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Members of Spalding Club Charged for Money Laundering Through Investment Scheme

Richard Marley
November 25, 2021
2 minutes read
2065

Lincolnshire police reported suspected fraud cases in connection with a trading-based investment scheme conducted by the Lottery Syndicate Club Ltd in Spalding.

According to the investigation reports, the men a trading-based investment scheme that was operated by the Lottery Syndicate Club Ltd from 2017 to 2019 and had hundreds of members.

The investigation was carried out by officers from the Economic Crime Unit (ECU). As a result, three men linked to the investment scheme were charged with multiple offenses including money laundering and fraud.

3 men have been charged with money laundering over a #Spalding lotto syndicate.

Two Spalding men and one from #Bedford have been charged after suspected fraud connected with an investment scheme run through the lotto club, which had several hundred members (2017-19) #HeartNews pic.twitter.com/MU3WgzTodF

— Heart News East (@HeartNewsEast) November 24, 2021

Christopher Toynton, aged 72, belonging to Horseshoe Road, Spalding, was charged with fraud, abuse of position, money laundering, and carrying out regulated activities.

Ross Gibson, aged 26, from Eve Lane, Dudley, who previously lived in Spalding, was charged with fraud by false representation, money laundering, and carrying out regulated activities.

Philip Cavener, aged 60, from Douglas Road, Bedford, was also charged for carrying out regulated activities. The three charged men will appear at Lincoln Magistrates’ Court on December 9.

“This has been a very complex investigation and we would like to thank everyone who has so far come forward to provide information. We continue to appeal to anyone else who may have been affected but has not yet come forward, to please contact the investigation team by email”, said the investigating officer PC Phil Gidlow from the ECU.

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Crypto Industry Rejects New Rules to Report NFT and DeFi Transactions
The representatives of the Crypto industry have disapproved of reporting data about NFTs, DeFi transactions and retail payments at the recent OECD meeting.

The meeting organised in Paris on Monday by the Organisation for Economic Co-operation and Development (OECD) unveiled that the crypto industry representatives have rejected the attempts to make reports about the non-fungible tokens (NFTs), decentralized finance (DeFi) and retail payments to tax officials.

International tax authorities want to implement new rules in the existing financial sectors to deploy the foreign bitcoin (BTC) holdings to prevent them from hiding from revenue services.

According to the Common Reporting Standard (CRS), banks need to identify any account holders as per the existing rules who are tax residents in foreign countries and acquire details regarding them to ensure that they are not evading tax.

The industry has contradicted this statement as these requirements are a lot harder to fulfil as mostly NFTs price is not entirely known at a given time. Non-digital assets such as paintings are included in these current rules.

Speaking on the behalf of the lobby group the Chamber of Digital Commerce. a partner at law firm Steptoe & Johnson, Lisa Zarlenga said that only those crypto assets should be considered that are “actively traded on an established market.”

Zarlenga further stated that this may constitute determining whether the prices are accessible and published or not and would ultimately expose anything traded on a major exchange.

Exceeding further in dealing with the traditional banking assets could be a breach of the “technology neutrality” principle since it deals with digital assets more strictly, as made evident by Zarlenga “Just because they’re digital doesn’t mean they should be included.”

The OECD’s Philip Kerfs claimed, “A number of delegates found it a very difficult criterion to apply in practice for binary reporting”. Moreover, OECD thinks that merely applying existing anti-money laundering (AML) laws would put wallet providers in an impossible situation of whether or not to report a transaction.

Suggested Read: Crypto Bill Approved by the US Congress Set to Revamp Digital Asset Securities

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A Brief Insight into AML Regulations for the Art Market
While the banking sector faces increased scrutiny to prevent illicit financial flows, a significant amount of dirty money is still being laundered through the art market. Although financial regulators have strengthened anti-money laundering (AML) regulations in various countries, transactions in art and antiques remain an area of concern.

The US and UK are the two biggest markets for art and antiques where oligarchs and corrupt politicians spend their dirty money in order to gain legitimate funds. Considering the high volume of illicit activity through art purchases, financial regulators have repeatedly urged art dealers throughout the world to incorporate AML screening measures.

The Art Market and Money Laundering

Even though the majority of art purchases involve legitimate funds, numerous cases have shown that Russian billionaires and drug lords use the art market to obscure the origins of their illegally-obtained funds. Following such a purchase, the art or antique item is stored in hidden warehouses for a particular time and then put up for sale.

Moreover, art can also be pledged as collateral in order to get loans in the form of legitimate cash. The Covid-19 outbreak gave rise to online art auctions that have had a serious effect on the traditional art market. According to a report, the global online-only auction sales, including the three biggest auction houses, Sotheby’s, Christie’s, and Phillips, crossed the $1 billion mark for the first time in the last year.

Online art purchases contribute to a large number of transactions that are completely unmonitored and also involve a number of intermediaries like advisors, art dealers, and auction houses. Considering these visible issues and loopholes in art dealings, financial regulators have come up with amendments to AML regulations that apply to the art market as well as antiquities dealers.

Updates to US Regulations for the Art Industry

In the US, financial institutions and other businesses need to comply with the regulations provided by the Anti-Money Laundering Act of 2020 (AMLA 2020). The AMLA updated the definition of “financial institution” to include “a person engaged in the trade of antiquities, including an advisor, consultant, or any other person who engages as a business in the solicitation or the sale of antiquities.” According to the new definition, art and antiquities dealers, as well as those involved in art deals fall under the scope of the AMLA.

The AMLA obliges antiquities dealers to implement sufficient methods for anti-money laundering/combating the financing of terrorism (AML/CFT). Corrupt entities and oligarchs that intend to launder money are provided with a certain level of anonymity because of the system involving intermediaries like agents and brokers. With updates in regulations, it is clear that AML compliance will be ensured in the US art market sooner or later.

The US Senate authorised the Senate Permanent Subcommittee on Investigations in July 2020 to identify the reasons why the US policies of AML sanctions are undermined in the art industry. The consequent efforts showed that the art market is the biggest unregulated market in the US. A study also revealed that there is a lack of AML measures in the major auction houses in the country. Those that do implement AML screening are doing it voluntarily and normally consider the client’s representative as the person to make the transaction. In most cases, the auction house does not require proof of identity from individuals or the UBO (ultimate beneficial owner) information from businesses. The Senate investigation determines that art dealers do not have AML controls as the current regulations do not oblige them to do so.

Canada’s Regulations for the Art Market

The Financial Action Task Force (FATF) issued its Mutual Evaluation Report for Canada in 2016, which highlighted that art dealers and auction houses are highly vulnerable to financial crimes like money laundering and terrorist financing. Arts and antiquities, as well as luxury cars and yachts, are the most commonly used medium by Russian oligarchs amid sanctions following the Russia-Ukraine conflict. Furthermore, in 2018, the Standing Committee on Finance of Canada’s House of Commons released a report named ‘Confronting Money Laundering and Terrorist Financing: Moving Canada Forward’. The report comprised 32 recommendations related to updates and amendments to Canada’s Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA).

The report also states that precious metals and stones dealers were obliged to follow AML regulations in Canada (when the report was published). However, this was not the case for high-value art or luxury goods dealers. The report also listed a set of measures that would ideally contribute to a better AML/CFT regime in the country. It was suggested in the report that “Federal, provincial, and territorial governments should collaborate to close the loophole regarding the transaction of sales between parties who are not subject to PCMLTFA reporting requirements, which creates vulnerability for money laundering to occur.”

The EU’s 5th AMLD

The EU’s Fifth AMLD (Anti-Money Laundering Directive) broadens the scope of AML regulations to include art traders, intermediaries in art dealings, art handlers at freeports, and those who make transactions through freeports when values exceed EUR 10,000. Moreover, the 5th AMLD also includes transactions in other high-value items like arms, precious metals, antiquities, and artifacts. As smaller transactions that are linked to each other can collectively go beyond the threshold that is set by AML requirements, all payments are now subject to transaction monitoring. Enhanced due diligence is required in high-risk cases and involves requiring a photo as well as ID document from individuals and the sources of money from businesses.

The Fifth AMLD also obliges art dealers and the relevant entities to disclose the ultimate beneficial ownership information of businesses, trusts, and foundations. The directive defines the term “obliged entity” as credit and financial institutions and regulated service providers operating outside the financial sector. It also lists freeports under “obliged entities”. The regulation allows EU member states to implement the rules obliging businesses that deal in countries with inadequate AML/CFT measures to perform enhanced due diligence and transaction monitoring on a regular basis.

What Shufti Pro Offers

Enhanced due diligence (EDD) and Anti-Money Laundering (AML) screening are the keys to combating money laundering in the art market. Art dealers must adopt the risk-based approach and employ AML checks to ensure that illegal money has not been used for purchasing artwork. Moreover, ongoing AML and transaction monitoring can assist organisations in maintaining an updated risk profile of every buyer making compliance with the regulations easier. AML screening checks the background of buyers against several sanction lists and PEPs.

Shufti Pro’s AML Screening solution allows your art dealership to validate every buyer and ensure that dirty money is not used for transactions. Furthermore, our ongoing transaction monitoring allows businesses to keep a check on every transaction being conducted by the customers.

Want to learn more about AML Screening for the Art Industry?

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Members of Spalding Club Charged for Money Laundering Through Investment Scheme

The Art Market and Money Laundering

Updates to US Regulations for the Art Industry

Canada’s Regulations for the Art Market

The EU’s 5th AMLD

What Shufti Pro Offers

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