Look at the most commonly asked questions in relation to Anti-Money Laundering to understand why and how you can strengthen your compliance processes.
What is Money Laundering?
Money laundering is the conversion of the proceeds of criminal activity into apparently clean funds by disguising the sources of the money, changing its form, or moving the funds to a place where they are less likely to attract attention.
What is the current legal framework?
The European Parliament approved the Fourth Anti-Money Laundering Directive [4MLD] in June 2015, which entered into force in June 2017. It strengthens the existing rules and makes the fight against money laundering and terrorism financing more effective. It also improves transparency to prevent tax avoidance. The Financial Conduct Authority [FCA] estimates that up to £57 billion is laundered through the UK every year. The Financial Action Task Force [FATF], an inter-governmental body created to investigate financial crime, is expected to monitor the UK.
Who needs to perform Anti-Money Laundering (AML) checks?
The Directive applies to banks and the whole of the financial sector as well as to lawyers, notaries, accountants, real estate agents, casinos and company service providers. Its scope also encompasses all dealers in goods (such as dealers in precious metals and stones), when payments are made in cash in excess of €15 000.
In particular, the Financial Action Task Force has identified the key ways that criminals launder money through law firms as:
• misuse of client accounts;
• property purchases;
• creation and management of companies and trusts;
• management of client affairs and making introductions;
What am I required to do?
• Identify and verify the identity of your customers and of their beneficial owners, and monitor the transactions of and the business relationship with customers;
• Report suspected money laundering or terrorism financing to the public authorities and take supporting measures, such as ensuring the proper training of personnel and the establishment of appropriate internal preventive policies and procedures.
Why do I need to perform Anti-Money Laundering checks?
The Anti-Money Laundering regulations oblige you to carry out customer due diligence for new clients, but also update all existing clients by assessing their identity. Moreover, the 4MLD expands on definitions of Beneficial Owners [BO] and Politically Exposed Persons [PEP]. In previous definitions of a BO, 25% plus one share was sufficient to prove ownership or control – this threshold is now seen as merely an indication and must be considered among other factors. Prior to the 4MLD, enhanced customer due diligence was only required with foreign PEPs, but this will be extended to domestic PEPs, their close associates and family members. With the FATF increasing its monitoring of the systems and controls that law firms and financial institutions have in place to ensure 4MLD compliance, the quality and consistency of customer due diligence to verify the identity of clients, the source of funds, beneficial owners and the nature of business transactions will be paramount.
Who are the Anti-Money Laundering regulatory bodies?
- Office for Professional Body Anti-Money Laundering Supervision (OPBAS). The OPBAS is a new regulator set up by the government to strengthen the UK’s Anti-Money Laundering (AML) supervisory regime and ensure that the professional body AML supervisors provide consistently high standards of AML supervision.
- Financial Conduct Authority (FCA)
- ICAEW (Institute of Chartered Accountants in England & Wales, plus other Accountancy bodies)
What is Electronic Identity Verification?
Electronic Identity Verification helps you prevent fraud and money laundering by verifying individuals and quickly conducting due diligence by accessing several data sources. ID verification checks and tools simplify the identification process since there is no need for the customer to be present, allowing you to save time as well as improving the onboarding stage.
What are the benefits of Identity and AML check tools?
CRIF’s premium identity verification service provides users with far more than confirmation of identity. It builds a profile and framework surrounding the subject in question including an anti-money laundering check, credit bureau profiles, previous linked addresses and identities, together with previous personal lines claims history, incorporating behaviour and historic insurer relationships. This wealth of information is invaluable when conducting customer due diligence and risk assessment of individual transactions and can assist in the identification of organised fraud rings which can be linked to money laundering and serious and organised crime. Swift and simple to use it requires no user training, and can easily be incorporated into business processes and workflows.