Businesses that operate in the financial services industry are regulated by the financial conduct authority and so will (or should) have robust AML procedures in place. But what if you are not in the business of finance…what do you need to know?
Money laundering in a nutshell
Money laundering is the process by which criminals convert the proceeds of illegal activities into legitimate funds. This can be funnelled through any company dealing with paying customers.
Common ways to launder money:
- Expensive policies or purchases made and then cancelled quickly
- Purchases made for no apparent reason
- Requests for refunds or claims payments to be made to unconnected third parties
- Transactions not in-keeping with client’s usual dealings
- Reluctance or difficulty in providing ID
- Large overpayments which results in the business having to pay back the extra amount
Non-financial services businesses are not scrutinised in the same way as regulated businesses are. But checks should still be in place so that any aml is easy to spot by any member of staff. Organisations should implement due diligence requirements based on the level or risk of likelihood they have identified that the business may be used to launder money or fund terrorism.
Customer id is needed for all new customers before dealing with them. It must be kept for five years and must be re-obtained if the customer changes name or address. Id must also be re-obtained if there has been no customer contact for 12 months or more.
Easy but serious mistakes to avoid
The proceeds of crime and terror acts (poct) applies to everyone. The main types of offence under poct 2002 are: failing to report knowledge or suspicion of money laundering and tipping off or giving somebody warning, that their activity might come under scrutiny by the authorities.
Is your customer on the sanctions list?
Financial sanctions orders prohibit a firm from carrying out transactions with a listed person or organisation (known as the target). In some cases, the order will prohibit a firm from providing any financial services, to the target. HM Treasury (hmt) maintains a list of targets known as the UK consolidated financial sanctions list. A breach of a financial sanctions order may be a criminal offence.
Standard anti-money laundering checks do not screen clients against the HMT list. Failures in aml controls will not automatically result in disciplinary sanctions although enforcement actions are more likely where a firm has not taken adequate steps to identify its money laundering risks, not put in place appropriate controls to mitigate those risks or failed to take steps to ensure that controls are being effectively implemented. Conviction may result in imprisonment for up to 2 years, a fine or both.
The FCA has the power to publish details of investigations as well as enforcement action. This presents an even more compelling argument for firms to take notice of financial crime legislation and make sure systems and controls are in place.