevention of Terrorism (Temporary Provisions) Act 1989. The Terrorism Act 2000 made it an offence to fail to disclose to NCIS a belief or suspicion (from information, which came to a person in the course of their trade, profession, business or employment) that another had committed one of the terrorist offences relating to money or property. The Anti-Terrorism, Crime and Security Act 2001 amended the failure to disclose offence in the Terrorism Act with regard to those in the regulated sector (ie those carrying out relevant financial business). It imposed an additional, higher, obligation to make a disclosure to NCIS where they had reasonable grounds for knowing or suspecting that another had committed one of the terrorist offences relating to money or property. The failure to report offence could therefore be committed even if the individual in question was not suspicious themselves.
This raises a number of important issues for financial institutions, namely:
1 How will the new test be applied in practice?
2 If the new test gives rise to more prudential reporting, what is the potential exposure of the organisation to civil liability for breach of confidentiality or defamation where unnecessary reports are made?
3 Does it apply to all of the respective financial institution's employees or only those carrying out relevant financial business?
4 When training staff and making them aware of this new offence, to comply with paragraph 5(1)(c) of the Money Laundering Regulations and Rules 6.2 and 6.3 of the FSA Money Laundering Rules, what guidance should be given to staff? Should they be required to report internally anything unusual or inconsistent with previous account activity?
The Act also creates a...