25th June: DBS Checks for BOOMs, Poor Quality of UK Audit, Growing Trade Tensions

WHAT’S NEWS

DBS Checks for BOOMs

Regulation 26 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the MLRs) require that supervisory authorities (e.g. ICAEW, ACCA, AAT) approve all BOOMs from 26 June 2018. BOOMs are:

  • Beneficial Owners holding more than 25% of a firm
  • Officers (MLRO or Money Laundering Reporting Officer, and MLCP or Money Laundering Compliance Principal)
  • Managers.

A basic (rather than enhanced) criminal record check (called DBS or Disclosure and Barring Service check) is needed for these purposes.

England Disclosure and Barring Service
Scotland Disclosure Scotland
Northern Ireland Access NI
Guernsey Guernsey Vetting Bureau

Approval is only granted if the BOOM does not have a relevant criminal conviction, such as lying (e.g. perjury) and monetary crime (e.g. fraud/tax evasion/money laundering).

Source: SWAT

Poor Quality of UK Audit

According to ICAEW’s June audit monitoring report, 76% of the audit reviews needed no regulatory action, meaning that 24% of the reviews did require further action and of these 8% of the audits reviewed required significant improvement. – ICAEW

According to the Financial Reporting Council (FRC), overall audit quality at the Big Four has significantly deteriorated. In 2017/18, 72% of audits required no more than limited improvements compared with 78% in 2016/17. Among FTSE 350 company audits, 73% required no more than limited improvements against 81% in the prior year. There has been an unacceptable deterioration in quality at one firm, KPMG: 50% of KPMG’s FTSE 350 audits required more than just limited improvements, compared to 35% in the previous year. As a result, KPMG will be subject to increased scrutiny by the FRC. – FRC

Growing Trade Tensions

Trump plans new curbs on Chinese investment, tech exports to China. Treasury is crafting rules that would block firms with at least 25% Chinese ownership from buying companies involved in “industrially significant technology”. – WSJ

Chinese President Xi Jinping is responding to the Trump administration’s trade-clash escalations by “punching back.” Apart from imposing higher tariffs, Beijing can hold up M&A deals involving U.S. companies, delay licenses, ramp up inspections or drive its 1 billion-odd consumers to shun American products. – WSJ

Also in the News:

Harley-Davidson to Shift Production of Motorcycles to the EU

EU tariffs on Harley-Davidson motorcycles exported from the U.S. have increased from 6% to 31%, resulting in an incremental cost of approximately $2,200 per average motorcycle exported from the U.S. to the EU. The company will be implementing a plan to shift production of motorcycles for EU destinations from the U.S. to its international facilities to avoid the tariff burden. – ZeroHedge

“Harley-Davidson maintains a strong commitment to U.S.-based manufacturing which is valued by riders globally. Increasing international production to alleviate the EU tariff burden is not the company’s preference, but represents the only sustainable option to make its motorcycles accessible to customers in the EU and maintain a viable business in Europe. Europe is a critical market for Harley-Davidson. In 2017, nearly 40,000 riders bought new Harley-Davidson motorcycles in Europe, and the revenue generated from the EU countries is second only to the U.S. Harley-Davidson’s purpose is to fulfill dreams of personal freedom for customers who live in the European Union and across the world…”

– from a Company’s filing

Harley’s international sales rose for the first time in over a year in the company’s first quarter, by 0.2% annually. Harley wants to boost its international business to half its annual sales volume over the next decade, from about 40% currently. Sales in Harley’s main U.S. market, meanwhile, fell by 12% in the first quarter, continuing a downward trend of sales in recent years. The tariffs are a tough blow for Harley, which has struggled to lift sales. – WSJ


Amazon’s Pharmacy Business

Amazon has announced plans to buy PillPack, an online pharmacy that offers pre-sorted doses of medications, as well as home delivery. The online retail giant’s $1 billion deal outbid a rival Walmart Inc.’s offer. – WSJ

Weekly roundups are published on Saturdays.

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