Key things to know about Money Laundering Prevention
14th May 2018 1839 - Blog Posts
Key things you need to know about Money Laundering Prevention
Preventing financial crime and money laundering are key areas of compliance – it is estimated that up to £57 billion is laundered through the UK every year. Financial services and law firms are obviously key targets for money laundering. As compliance and regulatory experts, Lawson Conner help many high-profile Law and Financial Services firms to take adequate steps towards money laundering prevention and mitigating their risk. The consequences of not having the correct AML policies in place are becoming increasingly serious – as well as financial losses and reputational damage, recklessly making a false or misleading statement in the context of money laundering is a serious criminal offence.
This blog offers an outline of the steps you need to take, and procedures that should be put into place, to prevent money laundering and ensure compliance with the latest regulations.
Money Laundering Regulations 2017
The latest guidance on money laundering prevention are the Money Laundering Regulations 2017, which were updated last June. This directive calls for firms to take a more risk-based approach to the prevention of money laundering, particularly with regards to ensuring thorough due diligence is carried out.
Some of the risk factors to be considered include; clients who are based at a geographical distance or in a high-risk jurisdiction, particularly complex or high-value transactions or the involvement of any politically exposed person. This list is by no means exhaustive – to be compliant with anti-money laundering regulations, firms should also consider factors such as the source of funds and wealth in a situation, and the identity of a client and the circumstances under which the transaction is being conducted.
The thematic review which is summarised here was conducted in July 2017 by the Solicitors Regulation Authority (SRA) following the introduction of the MLR. These requirements should be considered as a matter of urgency and the SRA expects firms to demonstrate the steps they have taken to meet their new obligation of being MLR compliant. Read more in this summary PDF ‘Preventing Money Laundering and Financing of Terrorism’.
Recording Risk and Conducting Due Diligence
An important part of the Money Laundering Regulations is to record risk to demonstrate a consistent approach to the directive, and to show that firms are not over reliant on assumed knowledge of the client. Risk assessments, decision making processes and evidence of due diligence should be recorded for each client. The Money Laundering Regulations have also tightened up customer due diligence requirements, so that simplified due diligence should be the exception rather than the norm. Due diligence needs to include all the risk factors already discussed, as well as in-depth identification verification and the consideration of geographical risk factors and where funds and wealth are coming from.
Training and Reporting
The latest directive says that staff should be trained, on a regular basis on money laundering prevention, preventing terrorism funding and general data protection rules. It also calls for the appointment of a designated Money Laundering Compliance Officer (MLCO) and a Money Laundering Reporting Officer (MLRO), which should both be board level appointments. Reporting is a key part of the Money Laundering Regulations, and any suspicion of money laundering or the financing of terrorism should be passed on to the MLRO, who can file a Suspicious Activity Report with the United Kingdom Finance Intelligence Unit, responsible for gathering information on potential money laundering and terrorism financing.
PEPs and Blacklists
Another major change that came into force with the Money Laundering Regulations 2017 is that the parts of MLR 2007 that previously only applied to foreign Politically Exposed Persons, have been extended to include local Politically Exposed Persons too. This puts more burden on due diligence as more in-depth checks need to be conducted on a wide range of UK-based PEPs.
This outline is just the tip of the iceberg for anti-money laundering regulations, which places an increasingly heavy regulatory burden on firms. At Lawson Conner, we are compliance experts, and specialise on reducing risk for our clients, leaving them free to focus on their core business activities. AML can be a time-consuming and costly process, but it’s critical that it’s conducted correctly, so you can mitigate risk by outsourcing all or part of the administration. We provide outsourced AML services, expertise and advice, freeing up your time to focus on the day-to-day duties. We also offer AML software, on a standalone basis, or on a managed compliance basis. With our managed compliance technology, clients can reduce regulatory risk, ensure that robust compliance systems are in place and potentially cut costs by 50-70%.