Topic 21: Due diligence Flashcards
What immediate checks will banks perform as part of the customer onboarding process?
- Check electoral roll
- Check with external credit reference agencies for county court judgments (CCJs – bad debts confirmed by the court)
What is a credit reference agency (CRA)?
A CRA (or credit bureau) collects information about individuals and companies, and organises, stores and supplies this information to banks and other customers.
They are a commonly used resource in assessing the ability of a potential borrower to repay and they form an automatic part of the credit scoring process.
What are the 3 stages of money laundering according to the Financial Action Task Force (FATF)?
1) Placement: criminal ‘dirty’ funds enter the financial system
2) Layering: layers of financial transactions distance the money from its illegal origins
3) Integration: the criminal funds re-enter legitimate commerce looking ‘clean’
What does the Terrorism Act 2000 say about money laundering?
The Act specifically mentions the retention or control of terrorist property (i.e. related money, proceeds), by concealment, removal from the jurisdiction, transfer to nominees or in any other way as money laundering offences.
What are the 3 principal money laundering offences under the Proceeds of Crime Act 2002?
1) Concealing criminal property: criminal property is property that a person knows, or suspects, to be the proceeds of any criminal activity. It is a criminal offence to conceal, disguise, convert or transfer criminal property.
2) Arranging: this happens when a person becomes involved in a process that they know or suspect will enable someone else to acquire, retain, use or control criminal property (where that other person also knew or suspected that the property derived from criminal activity).
3) Acquiring, using or possessing: it is a criminal offence for a person to acquire, use or possess any property when that person knows or suspects that the property is the proceeds of criminal activity.
What was the impact of the Money Laundering Regulations 2007?
A major concern arising from the Proceeds of Crime Act 2002 was that individuals working in the financial services industry could inadvertently become ‘involved’ in money laundering.
The 2007 legislation brought enhanced responsibilities for banks, looking to ensure that they put in place checks, controls and procedures to anticipate and prevent money laundering.
What was the impact of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017?
This additional legislation resulted from the EU’s fourth anti-money-laundering (AML) directive at the time the UK was part of the EU.
The 2017 legislation requires banks to combat money laundering by conducting a written money laundering and terrorist financing risk assessment, covering the customers, countries operated in, products and services offered, the transactions carried out and the delivery channels used.
What was the impact of the Money Laundering and Terrorist Financing (Amendment) Regulations 2019?
This additional legislation resulted from the EU’s fifth AML directive at the time the UK was part of the EU and came into force in January 2020. The legislation updates the UK’s AML regime to incorporate international standards set by the FATF.
These included:
- New relevant persons
- Identifying ownership
- Electronic identification
- Enhanced due diligence
- Reporting discrepancies to Companies House
- Duty to respond to requests for information about accounts and safe-deposit boxes
What is the Financial Action Task Force (FATF)?
The FATF is an international body which coordinates the fight against financial crime and money laundering. It currently has 39 full members: these are countries and international bodies.
The FATF does not itself become involved in law enforcement; in the UK that is the responsibility of the National Crime Agency (NCA).
What is the National Crime Agency (NCA)?
The NCA leads the UK’s fight to cut serious and organised crime, protecting the public by targeting and pursuing those criminals who pose the greatest risk.
Organisations subject to money laundering regulations must report any suspicious financial activity to the NCA through the Suspicious Activity Reports (SARs) system. Staff make a report to their MLRO if they know or suspect that a client is engaged in money laundering. The MLRO will then determine whether to report this to the NCA.
What is the result of failing to report knowledge of or suspicion of money laundering?
It is punishable by a jail sentence of between 5 and 14 years, and assisting a money launderer carries a 14-year jail sentence and an unlimited fine.
