Please find below the most frequently asked questions about money laundering and the associated regulations.

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Bottom_bar AMLCC Regulations FAQs

Regulations FAQs

What is Money Laundering?

Money laundering is the process by which proceeds of crime are integrated into the legitimate economy.. Under the Proceeds of Crime Act (POCA) 2002 money laundering offences are committed when a person:

  • Conceals, disguises, converts or transfers criminal property (Section 327)
  • Enters into an arrangement regarding criminal property (Section 328)
  • Acquires, uses or possesses criminal property (Section 329)

Conviction of any of these offences can be punishable for up to 14 years imprisonment and/or a fine.

This is only a general overview. The UK government's Introduction to Money Laundering and Regulations provides more comprehensive information.

What are the responsibilities of an accountant/bookkeeper to stay compliant?

All individuals or firms acting as an ASP (Accountancy Service Provider) have a legal obligation to report any knowledge or suspicion of money laundering as soon as practically possible. An employee

What are the penalties for failing to disclose an offence?

Individuals in the regulated sector commit an offence if they fail to disclose knowledge or suspicion that money laundering is occurring or has occurred. The maximum penalty is 5 years’ imprisonment and/or a fine.

How can a firm ensure it is being compliant with AML regulations?

Businesses need to establish a system that maintains their compliance with AML regulations and provides evidence of such compliance if subjected to an inspection by their supervisory body. The key requirements are:

Appointing an MLRO and having clear reporting procedures to the MLRO
Performing a risk assessment on their firm and keeping it updated
Performing risk assessments on every client and keeping them updated
Undertaking due diligence and ongoing monitoring for all clients
Maintaining clear and up-to-date records
Carrying out training for relevant staff and senior managers
Having clear Anti-Money laundering compliance policies and procedures
Identify reportable matters to the National Crime Agency(NCA)
Monitoring and amending the above routinely and as circumstances dictate

What are the duties of an MLRO?

The MLRO (Money Laundering Reporting Officer or Nominated Officer) is responsible for ensuring that all relevant staff are trained on an annual basis to make sure they are up to date with legislation and aware of the firm’s own policies and procedures. It is also their job to submit any SARs (Suspicious Activity Reports) to the NCA and to maintain the confidentiality of the report to avoid ‘tipping off’.

How many forms of ID are required when verifying a client?

Identification and verification of clients is essential. Don't forget that it is the natural persons behind a client that must be identified and verified, this applies equally when the client is not a natural person (the clients beneficial owner(s)).

Verification of a client may include:

  • Obtaining their photocard driving licence or passport to verify their name, DOB and visual identity
  • Obtaining an up-to-date utility bill (no older than 3 months) to verify their address
  • Undertaking an online verification, where appropriate to further verify the identity of the client or beneficial owners.

If a passport/driving licence is received from a client, does an online verification also need to be completed?

Electronic verification is used to complement the normal identification documents as a tool for 'Enhanced Customer Due Diligence' (EDD). It is usually reserved for high-risk clients or those requiring EDD in order to:

  • Search their electronic footprint
  • Search the PEP (politically exposed person) database and sanctions lists
  • Perform extra checks to confirm that a person’s identity exists

However, a firm may choose to run an electronic verification on all clients to manage the risk of a client being a PEP or on sanctions list.

AMLCC’s client risk assessment tool includes EDD factors and steps where they are required.

Do you need a client’s permission to carry out an online verification check?

You will need to advise your client that you intend to carry out an online verification but you do not need their permission, as it is your legal responsibility to do these checks. The best way to inform your clients is to include a paragraph in your letter of engagement stating that these checks are likely to occur during the verification process and that it may leave a ‘footprint’ on their file, though we are advised by our online verification provider that this will not affect the credit rating for an individual.

What should you do if a client fails an online verification check?

It is not uncommon that a client may have recently moved house or that they are living with their parents or partners where they have no external records of living at the address.

The hard copy verification process should already have been undertaken and the circumstances of any particular client should be considered and what evidence may be available or what risk is attached to the client reviewed and a decision made.

Is there a need to verify clients who you know personally?

You will need to verify all of your clients and carry out normal customer due diligence in order to show your supervisory body that you are complying with the money laundering regulations. Any variation from your standard policy should be noted and approved by senior management.

What are the credentials for a high-risk client?

A high-risk client could, for example, include to be any of the following:

Cash-based business
High-risk business such as opaque business practices or obscure trading procedures
Clients who operate in high-risk jurisdictions
Clients you have never met face to face
Politically exposed persons (PEP) or those on the Treasury Sanctions List
AMLCC’s client risk assessment tools with take users through the risk assessment process for clients.

What would help to verify a high-risk client?

If you have never met the client. The ID they provide should be certified by an individual of good standing such as a solicitor. A Skype call may be worthwhile to help verify their identity but will not be enough on its own. Finally, an online verification should be conducted to check their electronic footprint. This Enhanced Due Diligence (EDD) shows that you are doing everything you can to verify that client.

AMLCC’s client risk assessment tool includes EDD factors and steps where they are required.

If a client is not taken on, should this be reported?

Firstly, you will need to ask yourself why you are not taking on the client. If it is because you are suspicious of the client regarding proceeds of crime, then you should submit a SAR to the NCA containing your suspicions immediately. Alternatively, contact your AML supervisory body for advice on whether or not your suspicions are strong enough to submit a report.

Do freelance bookkeepers need to carry out their own AML check against a client?

The person who should carry out the AML checks should be the person who the individual is a client of. Therefore if an accountant outsources to a third-party bookkeeper, the client is technically the accountant’s and so they should be carrying out the AML checks. However, any third party who is hired should be given training on the firm’s AML policies and procedures to ensure they are working to the same standards.

What should a firm’s AML policies and procedures cover?

A firm must have policies and procedures on the following:

Customer due diligence and ongoing monitoring
Reporting SARs
Risk assessments
Compliance monitoring
AML training
Practical activities that affect the firm’s AML risks such as client accounts or cash handling.
A text editable draft firm policy is available with AMLCC.

How do I submit a SAR?

The easiest way to submit a SAR is by using the SAR Online System.

The quality of the SAR can affect the ability of the NCA to prioritise and process the report. It can also affect the law enforcement agencies' decision or ability to investigate. It is therefore important to include as much detail as possible; poor quality reporting can lead to delays in action being taken.

These SAR glossary codes may help you prioritise your report.

What is meant by the term

'Tipping off' can be found in the Proceeds of Crime Act 2002 (Section 333). It means making any disclosure that is likely to prejudice an investigation that might follow submission of a SAR. If you have submitted a SAR, further information can be requested on a transaction to verify the source of income but you must be careful not to tip off the client.

When would you need to ask for consent from the NCA?

Under the Proceeds of Crime Act 2002 the following scenarios will need to be addressed before deciding whether or not consent needs to be obtained:

Concealing, disguising, converting, transferring or removing criminal property
Facilitation of acquisition, retention, use or control of criminal property by or on behalf of another
Acquisition, use or possession of criminal property
If you find yourself in any of the above scenarios you can either choose not to go ahead with the activity or to proceed (only with consent). If you choose to proceed then you will need to obtain the appropriate consent from the NCA to ensure you will not be committing an offence by continuing with the transaction.
Consent is now better known as a defence against a principal money laundering office; in other words, you or your firm is about to undertake a money laundering office or similarly a defence against a terrorist financing offence.

What is the best practice if a SAR is considered by the MLRO but not made?

If the MLRO has decided not to submit a SAR to the NCA, the internal report should be documented clearly with the reasons why. This should be retained along with the internal report within the client's records. SARs that are considered but not submitted could be kept in a separate file to ensure they are clear if your firm ever undergoes an inspection by your supervisory body.

All individuals or firms acting as an ASP (Accountancy Service Provider) have a legal obligation to report any knowledge or suspicion of money laundering as soon as practically possible. An employee's responsibility ends once they have sent a report to their firm's MLRO/DMLRO. It is then the latter's responsibility to report the suspicion to the NCA via an SAR if felt appropriate.

MLRO: Money Laundering Reporting Officer
DMLRO: Deputy Money Laundering Reporting Officer
NCA: National Crime Agency
SAR: Suspicious Activity Report

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