PRESENTATI ON TO AAT Practice Managem ent Event 2 2 March 2 0 1 - PowerPoint PPT Presentation

PRESENTATI ON TO AAT Practice Managem ent Event 2 2 March 2 0 1 4 BY Richard F Sim m s FCA w w w .fasim m s.com 0 8 4 4 8 8 0 9 8 2 0

OVERVI EW  Risk Assessm ents  Custom er Due Diligence  Eight steps to com pliance  Sum m ary w w w .fasim m s.com 0 8 4 4 8 8 0 9 8 2 0

RI SK ASSESSMENTS  I dentify  Assess  I m plem ent  Monitor  Record w w w .fasim m s.com 0 8 4 4 8 8 0 9 8 2 0

RI SK ASSESSMENTS  I dentify the ML & terrorist financing risks  Assess the risks  I m plem ent controls to m anage risks  Monitor the operation of controls  Appropriate recording keeping w w w .fasim m s.com 0 8 4 4 8 8 0 9 8 2 0

RI SK ASSESSMENTS  I dentify  Size and structure of business  Business activities  Products and services w w w .fasim m s.com 0 8 4 4 8 8 0 9 8 2 0

RI SK ASSESSMENTS  Assessing the risks ( 1 )  Types of clients  Geographical area of clients  How you engage your clients w w w .fasim m s.com 0 8 4 4 8 8 0 9 8 2 0

RI SK ASSESSMENTS  Assessing the risks ( 2 )  Client’s business activities  Paym ent processes – is it cash based?  Movem ent of client’s funds w w w .fasim m s.com 0 8 4 4 8 8 0 9 8 2 0

RI SK ASSESSMENTS  Clients w ho pose a risk ( 1 )  Clients w ho carry out large one-off transactions  Clients w ho are not local to your business  Clients w ho handle large am ounts of cash w w w .fasim m s.com 0 8 4 4 8 8 0 9 8 2 0

RI SK ASSESSMENTS  Clients w ho pose a risk ( 2 )  Com plicated ow nership structure  Regular transactions to the sam e group/ individual  Unw illing to provide evidence of I D w w w .fasim m s.com 0 8 4 4 8 8 0 9 8 2 0

RI SK ASSESSMENTS  I m plem ent the risk  Apply Custom er Due Diligence  Ongoing m onitoring w w w .fasim m s.com 0 8 4 4 8 8 0 9 8 2 0

RI SK ASSESSMENTS  Monitoring the risk  Sudden increase in business  Unusual transactions  Untypical types of custom er w w w .fasim m s.com 0 8 4 4 8 8 0 9 8 2 0

RI SK ASSESSMENTS  Record Keeping  Dem onstrate to Supervisory Body that procedures are in place  Records – w hat has been done and w hy w w w .fasim m s.com 0 8 4 4 8 8 0 9 8 2 0

RI SK ASSESSMENTS  Sum m ary  Regular assessm ents  Appropriate m onitoring procedures  Regularly review and test procedures w w w .fasim m s.com 0 8 4 4 8 8 0 9 8 2 0

CUSTOMER DUE DI LI GENCE  From 1 5 Decem ber 2 0 0 7 , you m ust carry out custom er due diligence on a risk sensitive basis  CDD required on both new and existing clients w w w .fasim m s.com 0 8 4 4 8 8 0 9 8 2 0

CUSTOMER DUE DI LI GENCE  Establishing a relationship  I dentify and verify client’s identity  I dentify the beneficial ow ner( s) and control structure  Obtain inform ation on the purposes and intended nature of the business relationship w w w .fasim m s.com 0 8 4 4 8 8 0 9 8 2 0

CUSTOMER DUE DI LI GENCE  Establishing a relationship  Details of the client’s business activity  Understand the source and origin of the funds  Beneficial ow ners w w w .fasim m s.com 0 8 4 4 8 8 0 9 8 2 0

CUSTOMER DUE DI LI GENCE  I dentifying & verifying clients  Governm ent issued docum ents – e.g. passport  I nform ation held by credit reference agencies  Bank statem ents, utility bills etc. w w w .fasim m s.com 0 8 4 4 8 8 0 9 8 2 0

CUSTOMER DUE DI LI GENCE  CDD Rules include concept of:  ‘ Simplified ’ due diligence (Lower risk)  ‘ Normal ’ due diligence (Normal risk)  ‘ Enhanced ’ due diligence (Higher risk) w w w .fasim m s.com 0 8 4 4 8 8 0 9 8 2 0

CUSTOMER DUE DI LI GENCE  ‘Sim plified’  Credit or financial institution subject to MLR  Listed com panies ( excludes AI M and PLUS)  UK Public Authorities  ‘Enhanced’  Client not physically present  Politically exposed persons ( PEPs)  PEP – individual w ho has been entrusted w ith a prom inent public function or is closely related w w w .fasim m s.com 0 8 4 4 8 8 0 9 8 2 0

CUSTOMER DUE DI LI GENCE  ‘Prohibited’  Shell Banks – financial institutions w ith no physical presence and no real business is conducted  Countries w ith deficiencies in their anti- m oney laundering regim es – refer to FATF non-cooperative countries w w w .fasim m s.com 0 8 4 4 8 8 0 9 8 2 0

CUSTOMER DUE DI LI GENCE  ‘Prohibited’  Refer to HM Treasury’s publication –  https:/ / w w w .gov.uk/ governm ent/ publications / m oney-laundering-and-terrorist-financing- controls-in-overseas-jurisdictions-advisory- notice  HM Treasury em ail service  http:/ / engage.hm -treasury.gov.uk/ fin-sanc- subscribe/ w w w .fasim m s.com 0 8 4 4 8 8 0 9 8 2 0

CUSTOMER DUE DI LI GENCE  ‘Sim plified’ CDD Measures  Reduce the on-going m onitoring based on a reasonable m onetary threshold  Reduce the frequency of custom er identification updates  Sim plified CDD m easures are NOT acceptable if there is suspicion of m oney laundering w w w .fasim m s.com 0 8 4 4 8 8 0 9 8 2 0

CUSTOMER DUE DI LI GENCE  ‘Enhanced’ CDD Measures  Obtain additional inform ation  Obtain inform ation on the reasons for transactions  Request 1 st paym ent from account in the custom er’s nam e w ith a bank sim ilar to CDD standards w w w .fasim m s.com 0 8 4 4 8 8 0 9 8 2 0

W HAT ELSE COULD I NDI CATE HI GH RI SK?  Other reports in the past  Cash based business  Adverse press coverage  Purpose of business not clear  Previous HMRC investigations w w w .fasim m s.com 0 8 4 4 8 8 0 9 8 2 0

BENEFI CI AL OW NER W hat is a beneficial ow ner?  Corporate bodies  I ndividual w ho ow ns or controls m ore than 2 5 % of shares or voting rights  Partnerships  I ndividual w ho controls/ entitled to m ore than 2 5 % of the capital or profits  Charities  Usually trustees w w w .fasim m s.com 0 8 4 4 8 8 0 9 8 2 0

BENEFI CI AL OW NER W hat is a beneficial ow ner?  Trusts  I ndividual w ho is entitled to a specified interest in at least 2 5 % of the capital or trust controller  Estates of deceased persons  Executor or adm inistrator of the estate w w w .fasim m s.com 0 8 4 4 8 8 0 9 8 2 0

W HAT I S KNOW LEDGE OR SUSPI CI ON?  Not defined in legislation  Actual know ledge that som ething is the case  Suspicion is m ore definite than speculation  Falls short of know ledge based on evidence w w w .fasim m s.com 0 8 4 4 8 8 0 9 8 2 0

W HAT I S KNOW LEDGE OR SUSPI CI ON?  Must be crim inal conduct – proceeds of innocent errors are not crim inal property  Reasonable grounds  Not yet tested by Courts  W ould an ‘honest’ and ‘reasonable’ person in your position have had know ledge that m oney laundering w as taking place?  Cannot turn a ‘blind eye’ w w w .fasim m s.com 0 8 4 4 8 8 0 9 8 2 0

W HAT I S KNOW LEDGE OR SUSPI CI ON?  “He is a scrap dealer, all scrap dealers are crim inals, he is a crim inal”  This is not suspicion!  Do not need to identify the crim e or gather sufficient evidence to enable it to be proved in a court of law  I f unsure….report the suspicion w w w .fasim m s.com 0 8 4 4 8 8 0 9 8 2 0

TI PPI NG OFF  Do not tip off the relevant person  Do not tell anyone that a report has been m ade  Asking norm al questions is not tipping off  Asking unnecessary questions or investigating further m ay m ake you liable w w w .fasim m s.com 0 8 4 4 8 8 0 9 8 2 0

CONFI DENTI ALI TY  SAR to NCA can have adverse effects on client relationship  NCA – National Crim e Agency replaced SOCA as from 7 October 2 0 1 3  w w w .nationalcrim eagency.gov.uk  Maintaining the confidentiality of SARs is im portant to NCA  Agencies that are involved have a duty to keep source confidential w w w .fasim m s.com 0 8 4 4 8 8 0 9 8 2 0

CONFI DENTI ALI TY  MLROs should take steps to protect confidential source  Only refer to source’s nam e once in the source I D field but now here else  Do not refer to nam es of staff that m ade internal report  Highlight any particular concerns about safety ( physical, reputational etc.) w w w .fasim m s.com 0 8 4 4 8 8 0 9 8 2 0

CONFI DENTI ALI TY  Cannot be sued for breach of confidentiality w hen report to NCA provided  Report is m ade properly and prom ptly  You acted in good faith w w w .fasim m s.com 0 8 4 4 8 8 0 9 8 2 0

RECORD KEEPI NG  Clients’ identity  Supporting evidence of verification  Business relationship  Occasional transactions  Kept for 5 years after term ination of business relationship w w w .fasim m s.com 0 8 4 4 8 8 0 9 8 2 0

CONTI NUI NG CUSTOMER DUE DI LI GENCE  Must be on an on going basis  Regular m onitoring  Significant changes in business  Changes in appointm ents of senior m anagers / shareholders require checks w w w .fasim m s.com 0 8 4 4 8 8 0 9 8 2 0

NON-COMPLI ANCE  Client refusal –  Do not proceed w ith relationship  Term inate existing relationships  Consider if report is appropriate w w w .fasim m s.com 0 8 4 4 8 8 0 9 8 2 0