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The spectacular performance of the US financial market in recent years, the financial crises in South‐East Asia and Russia and the collapse of one of the most established merchant banks in the world are landmark events in economic history that have prompted concerns around the globe. The advent of the information age and globalisation means that the consequences of these events are felt more readily and extensively than ever before. Sustainability of financial growth and avoidance of future crises raise questions with a common denominator — good governance. With one of the principal financial centres in the world, it is trite to suggest that the need for good governance in the UK cannot be overstated. Protecting investors against abusive and fraudulent practices in the financial services industry has always assumed great importance. Since its emergence as an international financial and trading centre in the 13th century, the City of London has consistently emphasised the values of market confidence and integrity. In the Financial Services and Markets Bill, which is currently being read in Parliament, it is stated that its object is to maintain confidence in the financial markets, to promote public awareness and understanding, to secure an appropriate degree of protection for consumers through recognising the different degree of risks involved in different transactions and the different degrees of expertise and experience of different consumers, and to reduce the extent to which financial undertakings are used for the furtherance of financial crime.

There was a time in Britain when even senior representatives of the financial services industry were prepared to be quoted in the press as expressing doubts as to whether there was anything intrinsically wrong with directors and other corporate insiders taking advantage of their better knowledge about their companies in their own investment dealings. Indeed, some even went so far as to say that this was both proper and natural. True it is that, in Britain or for that much in continental Europe, there are few, even among the groves of academia, that would have advanced the theories justifying insider dealing that Professor Henry Manne so clearly articulated in ‘Insider Trading and the Stock Market’. Nonetheless, in what was then the leading book on the law and practice of the stock market, the authors, a leading Queen's Counsel and an eminent stockbroker, expressed the view in 1972 that a stockbroker who learnt even privileged information should not allow this to operate to the detriment of his client. Having said this, Sir Winston Churchill complained that it was defamatory to assert that advantage had been taken of ‘inside information’ during the so‐called Marconi scandal in 1911, and there are comments in a report to the House of Commons by special commissioners as early as November 1696 roundly criticising promoters of over‐valued stock selling out, in the entrepreneurial fashion eloquently advocated by Professor Manne, on the basis of their privileged knowledge and position. Thus, discussion of the pros and cons of insider dealing, at least in Britain, has tended to be emotional rather than based on economic or even pseudo‐economic analysis of empirical data. Even the surveys that have been conducted on attitudes to the practice would hardly impress a statistician.

The purpose of this paper is to discuss and evaluate the existing public and business policies which regulate and influence the operating procedures of USA, financial institutions qualifying prospective customers for their financial products and services. The specific focus of the paper is on the controversial issue of whether many of these financial institutions are recognizing forms of identification, such as the individual taxpayer identification number and foreign government‐issued documents, which are either inadequate for this purpose or inadequately secured as a legitimate form of identification.

By reviewing key USA laws and regulations pertaining to the legal qualification of prospective customers, the author is able to evaluate (based on available evidence) the business practices engaged in by certain members of the financial services sector.

The use of less secured forms of legal identification are allowing illegal aliens to gain access to a variety of financial products and services, thereby providing an environment conducive to encouraging further illegal entry and supporting residence of this population in the USA.

The paper offers an in‐depth analysis of USA laws and regulations which appear to offer contradictory guidance to financial service companies who are required to legally identify prospective customers of their products and services. Furthermore, while recommending new legislation to harmonize a public policy approach among federal agencies, i.e. to require secure forms of legal identification which are readily available to USA citizens and legal alien residents, the paper also explores how financial institutions are capable of enhancing their corporate citizenship profile and reputation, especially to stakeholder groups concerned with enforcement of immigration laws, by exercising enhanced voluntary business operating policies.

This paper aims to derive the conditions under which a financial services firm will want to hire a compliance services company and show how much money they should spend.

This paper uses a mathematical model to show the intuition behind many of the compliance decisions that cost financial services firms billions every year.

This paper finds that hiring compliance firms may save banks and brokerages money. However, their advice may lead to an embarrass de riches – whereby the lower compliance costs and higher profit advantages they confer may lead to more regulation. Regulators may furthermore tighten regulation – with the expectation that financial service firms will adapt somehow. This paper presents a fresh perspective on the Menon hypothesis, deriving conditions under which financial regulations help the competitiveness of an international financial centre.

The paper represents one of the first and only models of compliance spending by financial services firms.

This paper provides five potential policy responses for dealing with ever ratcheting financial regulations.

The paper hopefully launches literature on the compliance service industry – and the buy-or-do decision to engage in financial services compliance. This paper finds that efficient compliance can hurt firms, by encouraging regulation. This paper shows how firms can forestall the extra regulation that comes with easier internet and computerised monitoring.

Information disclosure requirements are a relatively common feature of consumer protection regimes generally. In the case of retail investment products such requirements have been in place since the late 1980s. Now the European Distance Marketing of Financial Services Directive will impose a similar disclosure regime wherever a contract is concluded at a distance. But, despite the popularity of disclosure regimes with policy makers, the available evidence suggests that such regimes may not be particularly effective. The purpose of this paper is to discuss first, the extent to which disclosure regimes are underpinned by a solid understanding of consumer decision‐making behaviour, and secondly, the implications the development of the internet as a delivery channel for retail investment products might have for their effectiveness. The paper concludes that, despite the indeterminacy of consumer decision‐making research such that it fails to provide a ready model on which to (re)design disclosure regimes, the development of the internet as a delivery channel both compounds the challenges for the regulator in devising an effective disclosure regime, but also provides the regulator with an opportunity to explore the potential to deliver interactive capabilities which would enhance the potential to better influence consumer decision making. As such, the paper should be of interest to regulators, the industry (which has expressed doubts about the cost‐effectiveness of such regimes) as well as academics interested in regulatory policy.

Enforcement as a concept imports compulsion to comply with a particular norm. Of course, the nature of enforcement might vary considerably with the norm in question or society within which action is desired. Professor Gower, in his ‘Review of Investor Protection’, expressed the view that a rule that could not be or was not enforced brought the system, within which that rule was supposed to operate, into disrepute. Whether this is true or not may be a matter for debate. Most systems of control envisage rules that in practical terms are unenforceable, but that are expected to have a normative or educational effect. Such functions, in the context of securities regulation, may be thought to be of some significance. Thus, the fact that simply because a rule cannot either in its terms or in practice be sanctioned by a predictable and determinate action intended to promote compliance, does not necessarily undermine that rule let alone the system within which it exists. To assume without more that a rule that cannot be enforced is not a legal rule, or to be precise a rule of law, while no doubt appealing enough to the positivist school of jurisprudence, is simplistic and outdated. Furthermore, in the context of the sort of economic regulation that we are discussing, whether a rule is characterised as one of law or not may or may not have significance. While there is a problem with determining the appropriate degree of interface between rules bearing differing qualities, purely in terms of achieving a defined regulatory objective it might well be that a rule which is not law in the formal sense of having been promulgated by an authority with legislative power, promotes a satisfactory degree of compliance. Therefore, many of the rules that pertained prior to the creation of the regime of regulation under the Financial Services Act 1986 were essentially non‐legal in the sense that they did not carry determinate sanctions ordained by a legal process consequent upon a violation and were not promulgated by an authority with legislative power. However, to dismiss them because they were unenforceable at law would give a very false picture of the efficacy of what was for many years a satisfactory regulatory structure. Even today, although the interrelationships of legal and non‐legal rules is very much more complex, it is still the case that significant areas of regulation have been left to non‐legal authorities.

The Single Market in financial services (investment funds, banking, insurance and investment services) has had a long gestation and has been a mixed success. It is now faced with a new challenge, the adaptation of the Community regulatory framework to an electronic environment. This paper reviews progress in creating a Single Market in financial services, in particular the application of freedoms to provide services and of establishment and the principles of mutual recognition, home country control and the single licence. It also identifies issues in relation to electronic advertising, marketing and provision of financial services on a cross‐border basis. The paper seeks to show that existing and proposed Community legislation provides a framework for future development of this new medium:

The purpose of this paper is twofold. Firstly, it highlights areas of disconnect between how the financial services sector in the UK approaches the requirement to evidence source of wealth when conducting customer due diligence; the requirements of the UK’s laws and regulations in relation to evidence source of wealth; and the expectations of the Financial Conduct Authority (FCA) in this regard. It then proposes an alternative approach to evidencing source of wealth.

Semi-structured interviews have been carried out among compliance professionals in UK financial services.

This paper provides rare insight into the anti-money laundering arrangements of UK banks, an area that has not yet been widely researched in the academic literature. It highlights a lack of legal certainty in the UK’s laws and regulation around anti-money laundering and argues that the expectations of the FCA exceed both the letter and the spirit of the laws. It suggests that mixed messages disseminated by the FCA have incentivised banks to shift their focus from financial crime risk (i.e. preventing money laundering and terrorist financing, etc.) towards regulatory risk (i.e. the risk of falling foul of regulatory expectations) and proposes a change to the law and regulatory guidance to enhance the level of legal certainty needed for the law to be effective.

The paper makes suggestions for a more practical and risk-based approach to anti-money laundering compliance and for a much-needed change in the law.

It provides unique insight into the due diligence challenges of financial services firms and argues for the FCA to propagate a more risk-based approach to enhanced due diligence.

The purpose of this paper is to highlight the activities of the FCA with respect to the incidence of money laundering and highlight regulatory gaps. The financial services sector provides a crucial infrastructure for the promotion of wealth and innovation in the UK. This attractive infrastructure also appeals to criminals looking to launder the gains of their illicit activities.

The paper analyses the UK money laundering regime, highlighting specific challenging areas. The paper investigates the role of politically exposed persons and the use of corporate structures in promoting money laundering. In this context, it also becomes crucial to investigate the role of financial institutions and the sufficiency of their governance approach in lessening the incidence of money laundering. The paper investigates secondary sources and relies on their findings. It compares these findings to the regulatory outcomes.

The paper recommends steps that can be used to lessen the incidence of money laundering in the UK. From the reports evaluated, it is clear that the Financial Conduct Authority is working towards reducing the incidence of money laundering, but this could be further strengthened with the adoption of additional enforcement tools.

The paper suggests that different approaches should be used based on firm size, the type of business and the risk that a financial services firm presents to the financial sector. A large firm will need to bear more regulatory burden compared to a smaller firm.

The paper investigates the current approach to minimising the incidence of money laundering in the UK. It suggests that the regulator can guide financial services firms to meet the regulatory objectives by relying on an approach that discerns the regulatory risks presented by different firms depending on their size.