Anti-Money Laundering

Transcription

1 Corporate Actions Group Anti Money Laundering Know Your Customer s Business/Know Your Customer Risk Matrix Product Vulnerabilities - Risk Classification for Registration Business Rating Assessment Rationale 1 Very Low Existing shareholders Very lowest level of vulnerability Funding made by existing clients Monies received direct from FCA regulated firms Risk Based approach 2 Low Existing shareholders Low probability unlikely to be attractive to Application and cheque in the same name money launderers Cheques from UK Clearing banks Banks responsible for performing CDD checks on customers Risk based approach for third party cheques (see Values not given unless gone through an FCA regulated broker Risk based approach 3 Moderate May be used to launder low level criminality Application and cheque in the same name Cheques from UK Clearing banks Banks responsible for performing CDD checks on customers Risk based approach for third party cheques (see CDD checks on all transactions above 50,000 No scale back refunds Risk based approach 4 High May be used to launder but product Limit on investment features may limit the extent to move Application and cheque or debit card account in the same name substantial amount of criminals funds Experian (ID verification) checks for all debit card transactions Scale back refund return part of funds received with application back to applicant 5 Very High Due to customer, or the product or delivery Substantial amount invested channel, it is assessed to present a higher money laundering or terrorist financing risk Scale back refund return part of funds received with application back to applicant 1

2 for the registration business Rights Issues Company wants to raise more money through the issue of new shares to existing shareholders Documentation sent by [Registrar] on behalf of company invites existing shareholders to take up issue They send cheque made payable to [Registrar] re: Rights Issue Registrar distributes lapsed rights proceeds. Existing Shareholders No experience to indicate that ML issues are other than a low risk possibility. Funds in respect of lapsed rights proceeds are received via corporate broker (FCA regulated firm). 2 (Low) Application & Cheque in same name Cheques from UK clearing bank only are acceptable (see glossary A risk based approach to be taken to assess each case (see glossary appendix 1) Third Party Cheques and electronic payments (see glossary 2

3 Initial Public Offering (IPO), includes placings, offers for subscription, offers for sale New company The company is raising capital by seeking individuals/firms or the general public/employees to invest in the company. Registrar collects and banks cheques from investors. Payable to [Registrar] re: Share Offer No experience of ML issues. Without Return Application Money (RAM) 2 (Low) OR Scale-Back With Return Application Money (RAM) 3 (Moderate) Application & Payment (i.e. Cheque or electronic payment) in same name up to 50,000: Cheques from UK clearing bank only are acceptable (see glossary Electronic payments are only acceptable from UK Bank accounts. (See glossary A risk based approach to be taken to assess each case (see glossary appendix 1) Applications above 50,000, perform CDD checks Perform CDD checks in line with UK and EU money laundering legislations and is in accordance with the guidance for the UK Financial Sector issued by the JMLSG. Obtain the following: Full name of applicant Residential Address Date of Birth If unable to perform satisfactory CDD checks or obtain satisfactory ID documents disclose to NCA and request 3

4 Consent to Transact (refusal of Consent to Transact - return funds to the applicant s account only) Source of wealth and source of funds to be established on a risk-sensitive basis Third Party Cheques and electronic payments (see glossary Scale-Back (Sample checks to be undertaken by the business on refunds Sampling of 5% of application between 15,000 (or the sterling equivalent) and 50,000. up to a maximum of 100 applications) Flexing: Amendments to these standard parameters need to be justified following a risk based review by the business involved depending on: The overall size of receipts and the type of IPO Where potentially the bulk of the applications are coming from high risk countries would require consideration of lower limits, previously known applicants may allow higher limits. 4

5 Venture Capital Trust (VCT) and Retail Bonds High risk element of IPOs, investors buying shares to offset tax positions. Registrar collects and banks cheques from investors. Payable to [Registrar] re: Share Offer Applications are often lodged by FCA regulated firm. No experience of ML issues. Without Return Application Money (RAM) 2 (Low) Application & Payment (i.e. Cheque or electronic payment) in same name up to 50,000. Cheques from UK clearing bank only are acceptable (see glossary Electronic payments are only acceptable from UK Bank accounts. (See glossary OR A risk based approach to be taken to assess each case (see glossary appendix 1) With Return Application Money (RAM) 3 (Moderate) Applications above 50,000, perform CDD checks Cheques from UK clearing bank only are acceptable (see glossary Conduct CDD checks in line with UK and EU money laundering legislations and in accordance with the guidance for the UK Financial Sector issued by the JMLSG. Obtain the following: Full name of applicant Residential Address Date of Birth Introduction Certificate Acceptable from an FCA/EU regulated firm or a 5

6 certification on the form that satisfactory Identification verification/cdd has been conducted in accordance with Money Laundering Regulations. The certifier must specify the date, their full name and their signature. If unable to perform CDD or obtain satisfactory ID documents disclose to NCA and request Consent to Transact (refusal of Consent to Transact return funds to the applicant s account only) Scale-back (Sample checks to be undertaken by the business on refunds Sampling of 5% of applications over 15,000 (or the sterling equivalent) up to a maximum of 100 applications) Flexing: Amendments to these standard parameters need to be justified following a risk based review by the business involved depending on: The overall size of receipts of the VCT Where potentially the bulk of the applications are coming from Third Party Cheques and electronic payments (see glossary 6

7 Mergers and Acquisitions (Take-overs) Including Schemes of Arrangement Company take over another company. Takeovers: Registrar acts for offer company and is responsible for the receipt and validation from existing shareholders of the company. If cash offer Offeror or credits [Registrar] bank account on settlement day for distribution to acceptors Mergers: Registrar is responsible for the receipt and validation of acceptances (if applicable) from existing shareholders of the company and distributes new shares to shareholders in the combined group, which may also involve cash fraction payments. Funding made by or on behalf of offeror or (sometimes via a banking syndicate facility involving overseas banks). Payments made direct to accepting shareholder only. ML risk in terms of accepting shareholders low original shares have been registered on receipt of a transfer with a brokers stamp or through CREST; in both cases via a regulated firm. In cases where [Registrar] is not registrar for the target firm the Registrar will take-on the share register from other service provider/company. UK Takeovers 2 (Low ) Non-UK Takeovers 3 (Moderate) UK Takeovers with a cash element For UK takeovers M&A Introduction Certificate from an FCA regulated firm is acceptable, or, Standard Due Diligence must be undertaken.. Non-UK Takeovers Non-UK takeovers to be considered on a case by case basis. For EU takeovers the M&A Introduction Certificate from an FCA/EU regulated firm is acceptable, or, Standard Due Diligence must be undertaken.. A risk based approach to be taken to assess each case (see glossary appendix 1) If the customer is outside the EU or is assessed to present higher money laundering or terrorist financing risk: - Apply Enhanced Due Diligence Conduct CDD checks in line with UK and EU money laundering legislations and in accordance with the guidance for the UK Financial Sector issued by the JMLSG. Source of wealth and source of funds to be established on a risk-sensitive basis 7

8 Open Offers Company wants to raise money to say fund an acquisition via a placing of new shares. Existing shareholders given pre-emptive right to buy the new shares Documentation sent by [Registrar] on behalf of company invites existing shareholders to take up issue They send cheque made payable to [Registrar] re: Open Offer Existing shareholders No experience to indicate that ML issues are other than a low risk possibility. 2 (Low) Application & Payment (I.e. Cheque or electronic payment) in same name Cheques from UK clearing bank only are acceptable (see glossary Electronic payments are only acceptable from UK Bank accounts. (See glossary A risk based approach to be taken to assess each case (see glossary appendix 1) Third Party Cheques and electronic payments (see glossary Schemes of Arrangement Schemes of arrangement are used when a company is undertaking some form of reorganisation, which involves seeking Court approval Whilst generally involving the issue of shares; some form of cash payment often accompanies a scheme (i.e. mandatory cash pay-out or fraction payments). Monies received via company or corporate brokers. Risk of ML low, shares distributed to existing shareholders and fractions sold on behalf of company by corporate broker and funds received direct from corporate broker (FCA regulated firm). 2 (Low) Source of wealth and source of funds to be established on a risk-sensitive basis Introduction Certificate from an FCA regulated firm confirming source of funds is acceptable. A risk based approach to be taken to assess each case (see glossary appendix 1) 8

9 Redemptions and Repayments Company issues a class of security which is redeemed or repaid for cash on one or more occasion. Can be optional or compulsory. Cash payments made to existing shareholders by Registrar on surrender of share or loan certificate. Company credit Registrar s account on payment date. In some cases the redemption/repayment form allows election to have funds paid direct (CHAPS) to a designated bank account or cheque to third party. 2 (Low) Obtain confirmation that outgoing payment/outgoing CHAPs payment is going to the registered share holder. If outgoing third party payment is over 15,000 (or the sterling equivalent). CDD checks in line with UK and EU Money Laundering legislations and in accordance with JMLSG is to be conducted on the payee. A risk based approach to be taken to assess each case (see glossary appendix 1) Electronic payments (see glossary Warrant Subscription Company issues a class of security which entitles the holder to subscribe for cash ordinary shares on one or more occasions Documentation sent by [Registrar] on behalf of company invites existing shareholders to subscribe for shares They send cheque made payable to [Registrar] re: Warrant Subscription If lapsed warrants sold proceeds distributed to nonsubscribers. Similar issues to rights issues. Warrant subscriptions sometimes allow the new shares to be allotted to third party. Lapsed warrants proceeds (received via corporate broker FCA regulated firm). 2 (Low) Application & Payment (I.e. Cheque or electronic payment) in same name Cheques from UK clearing bank only are acceptable (see glossary Electronic payments are only acceptable from UK Bank accounts. (See glossary A risk based approach to be taken to assess each case (see glossary 9

10 Third Party Cheques and electronic payments (see glossary Tender Offers Company (and sometimes other third parties) offer to purchase its own shares from shareholders for cancellation or to create Treasury shares Registrar is responsible for the receipt and validation of tenders and makes payments in respect of shares purchased by company. Existing shareholders Funding made by or on behalf of company (sometimes via the corporate broker who may formally make the purchase from shareholders). Payments made direct to tendering shareholder only. ML risk in terms of tendering shareholders low original shares registered on receipt of a transfer with a brokers stamp or through CREST; in both cases via a regulated firm. 2 (Low) Source of funds to be established on a risk-sensitive basis Introduction Certificate from an FCA regulated firm confirming source of funds is acceptable. Reconstructions Dividend Shareholders given the opportunity to elect for shares in a new company or cash in respect of shares held in a company that goes into voluntary liquidation. Existing company declares dividend Involves the issue of shares and some form of cash payment often accompanies a scheme (e.g. cash-out payment and/or fraction payments). Monies received via company or corporate brokers. Company credit Registrar s account on payment date. Registrar either issues Existing shareholders Risk of ML low - shares distributed to existing shareholders and fractions sold on behalf of company by corporate broker and funds received direct from corporate broker (FCA regulated firm). Funding made by existing clients. Existing shareholders. 10

11 cheques or pays shareholders electronically via BACs or CREST facility. Interest Payments Company issues a class of security (e.g. loan stock) with a bi-annual or annual payment of interest attached Company credit Registrar s account on payment date. Registrar either issues cheques or pays shareholders electronically via BACs or CREST facility. Dividend payments can be made to third party accounts by dividend mandate facility. No experience of any ML issues. Similar to dividends funding made by existing clients. Interest payments made to third party accounts by mandate facility. No experience of any ML issues. Electronic payments (see glossary Electronic payments (see glossary Return of Capital Company return cash to shareholders following the sale of a part of the company s assets (this may involve a B Share scheme, which entitles shareholders to receive the cash either as a capital or as an income payment) Registrar issues cheques, BACS, SEPA or CREST payments to existing shareholders. Usually involves a share capital reorganisation, so fraction payments involved. Monies received via company or corporate brokers. Existing shareholders Funding made by or on behalf of company (sometimes via the corporate broker who may make a repurchase under a B share scheme). Payments made direct to electing shareholder by cheque or applied to the account registered on their holding.. ML risk in terms of electing shareholders low original shares registered on receipt of a transfer with a brokers stamp or through CREST; in both cases via a regulated firm. Drawings Shareholders holding a class of Company credit Registrar s account on payment date. Existing shareholders Funding made by existing 11

12 share are balloted to decide who receives a cash payment. Registrar either issues cheques or pays existing shareholders electronically via CREST facility. clients. No experience of any ML issues. DRIS Company declares dividend Existing shareholders can reinvest in more shares rather than take the cash dividend. Shares are allotted by company not purchased in the market. Not applicable. No ML implications DRIPs Company declares dividend Existing shareholders can reinvest by purchasing more shares rather than take the cash dividend. Company credit Registrar s account on payment date to purchase shares. Cash residue treated as client money complying with FCA client money rules. Funding made by existing clients. No experience of any ML issues. Capitalisation or bonus issue Company issues shares to existing shareholder free of consideration Registrar issues additional shares to shareholders Highly unlikely any cash payments involved No ML implications. 12

13 Sub-divisions Company subdivides its share capital into a greater number of shares in issue. Registrar distributes newly denominated shares following the sub-division, which may involve the issue of cash fraction payments. Monies received via corporate brokers. Shares distributed to existing shareholders. ML risk very low - fractions sold on behalf of company by corporate broker and funds received direct from corporate broker (FCA regulated firm). Consolidations Company consolidates its share capital into a lesser number of shares in issue Registrar distributes newly denominated shares following the share consolidation, which may involve the issue of cash fraction payments. Monies received via corporate brokers. Shares distributed to existing shareholders. ML risk very low - funds received direct from corporate broker (FCA regulated firm). Optional Conversions Company issues a class of security which is converted into say ordinary shares on one or more occasion Only if the exchange ratio is not 1:1 there is the possibility of distributing cash from the sale of fractions. Monies received via corporate brokers. Funds received direct from corporate broker (FCA regulated firm). Issue of shares directly to existing shareholders; or some share exchanges allow a third party to be nominated as the registered holder of the resulting shares. Forms do not have to be lodged by regulated firm, therefore there is albeit possibly very low risk of ML issues. 13

14 Compulsory Conversions Company issues a class of security which is converted into say ordinary shares on a single pre-determined date in the future. Only if the exchange ratio is not 1:1 there is the possibility of distributing cash from the sale of fractions. Monies received via corporate brokers. Funds received direct from corporate broker (FCA regulated firm). Issue of shares directly to existing shareholders only. ML risk very low. Proxy voting Shareholders legal write to vote in absence on business to be put before general meetings of company shareholders. Not applicable. None identified. Not applicable Liquidation payments Distribution to exshareholders of cash obtained from any future sale of the assets of a company in liquidation. Liquidator funds Registrar who distributes payments to shareholders. Funds received direct from liquidator (FCA regulated firm). ML risk very low. 14

15 Scrip Dividends Company declares dividend Existing shareholders can reinvest by electing for new shares allotted by the Company in lieu of the cash dividend. Company retains dividend amount and allots shares to shareholders and Registrar distributes. Not applicable No ML implications 15

16 Appendix 1 Glossary Cheques or bankers draft- Payments must be made pounds sterling drawn on a branch in the United Kingdom of a bank or building society and bear a UK bank sort code number in the top right hand corner. Electronic payments (CHAPS/debit cards) - The registrar will supply the relevant information if applicable to comply with the EU Wire Transfers Regulations. As the registrar may not be in a position to confirm whether an electronic payment is third party or not, anything over 15,000 (or the sterling equivalent) will be treated as if it is. Debit Card payments will only be accepted from UK banks. As a guide to registrars, the following risk based approach should apply for electronic payments: and under - can be accepted without any Due Diligence Requirements or further monitoring ,000 - Discretionary due diligence to be undertaken 50,001-99,999 Bank statements to verify payment is in applicant s name along with passport to confirm the individual s identity. 100, All subject to Due Diligence. Registrars should ensure that all reasonable controls are undertaken to manage the receipt of payments in accordance with regulatory obligations and such controls should include duplicate payment monitoring. CHAPS payments are accepted from FCA authorised brokers/entities upon receipt of confirmation that satisfactory Know Your Customer (CDD) checks have been performed on the underlying applicants and evidence account is in the authorised firm s name and that they are indeed authorised. Third party cheques - Third party cheques are accepted if they are building society cheques or bankers' drafts where the building society or Bank has confirmed the name of the account holder by stamping endorsing the cheque/ bankers draft to such effect. Third party cheques are accepted from FCA authorised brokers/entities upon receipt of confirmation that satisfactory Know Your Customer (CDD) checks have been performed on the underlying applicants. The registrar is responsible for exercising reasonable discretion in relation to other third party cheque payments. Accordingly a risk based approach must be taken with regard to the nature of the payment and the other associated factors. As a guide to registrars the following should apply: Third party cheques up to 15k (or the sterling equivalent) - can be accepted without any due diligence requirements or further monitoring. Third party cheques between 15k (or the sterling equivalent) and 50k discretionary due diligence to be undertaken for all third party cheques. Third party cheques over 50k - all subject to due diligence, except for those received from an FCA authorised brokers/entities provided evidence received that account is in their name. 16

17 Checks for linked transactions should be carried out as appropriate. Risk Based Approach - a risk based approach will be undertaken based on all or elements of:- The corporate profile (e.g. private/public, regulatory status/history, nature of business, financial performance, business locations). Director profiles (e.g. regulatory status/history). Underlying shareholder/customer profiles (e.g. individual/corporate, history, UK/overseas). Payment/Entitlement values and currency. Payment channels (e.g. cheque, BACS, CHAPS, UK/overseas). Scope of existing monitoring controls. Return of funds As standard, all funds will be returned to the originator; direct to their account/card for electronic payments or a cheque made payable to the person named on the original. Sanctions As standard, sanctions responsibility rests with the issuer company; however, on a periodic basis share registrars check the share registers against the H M Treasury sanctions list (and any others, as deemed appropriate). Jurisdictions of concern The FATF publishes statements identifying jurisdictions with strategic deficiencies in their anti-money laundering and counter financing regimes. Unless specific restrictions are put in place, these notices shall be borne in mind when assessing general jurisdiction risk for corporate client relationships. 17