So you think all your clients property is clean? 25 October 2017

Transcription

1 So you think all your clients property is clean? 25 October 2017 Nigel Lubbock Director Tom Bailey Director

2 Why this topic? Statistics Professions Increased legislation Softer options for prosecution ICAEW draft guidance

3 Back to basics on the law We make no apology Two separate but complementary codes Both must be considered on a continuous basis: POCA 2002 MLR 2017 Both codes carry criminal sanctions

4 Proceeds of Crime Act 2002 Offences: S327 Concealing, disguises, converts, transfers, removes criminal property S329 Acquires, uses, possesses criminal property S330 Failure to disclose a knowledge or suspicion S333 Tipping off

5 POCA 2002 Section 328(1) arrangements: A person commits on offence if he enters into or becomes concerned in an arrangement which he knows or suspects facilitates (by whatever means) the acquisition, retention, use or control of criminal property by or on behalf of another person Beware becoming a small but important cog Section 328(2) Defence If he makes an authorised disclosure

6 Regulations The Money Laundering Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017

7 Are you a relevant person? Brexit irrelevant Auditors Insolvency practitioners External accountants Tax advisors Legal proceedings exceptions (R31.3)

8 2017 regulations Key issues: Conduct a whole firm Money Laundering and Terrorist Financing Risk Assessment Officer responsible for compliance Implement systems, policies, controls and procedures to address money laundering and terrorist financing risks and meet the requirements under the regulations Apply your policies, procedures and controls across the firm s structure Adapt appropriate internal controls Provide training to staff

9 Systems, policies, controls, procedures, record keeping? Do not shoot the messenger

10 Four key areas: Comply with customer due diligence requirements Comply with requirements relating to politically exposed persons Ensure record keeping and data protection systems and policies meet the requirement of the regulations Comply with regulations relating to record keeping and provision of information about beneficial ownership if you act as a trustee

11 Risk assessment Must take appropriate steps to identify and assess the risks of money laundering and terrorist financing to which the business is subject Must keep an up to date written record of the steps taken to comply Must be able to produce the risk assessment

12 Internal controls Appoint a director or party (to be responsible for compliance with the regulations (as well as a nominated officer) Establish an independent audit function to examine, evaluate and make recommendations on the adequacy of your policies and procedures Establish and maintain systems that allow you to respond fully and rapidly to law enforcement on whether we have had a business relationship with a person in the previous five years and the nature of that relationship

13 Process for reporting Disclosure to nominated officer Nominated officer considers disclosure and all known information Nominated officer determines whether information gives rise to knowledge or suspicion or reasonable grounds for knowledge or suspicion that a person is engaged in money laundering and terrorist financing SARs

14 Client due diligence (CDD) Risk assessment (18) Demonstrate it (28.16) Identify (28(2)) Verify (28(2)) Purpose of business relationship (28(2)) Source of funds Timing Before (30)

15 Verify (28(18)) on the basis of documents or information, in either case, obtained from a reliable source which is independent of the person whose identity is being verified Documents issued or made available by an official body are to be regarded as being independent

16 Simplified due diligence (R37) Low risk of money laundering etc Customer risk factors Public administration Resident in geographical area with lower risk Credit institution Listed in regulated market Geographical lower risk EEA Effective AML regime Low level compliance But beware R.37(4) the presence of one or more risk factors may not indicate that there is a low risk

17 Beneficial owner Company Ultimate control over management of the company Ultimately owns or controls (directly or indirectly) more than 25% of the shares or voting rights in the company An individual who controls the company (51) Includes LLPs

18 Beneficial owner Partnership (not LLP) The beneficial owner is entitled to or controls ( directly or indirectly) more than 25% of the capital or profits in the partnership or more than 25% of the voting rights Otherwise exercises ultimate control over the management of the partnership

19 Beneficial owner Trusts (or the like) (6) Beneficial owner means each of the following: Settlor The trustees The beneficiaries Where some of the individuals benefitting from the trust have not been determined, the class of persons and in whose main interest the trust is set up or operates Any individual who has control over the trust

20 Control Control means power alone, jointly or with the consent of another person under the trust instrument or by law to: Dispose of, advance, lend, invest, pay or apply trust property Vary or terminate the trust Add or remove a person as a beneficiary or to or from a class of beneficiaries Appoint or remove trustees or give another individual control over the trust Direct, withhold, consent to or veto the excise of a power

21 Ongoing monitoring of business relationship (28(11)) Scrutiny of business...throughout the course of the relationship Including the source of funds Ensure the business is consistent with your knowledge of the client, the client s business and the risk profile Review and keep up to date documents obtained for CDD

22 I did and here is the evidence Must be able to demonstrate to its supervisory authority that the extent of the measures it has taken to satisfy its requirements under this regulation are appropriate in view of the risks of money laundering and terrorist financing including risks: Identified by the risk assessment carried out; Identified from the information available to that person

23 Enhanced customer due diligence (33) Mandatory ECDD and Enhanced Ongoing Monitoring (EOM) where: High risk of money laundering or terrorist financing Business relationship or transaction with a person established in a high risk third country PEP or family member or known associate or PEP False documentation Transaction complex and unusually large, or an unusual pattern of transactions and the transactions have no apparent economic or legal purpose

24 What is EDD? As far as reasonably possible examining the background and purpose of the transaction Increasing the degree and nature of monitoring of the business relationship Seeking additional independent, reliable sources to verify information provided Taking additional measures to understand better the background, ownership and financial situation of the client and other parties to the transaction Taking further steps to be satisfied that the transaction is consistent with the purpose of the business relationship Increasing the monitoring of the business relationship

25 High risk red flags Business is conducted in unusual circumstances Client is resident in a geographical area of high risk The client is a business that is cash intensive The corporate structure of the client is unusual, excessively complex given the nature of the company s business

26 Politically exposed persons (PEPs) An individual who is entrusted with prominent pubic functions other than as a middle ranking or more junior official Family member of a PEP includes: Spouse Civil partner Children and their spouses Parents Known close associate of a PEP means an individual known to have joint beneficial ownership of a legal entity of a legal arrangement or any other close business relations with a PEP ICAEW draft guidance on treatment of PEPs

27 Questions and answers Please give us your feedback!

28 Our next seminars 12 December 2017 As data processors, are you ready for GDPR? 26 April 2018 Keeping you and your clients out of court

29 So you think all your clients property is clean? 25 October 2017 Nigel Lubbock Director Tom Bailey Director