Anti-Money Laundering. Renu Kiran

Transcription

1 Anti-Money Laundering Renu Kiran

2 Introduction The National Crime Agency estimates around 100bn a year of corrupt foreign money is laundered in the UK. Upmarket property, luxury goods and the British financial system are particularly common destinations for criminal cash from Russia, eastern Europe and Africa. UK s major high street banks allowed more than 700m to pass through. HSBC was fined 1.2bn in Legal Sector is a primary target for organised criminals

3 Introduction There were over 300,000 Suspicious Activity Reports filed last year. ( ) 14,000 were considered to be serious and companies requested consent to handle the transaction. Only 94 were grand corruption issues, of which the police only blocked 7. This year ( ) 423,304 Suspicious Activity Reports field.

4 What is Money Laundering? Proceeds of Crime Act 2002 (POCA) definition is wider - Money laundering is the process by which the proceeds of crime are converted into assets which appear to have a legitimate origin in order that they can be retained permanently or recycled into further criminal enterprises.

5 Proceeds of Crime Act 2002 (POCA) The principal money laundering offences created by the Proceeds of Crime Act 2002 (POCA 2002) are: the concealing offence the arranging offence the acquisition, use or possession offence Dishonesty is not required to commit one of these offences. The maximum sentence for the arranging offence is 14 years' imprisonment or a fine or both and six months.

6 Proceeds of Crime Act 2002 (POCA) The concealing offence A person commits an offence if he: 1. conceals criminal property 2. disguises criminal property 3. converts criminal property 4. transfers criminal property, or 5. removes criminal property from the UK The maximum sentence for the concealing offence is 14 years' imprisonment or a fine or both.

7 Proceeds of Crime Act 2002 (POCA) The arranging offence If you enter into an arrangement which facilitates acquiring or retaining criminal property. The maximum sentence for the arranging offence is 14 years' imprisonment or a fine or both and six months.

8 Proceeds of Crime Act 2002 (POCA) The acquisition, use and possession offence A person commits the acquisition, use and possession offence if he: 1. acquires criminal property 2. uses criminal property, or 3. has possession of criminal property The maximum sentence for this offence is 14 years imprisonment or a fine or both.

9 Types of Attractive Work Financial Action Task Force (FATF) identified: Misuse of Client Account using as a bank account Property Purchase moves large amounts of money in one transaction Creation & Management of companies & trusts hide source of funds Managing client affairs and making introductions legitimacy. Referrals to other firms can avoid ID and background checks should look at the whole transaction Litigation Sham litigation where quick settlement takes place and funds are laundered

10 Background The Fourth Money Laundering Directive came into effect on 25 th June Draft Regulations issued on 15 th March Second Consultation ended on 12 th April Regulations came into force on 26 th June 2017.

11 New AML guidance for the legal sector The Law Society's is currently working to update the practice note to take into account the changes brought about by the Money Laundering Regulations, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs).

12 the Money Laundering Regulations 2017 (MLRs). - Key Changes Firm s Risk Assessment (s.18) Firms are encouraged to assess the risks faced by the business taking into account the following factors: your customers; the countries or areas in which you operate; Your services; your transactions; the nature, scale, complexity and diversity of your business; the geographical spread of your client operations.

13 What does section 19 say? The policies, controls and procedures adopted by the firm must must include: (a)risk management practices; (b)internal controls ; (c)customer due diligence process (d)reliance and record keeping the Money Laundering Regulations 2017 (MLRs). - Key Changes (e)the monitoring and management of compliance.

14 the Money Laundering Regulations 2017 (MLRs). - Key Changes What does section 21 say? Appointment a money laundering compliance principal (MLCP) who is a member of the board of directors or equivalent to ensure compliance with regulations and The MLCP and the MLRO can be the same person.

15 the Money Laundering Regulations 2017 (MLRs). - Key Changes What does Regulation 24 say? Training The appointed person must take appropriate measures to ensure that employees are made aware of the law relating to money laundering and terrorist financing; and. maintain training records.

16 Due diligence - Risk Based Approach Simplified Due Diligence (SDD) is no longer automatic. Firms must identify and verify their client and also verify any person purporting to act on behalf of the customer. Decide appropriate Client Due Diligence (CDD) process on a risksensitive basis. Train staff on how to conduct a risk-based CDD and ongoing monitoring. Keep a written record of your risk assessment.

17 Enhanced Due Diligence (EDD) Section 33 provides a long list where Enhance Due Diligence is required where the customer is considered to be a greater risk. where you do not meet your customer face to face- Get additional & reliable sources to verify information provided. where you are dealing with a politically exposed person a transaction is complex and unusually large, - a young person going through a high value transaction. the customer is a company. the customer is a business that is cash intensive; A high risk customer does not mean that they will be involved in money laundering or other criminal activity.

18 Enhanced Due Diligence (EDD) Where the customer is a Company You must obtain and verify: company number or other registration number; the address of its registered office. the full names of the board of directors and the senior persons responsible for the operations of the corporate. And then identify and verify the beneficial owner. if the beneficial owner is a legal person, trust, foundation or similar legal arrangement then take reasonable measures to understand the ownership and control structure arrangement.

19 What s changing in the Money Laundering Regulations 2017 Politically exposed persons (PEPs) The rules for politically-exposed persons (PEPs) is no longer limited to persons outside the UK. As with foreign PEPs, the provisions apply to family members and known close associates.

20 Politically Exposed Persons (PEPs) PEPs: family member of a politically exposed person includes: a spouse or civil partner of the PEP; children of the PEP and the spouses or civil partners of the PEP s children; parents of the PEP known close associate of a PEP means an individual who has a joint beneficial ownership of a legal entity or a legal arrangement or any other close business relations with a PEP. an individual who has sole beneficial ownership of a legal entity or a legal arrangement which is known to have been set up for the benefit of a PEP.

21 Politically Exposed Person Regulation specifies PEPs as individuals entrusted with prominent public function as follows: heads of state, heads of government, ministers and deputy or assistant ministers; members of parliament or of similar legislative bodies; members of the governing bodies of political parties; members of supreme courts, of constitutional courts or of any judicial body; members of courts of auditors or of the boards of central banks; Ambassadors and high-ranking officers in the armed forces; members of the administrative, management or supervisory bodies of State-owned enterprises; directors, deputy directors and members of the board or equivalent function of an international organisation.

22 What s changing in the Money Laundering Regulations 2017 Beneficial ownership Increased transparency around beneficial ownership of companies and trusts. Companies will be required to maintain records, evidencing ultimate beneficial owners and update their register with the Companies House on an annual basis.

23 What s changing in the Money Laundering Regulations 2017 Cash thresholds have been reduced from 15,000 ( 12,544) to 10,000 ( 8,361). Retain CDD documents for 5 years from end of matter or business relationship. Criminal offences, penalties under this regulation: - imprisonment for a term not exceeding two years or a fine, or both. A person is not guilty of an offence under this regulation if that person took all reasonable steps and exercised all due diligence to avoid committing the offence. tip off - a criminal offence.

24 Reliance on third parties (s.39) A third party ID verification means a person who (a)performs a process, a service or an activity that would otherwise be undertaken by you and (b)is not an employee of your firm. What s changing in the Money Laundering Regulations 2017 Firms relying on third party for ID must get a written arrangement / statement from the third party. Third party must retain copies of the data and documents for the period of 5 years. When requested, the third party will be obliged to provide copies of CDD documents within two working days.

25 What s changing in the Money Laundering Regulations 2017 New penalties for breaching financial sanctions from 3 rd April The European Union Financial Sanctions Regulations 2017 come into force on 8 August.

26 What s changing in the Money Laundering Regulations 2017 A new beneficial ownership register of overseas companies that own UK property. On 7 th August HM Land Registry issued Practice guide 78. Estate Agents will be required to perform customer due diligence (CDD) on not only the vendor in the transaction but also the purchaser.

27 Payments To Third Party Consumer Bank Account Verification Check that the client is the owner of the account that firms are remitting funds to or receiving funds from. Paying monies into a third-party bank account is against the SRA rule and it could be seen as Tax crime under MLRs 2017.

28 Checklist for AML Policies Risk Assessment [s18] Policies, controls and procedures [s19] Internal controls [s21] Training [s24] Customer Due Diligence [s27 & 28] Enhanced Due Diligence [s33] Simplified Due Diligence [s37] - Do very few SDD. Criminality checks [s26]. Trust or company service providers [s56]. Reliance and record keeping policy. [s39]. Parent undertaking for foreign offices. [s39]

29 The future of the AML supervisory regime Supervisor of supervisors - A new Office for Professional Body Anti-Money Laundering Supervision (OPBAS) will tackle potential weaknesses in the supervisory system. OPBAS will operate within the FCA s existing governance arrangements. On 17 th August The Law Society has responded to HM Treasury s (HMT) consultation on the anti-money laundering (AML) supervisory review.

30 HM Land Registry Practice guide 67: evidence of identity; conveyancers HM Land Registry updated Practice guide 67 on 3 rd July Section 6.3 -For a change of name application where the supporting evidence is a deed poll, statutory declaration or statement of truth must be lodged using form AP1 and must include either a certificate confirming that you are satisfied that sufficient steps have been taken to verify the person s identity or evidence Or provide : - a passport, driver s licence or utility bill that shows the former name.

31 Identify and Verify your client. CDD on all your clients. AML Checklist to comply with the Money Laundering Regulations 2017 Enhance Due Diligence for high risk transactions EDD where you do not meet your customer face to face. Check for domestic and international PEPs and do checks on their close associates. Check against Sanctions list. Check validity of ID documents. ( Check that the client is the owner of the account that firms are remitting funds to or receiving funds from. Establishing and checking source of wealth. If relying on 3 rd party for ID check then get written confirmation / agreement. Demonstrate to the Regulators that you took appropriate measure to identify your client and retain the source information for 5 years. Ongoing Monitoring for current clients.

32 PSG can help Partnered with GB Group They are leader in Identity Data Intelligence. Verify the identity of 4 Billion citizens across 33 countries, equating to 60% of the global population. Accurately capture customer address data in 240 countries. Check identity, date of birth, address all in real time Bespoke Risk Profiles / scoring

33 Why PSG & GBG ID 3 Global Decision - The AML result will have a Decision to help you clearly and quickly interpret the report. Pass - The combination of matched personal data is sufficient to award a pass result and no alerts exist. Refer - The client matched some personal details but did not score highly enough to be awarded a pass. Alert - The client matched a negative data source such as a PEP, Sanctions list or a Mortality database. PSG will provide a REPORT GUIDANCE if the report comes back as Refer or Alert.

34 Why Integrate with GB Group

35 Why Integrate with GB Group

36 Thank You This presentation was prepared for Training Eye by Renu Kiran of PSG Connect Ltd. For further information please contact: PSG Connect Ltd. 6 Great Cliffe Court, Great Cliffe Road, Barnsley, S75 3SP T: For any queries about AML or GDPR training and how to meet Regulation 24 please contact Training Eye for a free consultation: T: info@trainingeye.co.uk