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Bottom_bar AMLCC Regulations FAQs

Regulations Frequently Asked Questions

What is Money Laundering?

Money Laundering is the process of hiding illegal sources of money. Under the Proceeds of Crime Act 2002 (POCA) money laundering offences are committed when a person:

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

This is only a general overview. More information is provided by the UK government at:- Click here for an Introduction to Money Laundering and Regulations

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

All individuals working for firms and carrying out 'accountancy services' have a personal & legal responsibility to report any knowledge or suspicion of money laundering as soon as practically possible. The maximum penalty for not reporting is 5 years imprisonment and/or an unlimited fine. For the employee, their responsibility ends once they have reported their suspicions to their firm's MLRO or DMLRO. Once this report has been sent, it is then the responsibility of the MLRO to report the suspicion to the NCA via a SAR. Once they have submitted the SAR to the NCA then that is where the reporting responsibility of the MLRO ends and it is then up to the NCA to pursue the report further, however the firm may need to think carefully about continuing to act for the client. It is a criminal offence for a business not to comply with the 2007 Money Laundering Regulations if it is within their scope of work.

How can you be sure that you are being complaint with AML regulations?

The key requirements of a business complying with the anti-money laundering regulations include:-

  • Appointing an MLRO and having clear reporting procedures to the MLRO
  • Perform Risk Assessments on every client and keeping them up-to-date
  • Customer due diligence and on-going monitoring for all clients
  • Clear record-keeping is in place and records kept up-to-date
  • In-house training is completed annually for all client-facing staff members including the MLRO
  • Clear anti-money laundering compliance policies and procedures are in place

Businesses will need to establish a system that continues to maintain their compliance with AML regulations, and will need to provide evidence of compliance if subjected to an inspection by their supervisory body.

What are my duties as an MLRO?

The MLRO is responsible for ensuring that all client facing staff are trained on an annual basis to ensure they are fully compliant.

It is also their job to submit any SARs to the NCA and maintain the confidentiality of the report to avoid tipping off.

What are the money laundering offences?

Sections 327-329 in the Proceeds of Crime Act define the money laundering offences as:-

  • Conceals, disguises, converts or transfers criminal property, or removes criminal property from England and Wales or from Scotland or from Northern Ireland
  • Enters into or becomes concerned in an arrangement which he know or suspects facilitates the acquisition, retention use or control of criminal property by or on behalf of another person
  • Acquires, uses or has possession of criminal property except where adequate consideration was given for the property

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

What happens if an accountant/bookkeeper fails to disclose an offence?

Individuals in the regulated sector commit an offence if they fail to make a disclosure in the event that they have knowledge or suspicion that money laundering is occurring. These offences are punishable with up to 5 years imprisonment and/or unlimited fine.

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

Identification of a client is a 2 way process.

Firstly you will need to identify the client by obtaining their driving license or passport in order to obtain their name, address, DOB and visual identity.

Secondly you will need to obtain an up-to-date utility bill (no older than 3 months) in order to verify their address.

A third verification can be conducted via an online verification. You can obtain this verification for both high and low risk clients to ensure you have conducted your client verifications completely.

An online verification would usually only be conducted on high risk clients in order to be able to search their electronic footprint due to the lack of production of other verification documents ,and to also search the PEP database and sanctions lists.

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

Electronic verifications should be used to complement the normal identification documents. It is only usually suggested that you complete an online verification if the client is perceived to be high risk, which is called 'Enhanced Customer Due-Diligence'.

For example if you have never met your client face-to-face extra caution should be applied to satisfy yourself that the client is who they say they are. This can be done with electronic verification.

What are the benefits of using online client verifications?

The benefit of using online verification is that it is another tool to use in verifying your client, specifically if they are a high risk client. A common reason for using an online verification is if you have not met a client face-to-face it can act a further due diligence with that client. It is also a tool that can check the sanctions and PEP (politically exposed person) databases.

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 however you will not need to receive their permission as it is your legal responsibility to do these checks. The best way to let your clients know that these checks may take place is to mention it in your letter of engagement by adding a paragraph that states these checks are likely to occur when verifying your clients and that it may leave a "footprint" on their file.

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

Assuming you are completing an online verification as you have not met your client face-to-face if the verification fails then it is worth trying meeting them to confirm identity either face-to-face if possible or via a Skype call. However you would have to look at the potential risks to establish, if you wish to continue to act for the client. Depending on the circumstances you may also need to submit a SAR.

Is there a need to verify clients that 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.

What are the credentials for a high risk client and what would help to verify them?

A high risk client would be perceived to be any of the below:-

  • Cash based business
  • High Risk Businesses such as opaque business practices or obscure trading procedures
  • Clients that operate in high risk jurisdictions
  • Clients you have never met face-to-face
  • Politically Exposed Persons (PEP) or those on the Treasury Sanctions List

In order to help verify these clients, the ID they provide should be certified by a professional individual such as a solicitor. If you have never met the client due to them living overseas then a Skype call may be worthwhile to help verify their identity. Finally an online verification should be conducted to check their electronic footprint. By conducting this enhanced due diligence it is showing that you are doing everything you can to verify that client.

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 who will be able to give you advice on whether or not your suspicions are strong enough to submit a report.

If you use/are a freelance bookkeeper, will they 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 has hired a third-party bookkeeper to help with a client, then the client is technically the accountants and so they should be carrying out the AML checks.

Any third party that is hired should be given training on the firm’s policies and procedures of AML to ensure they are working to the standards of the firm.

If a bookkeeper is not happy with not undertaking AML checks on third-party clients, then there are no rules to state that they cannot carry out their own checks if they so wish.

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

A firm must have policies and procedures on the following matters:

  • Customer Due Diligence and ongoing monitoring
  • Reporting SARs
  • Risk assessments
  • Compliance monitoring
  • AML Training

How do I submit a SAR?

The easiest way to submit a SAR is by using the SAR Online System which can be found here:-

Click here to access the SAR On-Line 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 important to include as much detail as possible; poor quality reporting can lead to delays in action being taken.

Below is a link to some glossary codes that may help prioritise your report:-

Click here to access the SAR Glossary Codes

What is meant by the term tipping off?

Tipping off can be found in the Proceeds of Crime Act 2002 Section 333. The term tipping off is making any disclosure which is likely to prejudice any investigation that might follow a SAR being submitted. 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 with the decision as to 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 there will be 2 choices; you could choose not to go ahead with the activity or you may choose to proceed. If you choose to proceed then you will need to obtain the appropriate consent from the NCA to ensure you won't be committing an offence by continuing with the transaction.

To seek consent you will need to submit a SAR which must state why you are seeking consent. The NCA will have 7 days to get back to you with their answer. If they do not give you consent and you proceed anyway, this will be a money laundering 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 as to why this report was not submitted. 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.

Questions that are often asked are given below.

Click on the question to reveal the answer.

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