I’ve been talking quite a bit about slavery in recent AML training sessions, mainly because of the recent criminal emphasis on people trafficking.  (Indeed, only yesterday morning on Radio 4′s “Today” programme they were interviewing people affected by people trafficking and kidnapping in Sinai.)  One of the issues facing those who work to relieve the problem of slavery in the world today is one of terminology.  We (quite rightly) laud William Wilberforce, and (quite wrongly) call him an abolitionist.  He might have wished to abolish slavery, but he did not succeed: he abolished the legal trade in slaves, but not slavery.  And yet the name of his movement (the Abolitionists) and the Act that they worked to pass (the Slavery Abolition Act of 1833) suggest that the whole concept of slavery has been removed.  Sadly, as demonstrated by the continuing work of campaigning organisation Anti-Slavery International, this is far from the truth: it is estimated that today there are 30 million slaves around the world – far more than at the height of the famous slave trade that brought us Dodington Park and Alton Towers.

Obviously you cannot pay a ship’s crew in the location where the services are delivered if those services are delivered at sea. So that would seem to leave jurisdiction where a crew member is domiciled. But in addition to the home domicile there are other AML issues such as the bank to which the payments are wired into from the US.. The Financial Action Task Force (FATF) Recommendations on the International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation set out several in its White Paper released last year. These included due diligence on payees to determine politically exposed persons and specially designed individuals, record keeping, controls regarding payee banks and financial institutions and reporting of suspicious transactions, among others. In others words, there are many concerns about paying third parties; even those third parties a company might not normally consider in their own compliance regime.

Based upon these conversations, I thought a deeper look into AML issues was warranted. Fortunately Carol Switzer, President of the Open Compliance and Ethics Group (OCEG) just penned another piece in her series in Compliance Week on compliance related issues. This month Switzer has taken a look at AML issues in an article entitled “The Complex Mechanics of Money Laundering” and compended with the article is another of OCEG/Compliance Week, GRC Illustrated Series, where in an illustrated manner, they review how to build an effective AML program.

Switzer explains that there are several laws which deal with AML compliance. They include “the Intelligence Reform & Terrorism Prevention Act of 2004, which amended the BSA; the Money Laundering and Financial Crimes Strategy Act; and the Money Laundering Suppression Act).” There are numerous regulatory and enforcement agencies with domestic AML oversight. They include “the U.S. Department of the Treasury and its Financial Crimes Enforcement Network (FinCEN), to the Security and Exchange Commission to the Dodd-Frank Act’s Consumer Financial Protection Bureau (CFPB) to the New York Stock Exchange, IRS, FBI, and a number of federal banking regulators.”

In the illustrated section following Switzer’s article, it sets out three basic steps which are (1) Define the Risk; (2) Quantify the Risk; and (3) Manage the Risk.

I.                   Define the Risk

It all begins with a comprehensive organizational analysis so that you can understand how much exposure your organization has and where it originates. A company should keep track of the places it does business and how it does business, either directly or through third parties. A company should determine where threats are hiding in its operations and to identify any specific AML issues posed by a particular products or service line. A company should also understand the enhanced risks posed by any specific geographic markets and then identify the risks inherent in different customer types.

II.                Quantify the Risks

Under this prong, a company should determine the quantitative impact of defined risks, both from a customer and asset perspective, while understanding how operating locations may affect these identified risks. Next a business should profile and risk rate customers and assets based on risk attributes including customer geography, business structure, sources of funds, business type, products and services utilized and other factors. From these factors a company should then formulate a comprehensive business risk assessment.

III.             Manage the Risk

Based on steps one and two a company should then implement an AML program consisting of people, processes, and controls proportional to the quantified risks which can ensure compliance, visibility, and protection. This Step III has four subparts.

1. Design: A company should define its internal roles and responsibilities. There should be designated risk categories which will inform the appropriate level of due diligence. A company should build and implement both suspicious activity controls and transaction monitoring.
2. Implement: This step involves the establishment of policies and procedures and training of employees and relevant third parties there. To the extent possible OCEG recommends using technology to monitor, review, escalate, and report suspicious activities using a risk-based and practical approach. Lastly, they recommend that companies should exchange knowledge with industry peers and experts.
3. Test and Analyze: A company should regularly test its controls and monitor personnel and third parties. A company should evaluate the data that it receives. Finally, as with all compliance regimes, there should be a confidential reporting mechanism to report suspicious activities or other violations.
4. Report: A company should report suspicious activity and any AML controls system weaknesses should be scheduled for analysis. A company should also document and file any suspicious activity for both its own internal use and regulatory reporting requirements.

A company must continually capture and update its understanding of threats and system weaknesses to influence continued evolution of an effective AML program. This should be coupled with the continuous evolution of your AML program because the nature of money laundering is ever-evolving as criminals construct new and “improved” methods to hide the proceeds of crime and funds for financing criminal action, making it ever more difficult to monitor and stop.

So how about the payment issue in marine transport industry and the ship’s crew? Most US companies no longer own and crew the ships they use to transport product or cargo and will typically use a charter party. The charterer gives orders for the employment of the vessel and payment of the crew. If your company is in such a position I would suggest that it make the following inquiries of your charter party. 1) Does the charter party have an International Organization for Standardization (ISO) program and policy in place for the hiring and paying of employees?; 2) Does the charter party vet all employees to include license checks; verify bank address to employee address and obtain background checks thereon?; 3) Does your charter party ensure that all banking transactions made to the employees are documented starting with hours worked, signature from masters and payments made to employees home country only?

If you are in the marine transport industry and use a third party to pay those working on your behalf you need to review the third party’s AML program. The same is true for any other business which uses a third party company to make payments to others outside the US.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2013

Professor Güven Sak, a noted Turkish economist and founder of their Economic Policy Research Institute (TEPAV), wrote a short article in which he ventured an explanation for Turkish reluctance to oblige: “Turkey has not yet found a definition of terrorism that includes the PKK [the outlawed Kurdistan Workers’ Party], while excluding Hamas”.  He also warned that expulsion from the FATF would have dire economic consequences for his country.  And so thankfully, on 15 February 2013, as the FATF bigwigs were packing their bags for Paris, the Turkish government signed in the Law on the Prevention of the Financing of Terrorism, which addresses many of the shortcomings around terrorist financing as well as creating a legal basis for freezing terrorist assets.  A week later, the FATF said that they were reasonably happy but want to see Turkey making good on its promises to improve, demanding a progress report in June.

Many people criticise the FATF, saying – with some justification – that it spends too much time finger-wagging at jurisdictions that are trying against the odds to improve, while ignoring larger transgressions by countries such as the US and the UK.  But it is encouraging to see that it can be a force for good, and that its stamp of approval still matters.  Without the carrot of FATF membership to encourage it, Turkey’s goose would be cooked, its AML status a political hot potato, equivalence problems sprouting everywhere – in short, it would be stuffed.

The above print ad, originally including the Aston Martin logo, has been circulating online in the past few days. However, what many people don’t know is that this FAKE ad is a copy of a BMW Pre Owned ad, posted below, released back in 2008 with the exact same headline: You know you’re not the first. But do you really care?

Some blogs featured the print and were forced to take off the picture after receiving e-mails from Lewis Silkin LLP, the law firm acting for Aston Martin Lagonda (AML), ensuring that the ad is fake and claiming AML’s intellectual rights for the wings logo and brand name. In respect to that, I posted a modified version of the ad taking off their logo and brand name.

Here is an extract of the e-mail:

The image appears to be an advertisement for Aston Martin pre-owned cars but has not been authorised or approved by AML. For the avoidance of doubt, AML has never consented to the use of its name or ‘wings’ device or domain name in this image.

Accordingly, the reproduction of the ‘wings’ device in the image constitutes copyright infringement; and the use of the ASTON MARTIN name and ‘wings’ device trademarks constitute trade mark infringement; and the image itself brings the Aston Martin brand into disrepute and is defamatory of AML.

It seems like AML are working hard to refrain the “virality” of this ad that would definitely tarnish their reputation for being purely stolen and maybe also because it could make feminists groups upset.

NOTE: The visual is taken from the cover a previous Playboy magazine issue and the print is signed “Aston Martin Pre Owed” and not “Owned”.

Just 16 days after Rich’s wife Mary was diagnosed with AML – a form of Leukemia – she is now cancer-free.

“I got a call after I went home (from the hospital) at 5 p.m., and my wife is crying. A doctor came in and said the chemo worked, and she is cancer free and is now officially in remission,” Rich said Friday morning. “Sixteen days after showing up with what they said was one of the highest blast cell counts they’ve ever witnessed, she is cancer-free.”

Mary will still have to go through a 6-7 month cycle of less-powerful chemotherapy, but by the end of the summer, if all goes well, she’ll be done with cancer.

But in just a week or two she’ll be able to eat again (she hasn’t had a real meal since Feb. 17) and, most importantly, see her two kids for the first time since being admitted to the hospital.

Mary joined Toucher & Rich Friday morning to give thanks to everyone that has sent her and Rich well wishes during her battle.

“There have been so many emails, so many friends that have cooked meals and brought them to the house, picked up Hank from school, family members by my side the entire time. This is really giving me strength,” she said. “Everybody has been so helpful and so supportive I really feel that’s what has given me the strength to fight this.”

“We are just thrilled. My dad was with me when we got the news and we just sat there sobbing,” said Mary. “The other route would have been very rough. The fact that they got all the cancer, all the leukemia on the first round is really a miracle.”

“I asked a nurse how rare this is, like someone is in remission this quick. She said of the 10 years she’s been in this unit she remembers one case that was close to this,” said Rich. “When I first got there, they said the one pro about AML is that it attacks so violently and so quick, if you attack just as violently and quick with the chemo it, for some reason, responds really, really well.”

“Boy you want to talk about really, really well: Cancer-free in 16 days. In my opinion that is truly a miracle,” said Rich.

Doctors zapped Mary with a heavy dose of chemotherapy in her first round hoping it would kill all the cancer, and that’s exactly what it did. She walked into the hospital with cancer in 80 percent of her body, and as of Thursday it was all gone.

“It’s the best news anyone has told me,” said Rich. “This is a Tyson-esque 90-second knockout that no one expected. We are elated and shocked, more than anything.”

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Obituary-writing is a specific journalistic skill, and like all niche professions it has its own shorthand.  You’ve read them all at some time:

• “a tireless raconteur” = crashing bore
• “untroubled by the rules of the City” = fraudster
• “led a Bohemian lifestyle” = lived in a pigsty and rarely washed
• “always a favourite to play Father Christmas” = very fat
• “tireless and dedicated worker” = hated his family
• “good company” = drank a lot
• “excellent company” = made Jeffrey Barnard look sober

In a similar vein (fnah fnah), doctors have their own slang, so that they can indicate to each other what they really mean without running the risk of being sued by outraged patients.  So the on-call doctor in A&E can warn his colleagues upstairs by writing on the notes that he is sending them a CLL [complete low-life] with a UBI [unexplained beer injury], sustained when PFO [p***ed, fell over], who is now presenting as LOBNH [lights on but no-one home].

It occurs to me that – hamstrung as we are by having to be circumspect to the point of blandness in references and confirmations – we in the AML community could develop our own shorthand.  So we could talk of “exciting parts of the world” [high-risk jurisdictions], “determined leaders” [dictators], “challenging legal structures” [laundering schemes], “not universally welcomed” [sanctioned] and “imaginative explanations” [lies].  More suggestions please!

Our family has been living with leukemia for two and a half months now. Ups, downs, things that are expected, and things that are out of the ordinary. We have learned to remember to bring her home meds to her clinic appointments, because we are guaranteed to be at the clinic for a good 2 or 3 hours any time we go. We have learned the phone system, what to tell the receptionist, how to ask for the nurse, and which nurses are in charge of what things. We are adept at flushing her central line, and even administering IV medications at home. We know what a stay in the hospital entails; what to bring, when to call for the nurse, what is a big deal and what is not, and where to find coffee.

Even though Kaera is not in remission yet, my money and faith is still on her. She is so damn tough! The amount of chemo she has received has increased with each hospital stay, and she tolerates it. This third cycle is harder than the previous two. She is much more tired, not as interested in eating, and we are expected to see her beautiful strawberry hair go in the next week. I spent a good chunk of the morning taking pictures of her from all angles to remember the little curl in the back, the way it falls to the side of her face, the way it falls in her face, and the way it changes from red to blond, the longer it gets.

I want to hold on to every moment, in the hospital and at home. These are long, long, days, but I know I will look back on them and remember them as precious, cozy, loving. Big brother wants her home. He gave his blood to be typed to see if he would be a donor match for a bone marrow transplant should she need one. He sat in my lap and was brave, watching the blood flow from his arm, knowing that he could be a hero. A superhero, in fact.

So, she plays, She snuggles. She sleeps. She burrows into me when I hold her, and I love it. I would give anything to take on any of this for her, but I can’t. All I can do is hold her, love her and put my faith in my strong, strong little girl.

Since I had a clean spinal tap and wouldn’t need a bone marrow transplant I agreed to be part of a clinical trial and use an additional chemotherapy. So rather than the regular three chemos I got four. My four chemos were bortezomib, cytarabine, daunorubicin,and etoposide. Chemotherapy can come in many forms (pills or liquids injections) but mine is sent into a vein in my chest through two tubes that combine in a Y form and enter my body right between my breasts. If I was a boy I’d show people the curling tube and pretend I was Iron Man, because that’s what it looks like and that’s how I feel. I think that brings you, the reader, up to speed on what AML is and how I was treated for it and how others can be treated for it.

Websites I used for this post:

• http://www.curesearch.org/Acute-Myeloid-Leukemia-in-Children-Treatment-Information/
• http://teammaddy.com/2012/08/page/3/
• http://www.macmillan.org.uk/Cancerinformation/Cancertypes/Childrenscancers/Typesofchildrenscancers/Acutemyeloidleukaemia.aspx#DynamicJumpMenuManager_6_Anchor_2

In the presentation, I compare the data supply chain with the food supply chain.

I believe that data consumers have the right to be provided with facts about the content of the data they are consuming, just as food consumers are provided with facts about the food they are buying. The presentation provides guidelines on how you can improve your data supply chain.

Little did I realise in November that within 3 months the term “provenance” would be hitting the headlines as the European horsemeat scandal grows.

There’s a silver lining in this food scandal for data quality management professionals. As financial regulators increasingly demand evidence of the provenance of the data provided to them, it is now easier for data quality management professionals to explain to their business colleagues and senior management what “data provenance” means, and what it requires.  Retailers, such as Tesco, must have controls in their supply chain that ensure that the food they sell to consumers only contains “what it says on the tin”. Similarly, financial services organisations providing data to financial regulators must have controls in their data supply chain that ensure the quality of the data they provide can be trusted. Regulators are now asking financial services organisations to demonstrate evidence that their data supply chain can be trusted. They require organisations to demonstrate evidence of their data provenance, as applied to their critical or material data.

But what exactly is “data provenance”? The best definition I have seen comes from Michael Brackett in his excellent book “Data Resource Simplexity“.

“Data Provenance is provenance applied to the organisation’s data resource. The data provenance principle states that the source of data, how the data were captured, the meaning of the data when they were first captured, where the data were stored, the path of those data to the current location, how the data were moved along that path, and how those data were altered along that path must be documented to ensure the authenticity of those data and their appropriateness for supporting the business”.

Enjoy your “beef” burger!

This is not a man short on self-esteem: in 2001, he sent every household in Italy a copy of “Una storia italiana” (“An Italian Story”) – a book about himself and his achievements, generously illustrated with photographs taken of his public and private life.  The title of this post is a description of Silvio – by Silvio.  You can read more of his comments here.  (Warning: do not open and read this link while drinking over your keyboard.  Seriously.)

Thankfully (if not for the headline-writers) it seems unlikely that Berlusconi will become Italy’s Prime Minister for a fourth time.  His TV-based campaign has gone down well in some quarters, and his promises to end austerity and see off the threat of a “German Italy” are being believed by some – he is expected to do well in Lombardy (his own constituency) and Sicily.  But once the show election is over, Silvio will be returning to court on 4 March to stand trial for paying to have sex with an under-age girl.  And from an AML perspective, we cannot deny that he – and his family and close associates – might warrant some rather enhanced due diligence.  Large fortune?  Check.  Connections with known organised crime groups?  Check.  Associated with industries known for high levels of corruption?  Check.  Previous convictions for tax fraud?  Check.  Absolutely anything this man says?  Check, check and double-check.

There is much confusion and disinformation about the extent to which coin dealers are required to obtain customer information to keep on file and use in submitting reports to the Internal Revenue Service (IRS) or other government agencies.

In some cases the confusion may be used to steer customers away from lower-margin bullion sales and towards the higher-margin coin sales, even though such items may be less suitable for the customer’s purposes.

I’ll attempt to summarize some of the reporting topics herein, but for more helpful information, you can visit the Industry Council for Tangible Assets’ (ICTA) website.

The three main circumstances where dealers may be required to do extra paperwork or submit reports for compliance with governmental regulations are (1) the receipt of “cash” payments of large enough amounts in one or more related transactions where the dealer must comply with cash reporting regulations; (2) a minimal amount of extra in-house paperwork for purchases or sales above a threshold dollar amount where the affected coin dealer (which includes almost every dealer who handles any bullion-related transactions) must comply with anti-money laundering regulations; and (3) purchases from non-corporate sellers of a limited list of precious metal coins and ingots in large enough quantities that the dealer needs to submit the IRS Form 1099-B.

Cash reporting regulations: There are two elements in the cash reporting regulations. The first and most basic rule is that when someone makes cash payments totaling more than $10,000 in a single or in related transactions, dealers receiving such payments are required to submit Form 8300 Report of Cash Payments Over $10,000 Received in a Trade or Business. Among the tricky parts is that cash includes more than just the Federal Reserve Notes in your wallet. It also includes traveler’s checks, money orders, and bank instruments like cashier’s checks of individual amount of $10,000 or less (bank-originated instruments in excess of $10,000 need not be reported by a dealer because the issuing institution had to already report it to the IRS). Another tricky part has to do with related transactions. If a married couple were to come in to make purchases within a short time frame, paying “cash” (as defined in the IRS regulations), and totaling more than $10,000, the dealer is required to add these transactions together to submit Form 8300 to the IRS. Related transactions can also include multiple transactions by the same person and two or more transactions by people with other family relationships, or even friends or co-workers.

The second part of cash reporting regulations has to do “suspicious activities”. While many financial institutions are required to submit Suspicious Activity Reports (SARs), coin dealers are not yet required to do so. However, coin dealers are encouraged to voluntarily file such reports if any of a variety of situations arises (see http://www.fincen.gov for more information), and it may be prudent for the dealer to do so.

The SAR is submitted to the Treasury Department’s Financial Crimes Enforcement Network on FinCEN Form 109 Suspicious Activity Report by Money Service Businesses. When the government receives a SAR, it is not just filed. Instead, it is effectively a criminal complaint that starts an investigation of the customer. It absolutely would bring on a greater degree of scrutiny of a customer’s financial activities.

Anti-money laundering (AML) regulations: Section 352 of the USA Patriot Act of 2001, for which regulations were adopted during 2002, requires coin dealers to be on the lookout for possible terrorist activities. Any coin dealer who does more than a nominal amount of purchases and sales of “bullion-related” coins and ingots (including most US $20 and $10 gold coins) with the public over the course of a 12 month period is subject to complying with these regulations. This means that the dealer is required to have a formal anti-money laundering compliance program, a designated compliance officer, annual training of all employees who deal with customers, and an annual audit of the dealer’s compliance with the program.

I suspect that there are many coin dealers who have not established their compliance programs, erroneously thinking that they do not meet the threshold amounts of “bullion” transactions. But, once a dealer meets the threshold quantities for becoming subject to these regulations, it pretty much means that the dealer is permanently required to comply with these regulations.

In complying with anti-money laundering regulations, dealers may be required to obtain the name of all customers engaging in cash transactions above a threshold dollar amount, no matter whether they’re buying or selling. I understand that the AML compliance programs of most dealers have a threshold of $3,000 above which they must obtain this customer information. Some dealers will have a higher threshold for reporting due to their higher average purchase and greater volume of transactions.

Dealers do not file any additional forms with any government agency under AML regulations. However, dealers are required to have the information available should an IRS agent come to their premises to check for transactions above the threshold amounts.

IRS Form 1099-B reporting regulations: The IRS proposed regulations in the early 1980s to require coin dealers to report certain purchases from non-corporate sellers. It took nine years for the IRS to finally pin down reporting thresholds. During this time, significant lobbying by ICTA succeeded in eliminating reporting requirements for small transactions (see IRS Revenue Procedure 92-103).

The final regulations come from the perspective of requiring brokers to report stock and commodity transactions, where the broker facilitates a transaction between a seller and buyer but does not take title to the assets. The IRS expanded the definition of a broker to include coin dealers, even those buying and selling from their own inventory and not acting as a broker. However, in establishing regulations from this angle, the result for coin and bullion dealers was that the reporting requirements covered extremely few items, and then only in sizable quantities; only items (of sufficient quantity) that could be potentially deliverable to fulfill commodity contracts on existing or approved exchanges.

Here are the only items listed by the IRS in Rev. Proc. 92-103 as requiring submission for IRS Form 1099-B, and the minimum threshold quantities that must be sold in single or related transactions before the form must be filed:

If an item is not on this list, sales of it does not need a Form 1099-B to be filed, no matter how large the quantity!

There is some ambiguity in the regulations whether the ingots are required to be the actual minimum size required for delivery against a commodity contract or whether a mixture of smaller size ingots that total more than the minimum ounces required for a contract are also sufficient to call for submission of Form 1099-B. ICTA has advocated the conservative position of recommending that coin dealers report any mixture of smaller ingots that, combined, meets or exceeds the minimum contract size.

The result of defining reportable transactions so narrowly is that relatively few 1099-B forms ever need to be submitted. If someone sells to a dealer 20 Krugerrands, 10 Gold Maple Leafs, $500.00 face value of US 90% Silver Coin, and 700 ounces of pure Silver Ingots, the dealer does not need to submit any paperwork to the IRS. The IRS still wants to see the transaction on the seller’s tax return, but it is the seller’s responsibility to collect and report this information.

There are many bullion-priced products available that are not reportable on Form 1099-B. Beware of a coin dealer who tries to steer a customer away from all bullion coins and ingots and into numismatic coins because “you can avoid government reports when you sell” is either dishonest, incompetent, or both.

Financial privacy from the US government has largely disappeared. While it troubles me to think that our freedoms and privacy are evaporating, that is pretty much the environment we face today. At least precious metals buyers are not subject to more invasive reporting requirements as imposed in other countries.

Buying these commodities in another country is generally legal but some dealers may be required to obtain your ID as reporting requirements may apply to local citizens but not with foreigners. So, verifying your ID will help to eliminate you as one subject to local taxation.

But the whole saga does raise again this question of vocabulary.  In the same way as common sense is actually not all that common, perhaps the idea of “reasonable” is not reliably consistent.  Behaviour that I might consider reasonable – cycling all the way back into town because I have forgotten the Jaffa Cakes and are you mad of course a plain Rich Tea won’t do – could be seen by others as, frankly, a little unhinged.  I don’t want to repeat what I said in that earlier post about reasonableness and the associated objective test of suspicion, but as you know the AML legislation, regulation and guidance (whatever your jurisdiction) is riddled with words open to varying interpretations: adequate, proportionate, appropriate, and even suspicion itself.  And as ever, things are always much clearer with hindsight: what appears perfectly adequate, proportionate and appropriate at the time might not appear so under the critical eye of the prosecution barrister years later – just ask Michael Wigley.

Sadly, it is not an exposé of laundering techniques in the ancient world, but an all-too-familiar lament about (what we AML folk recognise as a misapplication of) the money laundering requirements.  In short, her husband couldn’t do the transaction he wanted at the post office because of money laundering.  Nonsense, and very disappointing that a large institution such as the Post Office should get it wrong.  Mind you (and I’m not kidding here), I know the sub post office she means, and this is the same branch that recently refused to accept from me a parcel bound for Guernsey on the basis that “that’s not a real place”.  News to many of you, I am sure.

What staff often think this means is that the due diligence documents you hold on file must be current.  So if you take on a client and three years later the passport of which you hold a certified copy expires, do you need to get a copy of the client’s new passport?  I would say not.  The legal requirement, as I read it, is that the due diligence information you hold on your client – and to which you refer in order to assess their money laundering risk – must represent the client as they are now.  So, thinking about the passport: if the client still has the same name, and looks pretty much the same, and is of the same gender (stop sniggering at the back), then I would contend, m’lud, that the passport is still up to date.  If, on the other hand, the client has married or divorced or changed their name to that of their favourite footballer or doomed chanteuse (I’m not making this up – take a look), or no longer looks anything like their photo, perhaps because they have had an extreme and life-changing operation, then the passport no longer represents your client and you should ask for the new one.

Of course, all such decisions are taken on a risk-based basis.  So if your client is high risk, you might decide that one element of your EDD will be always to have his current passport on file.  One benefit of this is that you can take the opportunity to leaf through it to see where he has been travelling…  You don’t grow older without getting sneakier.

On the theme of love, I have been following – as a dog follows a nasty but irresistible smell – the trial of Vicky Price.  This is the ex-wife of Chris Huhne, who – once he had left her for another woman – said that he forced her to take speeding penalty points that he had earned.  It’s all most unpleasant, this public washing of marital laundry, but it is a handy example of why it is so important for us to look not only at PEPs, but also at their family and close associates.

When all is going well for the corrupt PEP (which is the variety that all of our controls are designed to spot), his family and friends provide all sorts of laundering opportunities.  [I know that PEPs can be female too, but I hate all of that "his/her" and "s/he" writing.]  He can open accounts in their names and move money into them – still under his control, of course.  He can appoint them to various juicy government jobs, so that they can siphon off more money.  He can set up trusts supposedly to benefit them, and create companies that are nominally run and financed by them.  And by keeping track of such connections, and questioning where their money has come from, we stand a better chance of seeing what is really going on with the PEP and the proceeds of his corruption.

And when things go wrong for the poor old PEP, we may get the “Pryce effect”: a previously loyal sidekick may step forward and say, “Actually, this is what was really going on – and here’s some handy evidence too.”  You’d think Mr Huhne, being an Oxford man, might have read a bit of Congreve.

But I am not sure that this is the whole story.  Leading by example is certainly important – after all, it’s how children learn to speak and walk and behave.  But once a child is talking and moving and interacting, the effort starts to shift from getting them to imitate you, to giving them the skills to make their own informed decisions.  You teach them right from wrong, kindness from cruelty, value from price – and then stand back to let them apply it all.  I don’t want to labour the comparison too much, or suggest that staff are like children, but for a financial institution it is too much to hope that a well-behaved senior management team will lead inevitably to a well-behaved workforce.  I think ideally we need a combination: a good example at the top, and employees who do the right thing (whether that is conducting due diligence checks, or reporting suspicious activity, or turning down dodgy business or bribes) because they believe that it is the right thing to do.

Do you remember that primary teacher or Brown Owl or grandma that you did not want to disappoint?  We all had one – and for them, we behaved like little angels.  And do you know why that was?  It was because they believed in you: they thought you were marvellous.  And so you didn’t want to let them down.  If we let employees know that we think they are doing a terrific job, and that we trust them to do the right thing – and, of course, tell them what that right thing is – they won’t let us down.  With a good tone at the top and a firm foundation, we’ll be in better shape than Jess Ennis.

So it was with great sadness (but very little surprise) that I watched the Lance Armstrong scandal unfold.  In short, the American rider won seven consecutive Tours de France, after beating cancer, and claimed to have done it clean.  Anyone who suggested otherwise was bullied, abused and threatened – careers were ruined, to say nothing of the anguish of cyclists who should have won events that Armstrong “won”.  And now he has finally admitted that he was cheating throughout – either taking performance-enhancing drugs, or blood-doping (taking out his own blood when on top form, and putting it back in when in need of a boost).  Me?  I’m spitting chips, and I want my money back for the three books about Armstrong that I bought.  ”It’s All About the Bike” – phooey!

So how to bring this back to money laundering?  Well, it’s obviously the most enormous failure of compliance – both legal and moral.  The rules of professional cycling say that you must ride clean, and the morality of sport suggests that you should too.  Armstrong has claimed that he only did what every other rider was doing, that he wasn’t actually cheating because cheating is getting an unfair advantage.  This argument can be – and indeed has been – applied to almost any bad behaviour.  Including money laundering.  You’ve all heard the excuse: “If we don’t take it, someone else will”.  It’s a race to the bottom (Eros Poli jokes aside): if one employee or one institution or one sector or one jurisdiction is prepared to ignore the rules, it makes it harder to everyone else to do the right thing.

And it took so long to catch him.  Seven consecutive wins – it’s hard to convey just how outstanding that is, and just how weird.  Rumours were there for years, and testing was in place, but one rider determined at all costs to win was able to evade the controls.  Criminals likewise are determined at all costs – including murder – to make a profit, but we must make sure that our controls are strong enough (and our staff brave and equipped enough) to catch them.  The people are the key.  Those who spoke out against Armstrong had a really rough time; he accused his masseuse of being an alcoholic prostitute in order to discredit her, and had a team-mate sacked and called his wife a “crazy bitch” when they said that he was doping.  The fate of the whistleblower has never been pretty, and yet they remain our best possible route for uncovering wrongdoing.  Do your staff know who to tell if they suspect a colleague of not following procedures, or of being under the control of criminals?  More will doubtless surface about Armstrong and his crimes, but perhaps we can take comfort from one small lesson: the truth will out.  But at what cost along the way?