New fund raising guidelines have been recommended by the BVCA Task Force set up last month – see evcj November, page 2. The Task Force, chaired by BVCA executive director Jennifer English, has concluded that the private equity industry should be classified as low risk. Law already provides that if an institution or its staff knowingly assist a money launderer they have committed a criminal offence.
The main purpose of the Task Force said English is to alert members of the potential risks. She said: “It is very important that members understand not only the legal and regulatory duties, but a wider duty.” The Task Force has made six recommendations. It has recommended members carry out a review of their current recording and reporting procedures to ensure they are adequate. It has also suggested that mechanisms are put in place to help resolve any internal conflicts and encourage executives to report any doubts. With regards to sources of funding, if members have concerns about the source of a fund investor’s wealth, they should investigate further and report the matter to their money laundering reporting officer. English stressed it is important this position is a person of senior standing so that the executive feels comfortable confiding any suspicions. The BVCA has also reminded its members to be alert to the black lists of individuals and countries and when there is doubt about a co-investee appropriate enquiries should be made.
Finally, the BVCA has agreed to provide training on money laundering avoidance. As a first step it is looking at setting up a seminar for members in the new year. “Some of the larger firms already have training in place, but we think it would be helpful for other members to have some sort of training to make all executives aware of the issues,” said English.
The Task Force has been in discussions with the Joint Money Laundering Steering Group (JMLSG) and the BVCA will subsequently become a member of the JMLSG. The JMLSG produces money laundering guidance notes and the BVCA has prepared a draft of industry specific guidance notes for firms and is working with the JMLSG with a view to its notes becoming part of the JMLSG’s guidance notes.
The main conclusion, stressed English, is that the private equity industry is viewed as low risk and the issues raised here do not apply solely to the private equity industry, but to the financial services industry as a whole.
The decision to set up the task force followed Gordon Brown’s speech at the Labour Party conference in Brighton. In his speech, Brown stated: “No institution, no bank, no finance house anywhere in the world should be harbouring or processing funds for terrorists.” He called upon “all nations to implement financial sanctions to ensure that just as there is no safe haven for terrorists there is no safe hiding place for terrorist funds.”