AML Obligations
Firms must take reasonable care to establish and maintain effective systems and controls to comply with the legislation. This includes procedures and controls to identify, assess, and manage the money-laundering risk. Controls must be comprehensive, proportionate to the nature, scale, and complexity of the activity. They must be reviewed from time to time.
The Senior Management Arrangements, Systems, and Controls (SYSC) rules require firms to ensure that their systems include the allocation to a director or senior manager who may also be the money MLRO of all responsibility for the establishment and maintenance of effective money-laundering systems and controls, provision of information to management and governing bodies, including a report of this annually by that firm’s MLRO on the operation and effectiveness of the system, appropriate training for employees in relation to money-laundering, appropriate documentation on its risk management policies and risk profiles, reference to money laundering, appropriate measures to ensure money-laundering risk is taken into account in operations, appropriate measures to ensure identification procedures do not unreasonably deny access to services.
An authorised firm must appoint a money laundering reporting officer. The officer has responsibility to oversee compliance with the regulator’s SYSC rules on money laundering. He or she must act as the point of activity, focal point for activity relating to money laundering. He must have appropriate authority and independence within the firm. He must have access to appropriate resources and information to carry out the responsibility. He must be based in the UK.
A nominated officer is nominated to receive reports of suspect money-laundering. The person will usually be the money laundering reporting officer or a deputy.
Processes must be put in place to facilitate reporting of suspicions to the MLRO. The MLRO has a duty to pass on reports to the National Crime Agency if he has reasonable grounds to suspect or an officer suspects that another person is engaging in money laundering.
The FCA has issued a financial guide in relation to financial crime. It provides practical examples and actions they should take to counter financial crime. It is aimed at helping firms to provide an effective risk-based, outcomes-focused approach to tackling the risk of financial crime.
The joint money-laundering group is made up of representatives of the financial industry body. It provides guidance in relation to money-laundering legislation and its implementation. It helps firms establish procedures and policies appropriate to their firm.
Courts are to take account of industry guidance such as this guidance approved by the Treasury Minister in deciding whether any of the above offenses have been complied with. Similarly, where firms have breached or allegedly breached their SYSC and are subject to disciplinary action, the regulator must have regard to the guidance notes, compliance with the guidance notes in the circumstances.
Senior management of regulated firms is responsible for the anti-money-laundering and combating of terrorist financing systems and controls within their business. They must ensure the relevant controls and procedures are designed, implemented, and that they work effectively. A manager or senior director must have overall responsibility for the purpose of establishment and maintenance of the systems and controls. They must appoint an MLRO.
Firms must draw up and maintain documentation in relation to their risk management profiles. It must be tailored to their circumstances. The documents must set out the policies and the application of their policies.
Firms are expected to identify and know their customers. There must be evidence that they are who they say they are and that they are not acting for a third party. Steps must be taken to verify customers’ ID. Know your customer information must be kept and retained. This includes information relevant to the customers’ circumstances in business, including the source of wealth and funds and purposes of the transaction.
The risk-based approach to money-laundering and terrorist financing legislation allows lower-level procedures in relation to customers who have minimal risks. This may include long-term customers, customers whose sources of income and employment are known, and customers who are already approved by an outside agency.
The customer due diligence procedures are set out in the JMLS. The guidance requires the identifying and verifying the identity of the customer and beneficial ownership of trusts and companies, etc.
Information must be obtained on the purpose and nature of the business relationship.
The customer due diligence must be applied when a business relationship is established, where an occasional transaction of €15,000 or more is carried out, where there is a suspicion of money-laundering or terrorist financing, or doubts about the veracity of documents or verification documents arise.
Enhanced due diligence is required for higher-risk situations, customers who are not physically present, and politically exposed persons. Simplified due diligence may be appropriate in relation to listed firms, established trusts, and low-risk products.
Politically exposed persons are high-ranking, non-UK public officials, members of Parliament, their family, and close associates. They are politically exposed because their position may make them vulnerable to corruption. Senior management’s approval is required before establishing relationships with such persons. Measures must be taken to ascertain the sources of their wealth.