Consulting & Advisory

In UK law money laundering is defined in the Proceeds of Crimes Act 2002 (POCA) and includes all forms of handling or possessing criminal property, including possessing the proceeds of one's own crime, and facilitating any handling or possession of criminal property.

Part 3 of the Terrorism Act 2000 criminalises terrorist financing and makes it an offence to: use, possess, or raise funds for the purposes of terrorism, or enter into arrangements to provide funds or property for that purpose.

The UK's Anti-Money Laundering (AML) legal framework encompasses a range of legislation and regulations to ensure compliance and combat financial crimes. Anti-Terrorism, Crime and Security Act 2001: Introduced measures to counter terrorism and serious crime, emphasizing the sharing of financial information and investigating money laundering. Money Laundering Regulations (MLRs) 2017: Detailed requirements for AML compliance across sectors like banking, accountancy, and legal services. Businesses are mandated to have robust AML policies, perform customer due diligence, and report suspicious transactions. Serious Crime Act 2015: Equipped law enforcement agencies with enhanced powers to combat serious crime, enabling the seizure of criminal assets and targeting money laundering activities. Criminal Finances Act 2017: Introduced fresh measures against money laundering and terrorist financing, including Unexplained Wealth Orders and broadening the Suspicious Activity Report (SAR) regime to encompass money laundering offenses. Sanctions and Anti-Money Laundering Act 2018: Established a new framework for imposing sanctions and battling money laundering and terrorist financing. Economic Crime (Transparency and Enforcement) Act 2022: A recent addition aimed at bolstering the enforcement of economic crime offenses, including money laundering.

HM Revenue & Customs (HMRC): As the UK's tax authority, HMRC plays a vital role in enforcing AML laws and regulations. National Crime Agency (NCA): The NCA is the primary agency in the UK responsible for combating serious and organized crime, including money laundering and terrorist financing. Financial Conduct Authority (FCA): The FCA serves as the UK's financial regulator, overseeing the compliance of most financial institutions with the Money Laundering Regulations.

The UK's AML regime is governed by the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017). The regulations apply to a wide range of firms, including banks, credit institutions, financial institutions, accountants, and lawyers. The key elements of an effective AML compliance program in the UK include: Risk assessment: Firms must assess the risks of money laundering and terrorist financing associated with their business. This includes identifying the types of customers they deal with, the products and services they offer, and the geographic areas in which they operate. Customer due diligence (CDD): Firms must conduct CDD on all new customers to understand their identity, source of funds, and purpose of the relationship. This may involve verifying the customer's identity, obtaining information about their business activities, and understanding the beneficial ownership of the customer. Ongoing monitoring: Firms must monitor all customer relationships on an ongoing basis to identify and report suspicious activity. This may involve scrutinizing transactions, reviewing customer records, and keeping track of changes in customer behavior. AML screening: Firms must screen customers against various watchlists to identify potential financial crime risks. This includes screening against sanctions lists, PEP lists, and high-risk country lists. Training and awareness: Firms must train their staff on AML compliance requirements and procedures. This training should be ongoing and should be tailored to the specific roles and responsibilities of each employee. Record keeping: Firms must keep records of their AML compliance program, including risk assessments, CDD, and suspicious activity reports. These records must be kept for at least five years. Independent audit: Firms should have their AML compliance program independently audited on a regular basis to ensure that it is effective and compliant with the regulations.

Regulation 21 of the Money Laundering Regulations 2017 necessitates establishing an independent audit function when suitable for the size and type of the organization. As a result, the firm's first barrier is determining if they are of sufficient size and character to require one.

The auditor must be independent and appropriately qualified to conduct the audit. This does not necessarily mean the person has to be a chartered accountant or qualified to undertake financial audits. The auditor must not have been involved in the establishment, implementation or maintenance of the reporting entity’s AML/CFT programme; or the undertaking of the reporting entity’s risk assessment. An AML/CFT audit does not have to meet auditing and assurance standards set by the External Reporting Board (XRB). Your independent audit is a systematic check of your risk assessment and programme by an independent and suitably qualified person. It should advise whether: you meet the minimum requirements for your risk assessment and programme; your programme was adequate and effective throughout the specified period; and whether any changes are required.

An AML compliance officer is the person who is responsible for maintaining AML compliance in their organisation. This person will manage the anti-money laundering compliance program in their organisation, including supervising the development and implementation of and performing ongoing monitoring of their institution’s anti-money laundering compliance program. They will help ensure that their organisation complies with AML rules and regulations and takes the required measures against financial crime.

Politically exposed persons (PEPs) are individuals around the world with “prominent public functions”. Obvious examples are Government Ministers and Members of Parliament. The law recognises the risk of PEPs abusing their positions for private gain and using the financial system to launder the proceeds of this abuse. PEPs, as well as their families and close associates, must therefore go through enhanced scrutiny when using the services of certain firms that act as ‘gatekeepers’ to the financial system, such as banks.

A key feature of the MLR 2017 is the ‘risk-based approach’ to preventing and detecting money laundering, and the specific requirement to undertake and maintain a documented practice-wide AML risk assessment. There are no black-and-white rules that tell you your firm is at high risk of exposure to money laundering activity. The conclusions of your practice-wide risk assessment are a matter of judgement. Factors that will play a part in setting your risk rating include: the type of work you do the countries in which your work takes place the types of clients you have how often you engage in regulated activities

Customer due diligence means taking steps to identify your customers and checking they are who they say they are. In practice this means obtaining a customer’s: name photograph on an official document which confirms their identity residential address and date of birth The best way to do this is to ask for a government issued document like a passport, along with utility bills, bank statements and other official documents. Other sources of customer information include the electoral register and information held by credit reference agencies such as Experian and Equifax. You also need to identify the ‘beneficial owner’ in certain situations. This may be because someone else is acting on behalf of another person in a particular transaction, or it may be because you need to establish the ownership structure of a company, partnership or trust. As a general rule, the beneficial owner is the person who’s behind the customer and who owns or controls the customer, or it’s the person on whose behalf a transaction or activity is carried out. If you have doubts about a customer’s identity, you must stop dealing with them until you’re sure.

You must apply customer due diligence measures: when you establish a business relationship with a customer (or another party in a property sale) when you suspect money laundering or terrorist financing when you have doubts about a customer’s identification information that you obtained previously when it’s necessary for existing customers - for example if their circumstances change if you are not a high value dealer, when you carry out an ‘occasional transaction’ worth €15,000 or more as a high value dealer, when you: make a payment to a supplier worth €10,000 or more carry out an ‘occasional transaction’ worth €10,000 or more

In some situations you must carry out ‘enhanced due diligence’. These situations are: when the customer is not physically present when you carry out identification checks when you enter into a business relationship with a ‘politically exposed person’ - typically, a non UK or domestic member of parliament, head of state or government, or government minister and their family members and known close associates when you enter into a transaction with a person from a high risk third country identified by the EU any other situation where there’s a higher risk of money laundering The enhanced due diligence measures for customers who are not physically present and other higher risk situations include: obtaining further information to establish the customer’s identity applying extra measures to check documents supplied by a credit or financial institution making sure that the first payment is made from an account that was opened with a credit institution in the customer’s name finding out where funds have come from and what the purpose of the transaction is The enhanced due diligence measures when you deal with a politically exposed person are: making sure that only senior management gives approval for a new business relationship taking adequate measures to establish where the person’s wealth and the funds involved in the business relationship come from carrying out stricter ongoing monitoring of the business relationship