UK Export Finance: Financial Crime Compliance
Find out about our approach to financial crime compliance and how it is at the heart of what UKEF does.
UK companies that do business with integrity are better positioned to reduce risks and capitalise on commercial opportunities.
Doing business with integrity means ensuring compliance with the UK Bribery Act 2010 and all other relevant financial crime laws and regulations. It also involves insisting local partners, agents and distributors adhere to high standards.
Companies that make integrity core to their business protect and strengthen brand reputation, enjoy greater and more sustainable commercial success over the long-term, and minimise the risk of financial loss, reputational damage and potential prosecution.
Tackling financial crime, including bribery and corruption, creates more prosperous and healthy communities and a better business environment. It also enables the UK to maintain its status as a global leader in the fight against financial crime.
UK Export Finance’s approach to Financial Crime Compliance
As the UK’s official Export Credit Agency (ECA), our mission is to advance prosperity by ensuring no viable UK export fails for lack of finance and insurance, doing that sustainably and at no net cost to the taxpayer.
UKEF has put the management of financial crime risk and the deterrence of financial crime at the heart of what we do. We achieve this by undertaking rigorous due diligence including checks against financial crime prior to any support being provided. We also aim to implement identified elements of financial crime compliance best practice from the regulated financial services sector.
UKEF is committed to fulfilling obligations arising from public statements made in respect of taking reasonable precautions to avoid UK taxpayer’s money being used to support transactions tainted with financial crime. We are also committed to taking precautions that are reasonable and proportionate in the circumstances to avoid loss as a result of:
- “Direct risks”, meaning financial crimes committed against UKEF or by UKEF staff, and
- “Indirect risks”, meaning potential financial crimes committed in relation to a transaction that UKEF supports.
As a Government Department accountable to Parliament, and operating under the consent of HMT, UKEF considers reputational issues very seriously. Therefore, our approach to financial crime is underpinned by an effective and robust risk culture and acting in accordance with the following provisions in so far as they are relevant to UKEF activities:
- The UK sanctions regime as set out under the sanctions and Anti-Money Laundering Act 2018 and relevant secondary legislation
- The Fraud Act 2006
- Requirements arising from the Organisation for Economic Co-operation and Development (OECD) Recommendation on Bribery and Officially Supported Export Credits, which UKEF has committed to implementing in full
In August 2022, the Public Sector Fraud Authority (PSFA) was launched to bring together experts from across sectors to reduce the impact of fraud on the public sector. UKEF is committed to acting in line with the objectives of the PSFA and supporting its aim of tackling fraud against the public sector.
UKEF refers cases of suspicious activity involving financial crime to law enforcement agencies as appropriate. As UKEF is not a law enforcement agency and has no statutory investigatory powers, its ability to investigate and detect financial crime is limited to UKEF’s reasonable and proportionate commercial due diligence.
UKEF policies
In light of the approach set out above, UKEF’s financial crime compliance policies and procedures are focussed on the following key financial crimes:
Anti-Money Laundering
UKEF is committed to ensuring that the opportunity for the department to support transactions involved in money laundering or where the proceeds will aid and abet crime is fully reduced. UKEF will not tolerate the use of its transactions, processes, and systems to facilitate money laundering.
Breaches of Sanctions Law
UKEF has reasonable and proportionate controls, systems, and procedures in place to mitigate the risk of UKEF supporting transactions that breach applicable sanctions regimes.
Bribery and Corruption
UKEF is committed to ensuring that it has reasonable and proportionate controls, systems, and procedures in place to prevent both bribery and corruption against UKEF and within the transactions supported by UKEF.
Counter-Terrorism Financing
UKEF has no risk appetite for being involved in any transaction which will support terrorism and has controls, systems, and procedures in place to meet this aim.
Facilitation of Tax Evasion
UKEF is committed to ensuring that it has reasonable and proportionate controls, systems, and procedures in place to identify the risk of counterparty tax evasion or the facilitation of tax evasion.
Fraud
Fraud against UKEF is not acceptable in any form, at any level, or to any degree. UKEF will take appropriate action (including criminal and/or civil action as appropriate) in response to any fraudulent activity against it. UKEF is committed to ensuring that it has reasonable and proportionate controls, systems, and procedures in place to identify and prevent fraud.
These policies remain subject to ongoing review, and can be expected to evolve over time, including to cover other financial crimes. UKEF will consider whether any such changes require prior consultation in accordance with applicable government codes of practice and guidance.
UKEF procedures
UKEF has a dedicated Compliance Function, which is responsible for identifying, assessing, monitoring, managing, and reporting on financial crime risks. This function reports to the Director of Legal and Compliance, and comprises of:
- a Financial Crime Due Diligence division, responsible for transaction screening and enhanced due diligence measures ensuring risk owners understand the financial crime risks, have controls available and can deliver safe business; and
- a Compliance Division, responsible among other things for strategy, policy and compliance assurance activities.
UKEF requires all applicants to either complete an application form, which includes making representations in respect of the contract award and financing in relation to financial crime, or submit their details through UKEF’s online portal. Applicants must also declare whether an agent has acted in relation to the export contract or any related agreement when seeking support. Applicants also undertake commit to report any corrupt activity in connection with any export contract to UKEF.
Whilst there is no legal requirement under UK law for commercial organisations to have a code of conduct in place, it is strongly recommended to do so. In the event that an applicant indicates in the application form that they have no such code of conduct and / or procedures, UKEF directs applicants to relevant guidance issued by the Ministry of Justice.
UKEF takes a risk-based approach to requests for exporter support, including whether the support is sought for a specific export contract or more broadly for general working capital for an exporting counterparty’s entire business.
Before offering support to a transaction, UKEF will make reasonable enquiries about a case and the parties to it, based on responses made by applicants and banks in the application forms (or other relevant documents). As part of the screening process, UKEF will make use of dedicated third party screening tools.
Despite not being regulated, through the risk assessment and due diligence process UKEF seeks to consider best practice methodology to proportionately identify financial crime risk or red flag indicators to then assess and consider the extent of the risk and the options to mitigate. The due diligence process includes collaboration and partnership across the government estate to shift due diligence from sole reliance on open-source media checks to being intelligence-led.
UKEF would not provide cover if UKEF due diligence concluded that a transaction is tainted by corruption. UKEF has no tolerance for being a victim of financial crime. Nor will UKEF tolerate providing support for transactions outside of its financial crime risk appetite.
As part of the documentation for any UKEF support for a transaction, UKEF establishes contractual rights of financial recourse to the applicant or the cancellation of insurance cover, which can be exercised if the applicant subsequently admit to, or are convicted of, corruption and UKEF has suffered a loss.
After support has been confirmed, UKEF will apply the same criteria on an ongoing basis to the circumstances of the transaction and parties, including any changes or additional information in respect of the transaction.
At any time during the contract, UKEF has the right to audit the records of the applicants that relate to obtaining the contract supported by UKEF.
UKEF reinsurance transactions
Certain differences apply to UKEF’s procedures in circumstances where UKEF is providing reinsurance to the ECA of an overseas supplier in respect of supply within that contract from a UK exporter.
In cases where the ECA is an OECD member, UKEF’s enquiries will be restricted to assessing the adequacy of the Lead ECA’s recourse rights.
UKEF will exercise discretion in balancing the demands of rigour and of workability in the application of its standard anti-bribery and corruption procedures to the subcontract. This discretion provides for alterations to standard procedures principally in circumstances where there are multiple subcontracts to the same overseas seller, where some or all are of relatively low value.
Public consultations
UKEF, which is the operating name of the Export Credit Guarantee Department (ECGD), has previously held several public consultations relating to financial crime matters. These consultations do not represent the totality of UKEF financial crime policy: policies are informed by precedence, operational experience and are regularly reviewed and updated in line with internal requirements.
2015: UKEF’s anti-bribery and corruption policy
UKEF consulted on proposed changes to the anti-bribery and corruption declarations and undertakings which it requires from customers. The changes made following the consultation took into account that UKEF had moved to supporting a wider range of exporters, including smaller exporters, and considered it was appropriate to make the relevant declarations and undertakings clearer. The consultation also covered the approach UKEF should take when making any further changes in the future to its anti-bribery and corruption procedures or their application.
2010: Proposed revisions to ECGD’s business principles
The Export Credit Guarantee Department (ECGD) consulted on revising ECGD’s statement of business principles which had been in place since 2000 and had become outdated. The government also proposed that ECGD should adopt a policy of applying international agreements on bribery, environment, and sustainable lending. There were also proposals on ECGD’s procedures for carrying out anti-bribery due diligence where it reinsures another export credit agency which is a member of the Office for Economic Cooperation and Development (OECD). The government also proposed that ECGD should adopt the government’s code of practice on consultation. The government response to the consultation is set out in two documents, the Interim Response (March 2009) and the Final Response (April 2010).
2009: ECGD Anti-bribery and corruption review
ECGD introduced revised procedures on anti-corruption and bribery on 1 July 2006 following a public consultation. In its Fifth Report of the 2005 to 2006 session, published on 25 July 2006, the then Trade and Industry Committee (TIC) commented on the new procedures, and made a number of recommendations.
The government’s response to the TIC report’s recommendations was published on 27 October 2006. In that response, the government gave an undertaking to review the revised anti-bribery and corruption procedures in 3 years (2009). The 2009 review fulfilled that commitment.
2006: House of Commons Trade and Industry committee report – Export Credits Guarantee Department’s bribery rules
ECGD introduced revised procedures on anti-corruption and bribery on 1 July 2006 following a public consultation. In its Fifth Report of the 2005 to 2006 session, published on 25 July 2006, the then TIC commented on the new procedures, and made a number of recommendations.
2005: ECGD consultation on changes to its anti-bribery and corruption procedures
ECGD held a consultation on changes to the anti-bribery and corruption procedures it introduced in December 2004. The outcome of the consultation is contained in three documents: the interim response, the final response and the concluding response.
Transparency information
UKEF retrospectively publishes data relating to FCC activities. This data is hosted on the website of the Export Guarantees Advisory Council (EGAC). Information is contained in the minutes of the relevant meeting.
UKEF also publishes an annual overview of activities in the UKEF Annual Report and Accounts.