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Government targets Limited Partnerships in money laundering clampdown

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Government targets Limited Partnerships in money laundering clampdown

by Eamon McCarthy-Keen, Associate, Peters & Peters Solicitors LLP

The UK Government plans to introduce reforms to Limited Partnerships (“LPs”), as part of its clampdown on the use of LPs for money laundering, corruption and tax evasion purposes. Scottish LPs (“SLPs”) have been widely linked to international money laundering, in part because of their separate legal personality and, unlike companies, they can be composed entirely of offshore corporate partners. The Government’s reforms include new registration, reporting and transparency requirements for existing and new LPs and a new requirement for LPs to demonstrate a connection with the UK. The proposals will also provide new powers for Companies House to strike off dissolved LPs or LPs no longer carrying on a business.While the reforms are seen as necessary and proportionate, they will increase the administrative burden for existing and new LPs.

Commercial uses of LPs

LPs have been used for a variety of purposes and in various industries, including pensions, real estate and oil and gas. They have recently become the standard vehicle for venture capital and private equity funds, providing flexibility and fiscal advantages.Notably, LPs do not need to be managed from the UK, which is an attractive feature for fund managers seeking monies from foreign investors for investment portfolios. SLPs have the additional benefit of having separate legal personality, allowing them to enter into contracts and own property in their own right.

The number of SLPs has substantially increased in the last decade, accounting for around two-thirds of the LPs currently on register (approximately 48,000). The National Crime Agency, the UK’s principalanti-money laundering law enforcement body, believes that some of this rise may be explained by the use of SLPs for money laundering and corruption purposes.

Partners in crime

SLPs are alleged to have been used in the Russian ‘Global Laundromat’ money laundering scheme, whereby at least USD20 billion was allegedly diverted from the Russian treasury and state contract through a number of fictitious loans and sham litigation. 113 SLPs are said to have been involved in the scheme. The fact that no natural persons are required to be either the general partner or limited partner of an SLP means that both can be offshore companies, adding a second layer of opacity.

SLPs were also allegedly linked to the Azerbaijan ‘Laundromat’ money laundering scheme, a similar scheme involving the laundering of USD2.9 billion. Among the 50 UK entities allegedly used in the Azerbaijan scheme, 20 were SLPs.

New reforms

In April 2018, the Government published a consultation paper proposing reforms and inviting responses during its consultation period.Nearly 50 respondents from the industry, mainly accountancy and law firms, and pension funds and trusts, responded to the Government’s call for evidence.

In December 2018, the Government published a further paper following the end of its consultation period, taking into account the responses from the regulated sector.The Government plans to introduce the following reforms in four key areas:

  1. Registration – new LPs will need to be registered by agents supervised by an appropriate anti-money laundering (AML) supervisor (e.g. the FCA). This could be achieved by instructing accountants or lawyers, who are already subject to AML reporting obligations and supervision, to establish the LP. The Government does not expect this requirement to be too burdensome as the overwhelming majority of LPs are registered through formation agents. Many LPs are established through trusts and company service providers (TCSPs), which are, since 2017, already subject to money laundering checks.
  2. UK connection – LPs will need to show a “demonstrable link to the UK”. This can be achieved by either: (i) retaining a principal place of business in the UK; (ii) demonstrating that LPs are continuing some legitimate business activity at an address in the UK; or (iii) demonstrating that they continue to engage the services of an AML-regulated agent, which agreed to provide its address as a service address. The requirement for a UK connection was of most concern to the majority of respondents, who feared that this may have a detrimental effect on the funds market, limiting the flexibility of the LP model and rendering it unattractive to foreign investment. The Government appears to have somewhat allayed those concerns by providing option (iii).
  3. Reporting and transparency–LPs will need to file an annual confirmation statement at Companies House confirming that all previous details filed remain correct, and to provide additional information, upon registration and on a rolling basis, including contact information for all partners to the LPs, a standard industrial code identifying the nature of their business, and, notably, the date of birth and nationality of all partners that are natural persons.
  4. Strike-off powers – the Government intends to introduce new powers for Companies House to strike off LPs that are dissolved or no longer carrying on business.

The Government intends to legislate these reforms “when parliamentary time allows”. We anticipate these reforms coming onto the statute books this year, Brexit permitting. The Government is also considering how these proposals will apply to existing LPs and transitional arrangements and plans to consult on a broader package of reforms to Companies House later this year. Details of the requirements, including the procedure for challenging inadvertent strike-offs and the extent of the strike-off provisions, remain to be seen. LPs would do well to continue monitoring these developments and plan accordingly.

Implications for companies (and money launderers)

The reforms, as they stand,will not require LPs to have a principal place of business in the UK to demonstrate a UK connection:a service address in the UK with an AML-regulated agent will suffice. This was a key concern for funds managed overseas. The proposed reforms are broadly seen as reasonable and necessary. The Government is keen on ensuring that LPs, which provide a significant contribution to the UK economy, do not lose their commercial appeal and flexibility.

The new reforms will, nonetheless, carry an additional administrative cost for existing and new LPs. Existing LPs will need to ensure that their agents comply with the new reporting requirements. Funds should advise their investors, particularly those that are natural persons, that their personal information will need to be disclosed. Whilst new LPs will need to seek the services, if they have not done so already, of an AML-regulated agent, which will invariably drive up costs.

Whether these new proposals will deter money launderers will depend, as with all new reforms designed to deter criminal activity, on effective enforcement. Evidence suggests that the new rules introduced in 2017 requiring SLPs to provide data on their persons of significant control have not been widely complied with- less than half of all SLPs have done so according to reports.This does not forebode well that the new registration, reporting and transparency requirements will be effectively policed. In addition to the proposals, the Government would be wise to allocate further resources to an already-stretched Companies House to enforce the new rules, rather than merely adding to its burgeoning task list.

Firms setting up LPs, for their part,should also conduct enhanced due diligence on their clients and, in particular, on the purpose of setting up the LP. Since 2017, firms are criminally liable if they fail to prevent the facilitation of tax evasion.So, if they inadvertently set up an LP for the purpose of evading domestic (or foreign) taxes, they are at risk of incurring criminal liability if they do not have reasonable prevention procedures in place.

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U.S. inauguration turns poet Amanda Gorman into best seller

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U.S. inauguration turns poet Amanda Gorman into best seller 1

WASHINGTON (Thomson Reuters Foundation) – The president’s poet woke up a superstar on Thursday, after a powerful reading at the U.S. inauguration catapulted 22-year-old Amanda Gorman to the top of Amazon’s best-seller list.

Hours after Gorman’s electric performance at the swearing-in of President Joe Biden and Vice President Kamala Harris, her two books – neither out yet – topped Amazon.com’s sales list.

“I AM ON THE FLOOR MY BOOKS ARE #1 & #2 ON AMAZON AFTER 1 DAY!” Gorman, a Los Angeles resident, wrote on Twitter.

Gorman’s debut poetry collection ‘The Hill We Climb’ won top spot in the online retail giant’s sale charts, closely followed by her upcoming ‘Change Sings: A Children’s Anthem’.

While poetry’s popularity is on the up, it remains a niche market and the overnight adulation clearly caught Gorman short.

“Thank you so much to everyone for supporting me and my words. As Yeats put it: ‘For words alone are certain good: Sing, then’.”

Gorman, the youngest poet in U.S. history to mark the transition of presidential power, offered a hopeful vision for a deeply divided country in Wednesday’s rendition.

“Being American is more than a pride we inherit. It’s the past we step into and how we repair it,” Gorman said on the steps of the U.S. Capitol two weeks after a mob laid siege and following a year of global protests for racial justice.

“We will not march back to what was. We move to what shall be, a country that is bruised, but whole. Benevolent, but bold. Fierce and free.”

The performance stirred instant acclaim, with praise from across the country and political spectrum, from the Republican-backing Lincoln Project to former President Barack Obama.

“Wasn’t @TheAmandaGorman’s poem just stunning? She’s promised to run for president in 2036 and I for one can’t wait,” tweeted former presidential candidate Hillary Clinton.

A graduate of Harvard University, Gorman says she overcame a speech impediment in her youth and became the first U.S. National Youth Poet Laureate in 2017.

She has now joined the ranks of august inaugural poets such as Robert Frost and Maya Angelou.

Her social media reach boomed, with her tens of thousands of followers ballooning into a Twitter fan base of a million-plus.

“I have never been prouder to see another young woman rise! Brava Brava, @TheAmandaGorman! Maya Angelou is cheering—and so am I,” tweeted TV host Oprah Winfrey.

Gorman’s books are both due out in September.

Third on Amazon’s best selling list was another picture book linked to politics and projecting hope: ‘Ambitious Girl’ by Vice-President Kamala Harris’ niece, Meena Harris.

(Reporting by Umberto Bacchi @UmbertoBacchi, Editing by Lyndsay Griffiths. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers the lives of people around the world who struggle to live freely or fairly. Visit http://news.trust.org)

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Why brands harnessing the power of digital are winning in this evolving business landscape

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Why brands harnessing the power of digital are winning in this evolving business landscape 2

By Justin Pike, Founder and Chairman, MYPINPAD

Delivery of intuitive, secure, personalised, and frictionless user experiences has long been table stakes in digital commerce, well before the era of COVID-19. As businesses harness the revolutionary power of digital technologies, they have pursued large-scale change to adapt to evolving consumer preferences (some more successfully than others, but that’s a blog for another day). Digital transformation is a term we hear repeatedly, and it looks different for each organisation, but essentially, it’s about utilising technology and data to digitise, automate, innovate and improve processes and the customer experience across the entire business.

As I said, this was already well underway but then came 2020 and no industry escaped the disruption of the coronavirus outbreak, which has had an indelible impact on businesses performance, operations, and revenue. Regardless of whether the impact of COVID has been very positive or very challenging, it has forced organisations globally to re-evaluate and re-orient strategies to adapt.

As lockdowns and pandemic-related restrictions continue to change daily life, this raises the question of how we can balance a dramatic shift to digital and the benefits it brings, while ensuring business continuity and innovation both during and post-COVID, and protecting everyone against fraud?

Digital is an essential survival tool, and even more so in a COVID world

No one could have predicted the dramatic digital pivot that has taken place over this year. Indeed, within weeks of the COVID outbreak cash usage in the UK dropped by around 50%. Digital solutions including delivery applications, contactless payments, mobile commerce, online and mobile banking have become essential components of a touchless customer experience in the era of social distancing. It’s no longer just about an enhanced and superior customer experience, it’s also about health, safety and survival.

In store, businesses have benefited from contactless payments enabling faster throughput and reduced need for consumers to touch payment terminals (therefore requiring greater cleaning, which degrades the hardware much faster). Mastercard reported a 40% increase in contactless payments – including tap-to-pay and mobile pay – during the first quarter of the year as the global pandemic worsened. Digital has also become an essential sales channel for many B2C brands. Where brick and mortar stores have been required to close, digital commerce enables continuity of customer relationships and revenue. This channel also provides brands with rich customer data, which can be used to enhance and personalise the customer experience and typically results in greater levels of engagement and uplifts in revenue.

Industry forecasts estimate that worldwide spending on the technologies and services enabling digital transformation will reach GBP 1.8 trillion in 2023 – a clear indication that the process represents a long-term investment and a global commitment to digital-first strategy. The key point here is that digital brings significant benefits, and regardless of COVID, is here to stay.

The challenges that rapid digital transformation brings to businesses

Justin Pike

Justin Pike

Regardless of whether businesses are operating in developed or less-developed economies, these times of crisis have levelled the playing field in the sense that all businesses are facing similar issues. Access to products and supplies, maintaining customer relationships, accelerating sales for some and declining sales for others, health and hygiene are just a few of the unique challenges brought about by COVID.

Many businesses in physical environments have had to swiftly implement changes to significantly reduce safety risks for staff and customers, such as contactless payments, mobile ordering and delivery options. But with these changes come a host of other benefits of digitisation, such as faster transactions, and reduced human error at the point-of-sale.

The reliance on technology, however, can also expose organisations and consumers to certain vulnerabilities. In particular, the risks of fraud and cybercrime have dramatically increased since the onset of the pandemic as scammers have taken advantage of digital technologies to target both businesses and individuals.

As a McKinsey report illustrates, new levels of sophistication in the activities of fraudsters have placed more pressure on companies that have been previously slow to go digital, bringing “into sharp relief how vulnerable companies really are”, and damaging the financial health of small and large businesses. In fact, the Bottomline 2020 Business Payments Barometer reveals that only one in 10 small businesses across the UK report recovering more than 50% of losses due to fraud.

But take these stats with a grain of salt. While it is important to be aware of the risks and challenges this new business landscape brings, it’s equally as important to have a lens firmly across your own business, industry and audience, and to identify the changes you can make internally to mitigate risk as well as improve your customer experience. Where can you make some quick wins? Do you have the right skillsets internally to achieve what you need to achieve? What technology is out there that will enable your business goals? There are tech companies like MYPINPAD that are making huge strides in software development, which will transform businesses globally.

A digital world post-COVID

Almost a year in, the line between business success and failure remains fragile. However, an ongoing transition towards greater digitisation will be the difference between survival and the alternative.

There is a wide range of initiatives businesses can implement to weather this storm. If we look at the space MYPINPAD operates within, secure digital consumer authentication is crucial to the ongoing success and security of not only financial products but also identification and verification across a range of different industry verticals. Shifting the authentication of consumers securely onto mobile devices enables businesses to completely reshape their customer experiences. By bringing together a more seamless, frictionless customer experience, accessibility, privacy, security and access to consumer data, businesses are able to drive digital transformation across day-to-day activities.

Against this backdrop, software with stronger security standards continue to play an ever more vital role in supporting society, protecting consumers and businesses from the increase in risks that rapid digitisation brings. Already, merchants can deploy PIN on Mobile technology from companies like MYPINPAD, onto their smart devices to speed up the digitisation process many are now tackling.

Essentially, opening up universal payments and authentication methods that feel familiar, for both online and face-to-face transactions, will be key to opening up a world of possibilities when it comes to redefining how businesses engage with consumers.

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Brexit responsible for food supply problems in Northern Ireland, Ireland says

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Brexit responsible for food supply problems in Northern Ireland, Ireland says 3

LONDON (Reuters) – Food supply problems in Northern Ireland are due to Brexit because there are now a certain amount of checks on goods going between Britain and Northern Ireland, Irish Foreign Minister Simon Coveney said.

British ministers have sought to play down the disruption of Brexit in recent days.

“The supermarket shelves were full before Christmas and there are some issues now in terms of supply chains and so that’s clearly a Brexit issue,” Coveney told ITV.

The Northern Irish protocol means there are “a certain amount of checks on goods coming from GB into Northern Ireland and that involves some disruption,” he said.

(Reporting by Guy Faulconbridge; Editing by Tom Hogue)

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