Money Laundering Flashcards
Money Laundering Regulations 2017
- The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (‘MLR’) came into force on 26 June 2017.
- MLR requires organisations to get themselves in a position to identify potential money laundering and report it as necessary.
- MLR applies to a number of organisations, institutions and professional advisors. They are listed in Regulation 8(2) and include “independent legal professionals” and “trust or company service providers”.
- Most legal work falls within the categories of “independent legal professionals” and “trust or company service providers”.
- MLR does not apply to all types of legal work. For example, the MLR do not apply to employment or most litigation cases.
- Even though MLR do not apply to all types of work, in practice, most firms take the steps required by the MLR irrespective of whether or not the work they are undertaking for a particular client is caught.
Anti-Money Laundering Guidance for the Legal Sector (‘AMLG’)
In March 2018, the Legal Sector Affinity Group (LSAG), which includes the Law Society and all the legal sector supervisors named in the anti-money laundering regulations, published guidance on anti-money laundering. We refer to the guidance in this module as the Anti-Money Laundering Guidance for the Legal Sector (‘AMLG’).
AMLG provides useful guidance for legal practitioners on many aspects of compliance with MLR including guidance on evidence that would demonstrate that you have complied with the requirements on CDD.
Regulation 28(2) MLR requires you to identify the customer and verify their identity.
Paragraph 4.3.2 AMLG recommends that you identify the customer and verify their identity on the basis of documents or information received from a reliable source which is independent of the customer”. AMLG gives further guidance on evidence depending upon the category of customer.
Evidence: UK natural person
The following slides show some of the examples of evidence of identity and verification recommended in the AMLG.
Example of evidence for a UK natural person (AMLG paragraph 4.9.1):
current signed passport
current photocard driving licence
assurances from persons within the regulated sector who have dealt with the person for some time
In most cases of face to face verification, producing a valid passport or photocard ID should enable most clients to meet the AML identification requirements. It is good practice to have either:
one ‘government document’ which verifies either the name and address or name and date of birth; OR
a ‘government document’ which verifies the client’s full name and another supporting document which verifies the name and either their address or date of birth.
UK natural persons: the way forward
Some law firms are now using reputable electronic data service providers, like 192.com, to perform their CDD compliance checks for UK-based individuals, as such providers have access to the databases held by a number of agencies (including but not limited to):
the electoral roll
Companies House
Credit Reference agencies
Passport Office
DVLA
This is often the chosen method of verifying UK-based clients’ identities rather than the traditional methods referred to above. So rather than asking to see an original passport or driving licence, many firms are instead, relying on reports supplied by such service providers.
Evidence: UK partnership
A partnership (other than in Scotland), is not a separate legal entity, so you must obtain information on the constituent individuals. If the partnership or unincorporated business is a well-known reputable organisation with a long history in its industry and with substantial public information about their principals and controllers it should be sufficient to get (AMLG para 4.9.2):
name
trading address
registered address (if any)
name of business
The individuals running smaller partnerships and unincorporated businesses should be identified in the same way as private individuals (above). Larger partnerships, unincorporated businesses and LLPs should be treated as private companies (see below).
Evidence: UK companies
A company is a legal entity in its own right, but conducts its business through representatives. You should identify and verify the the existence of the company (and consider whether or not the person instructing you has the capacity to do so) (AMLG paragraph 4.9.3).
A company’s identity is made up of:
its constitution
its business
its legal ownership structure
Regulation 28(3) MLR requires that, in all cases, if a client is a corporate body, you must obtain and verify:
its name
the company number or other registration number, and
The address of the registered office and, if different, principal place of business.
Evidence: UK listed public companies
For companies which are listed and whose shares are admitted to trading on a regulated market or, for a majority-owned and consolidated subsidiary of such a company, you need only carry out simplified due diligence (see Regulation 36).
Identifying the company includes obtaining:
a copy of the dated page of the website of the relevant stock exchange showing the listing
a photocopy of the listing in a reputable daily newspaper
information from a reputable electronic verification service provider or online registry
Evidence: UK listed public companies
Verification sources include:
a search of the relevant company registry
a copy of the company’s certificate of incorporation
Note that AIM is not registered to be a regulated market in the UK. The UK’s registered market is the London Stock Exchange.
Evidence: UK private and unlisted companies (Reg 28(3) MLR and AMLG para 4.9.3)
Private companies are generally subject to a lower level of public disclosure than public companies. However in general the structure, ownership, purposes and activities of many private companies will be clear and understandable.
You must obtain and verify:
the name
company number or other registration number
the address of the registered office and principal place of business
You must also take reasonable measure to determine and verify:
The law to which the company is subject and its constitution
The full names of the board of directors (or equivalent management body) and senior persons responsible for its operations.
Verification sources may include:
Certificate of incorporation
Filed audited accounts
Details from the relevant company registry confirming the company’s details and the directors, including the directors’ addresses
Information from a reputable electronic verification service provider.
