Additional anti-money laundering and financial crime obligations for your business

Suspicious activity reporting/consent procedures

All persons within the regulated sector and nominated officers have obligations under POCA to make disclosures of suspicions of money laundering via the NCA SAR regime.

  • In addition any person may need to make an authorised disclosure about criminal property. All persons are required to make disclosures to the NCA of suspected terrorist financing.

A useful starting point for information on making suspicious activity reports is the National Crime Agency (NCA) website, in particular, the guide to completing disclosure forms.

http://www.nationalcrimeagency.gov.uk/publications/suspicious-activity-reports-sars

The UK Financial intelligence Unit (UKFIU) is the section of NCA that receives and analyses SARs. Access further information and contact details.

In addition, guidance on the submission of suspicious activity reports (SARS) is available within the accounts rules guidance at rule B6.23

Financial sanctions:

  • Financial and economic sanctions are commercial and financial penalties applied by one or more countries against a targeted country, group, or individual. Economic sanctions may include various forms of trade barriers, tariffs, and restrictions on financial transactions. Economic sanctions are not necessarily imposed because of economic circumstances—they may also be imposed for a variety of political, military, and social issues. Economic sanctions can be used for achieving domestic and international purposes
  • Law firms are prohibited from entering into a business relationship with any natural or legal entity named on the consolidated list of targets, without specific license from HM Treasury.

As a part of a firm’s client onboarding and ongoing due diligence, the firm must undertake appropriate screening against this list:

https://www.gov.uk/government/organisations/office-of-financial-sanctions-implementation/about

https://www.gov.uk/government/publications/financial-sanctions-consolidated-list-of-targets/consolidated-list-of-targets

Office of Financial Sanctions Implementation (including Sanctions Consolidated list)

Current FATF high risk jurisdictions list

The FATF identifies jurisdictions with weak measures to combat money laundering and terrorist financing in two FATF public documents that are updated and issued three times a year.

  • When acquiring new business or risk-assessing potential transactions, Law Firms should consider and assess the risk of undertaking business with, through or on behalf of those countries deemed of high money laundering concern as per below list.
  • Where a Firm choses to enter into such business, enhanced and on-going due diligence measures should be applied.

http://www.fatf-gafi.org/countries/#high-risk

Politically exposed persons (PEPs)

What is a PEP?

  • A "politically exposed person" (PEP) is a term describing someone who has been entrusted with a prominent public function.
  • A PEP generally presents a higher risk for potential involvement in bribery and corruption by virtue of their position and the influence that they may hold. Positions may include:
    • Head of state, heads of government, ministers and deputy or assistant ministers
    • Members of parliament
    • Members of supreme courts, of constitutional courts, or of other high-level judicial bodies – members of courts of auditors or of the boards of central banks
    • Ambassadors, charges d'affairs and high-ranking officers in the armed forces
    • Members of the administrative, management or supervisory bodies of state-owned enterprises

The definition of a PEP also extends to:

  • family members of a PEP – spouse, partner, children and their spouses or partners, and parents
  • known close associates of a PEP – persons with whom joint beneficial ownership of a legal entity or legal arrangement is held, with whom there are close business relationships, or who is a sole beneficial owner of a legal entity or arrangement set up by the primary PEP

Currently the regulations only apply to persons appointed by governments and authorities outside the UK (overseas PEPS), but it may be appropriate, on a risk-based approach, to apply some or all of the enhanced due diligence requirements to UK domestic PEPs also (N.B. the 4th Money Laundering Directive will officially extend regulation to domestic PEPs)

The identification of PEP status should form part of client onboarding and ongoing due diligence.

Firms should consider and assess the heightened risk of undertaking business with or on behalf of PEPs, particularly the risk of laundering the proceeds of corruption.

Where a firm choses to enter into such business, enhanced and on-going due diligence measures should be applied.

 Our AML contacts

  • For confidential telephone-based guidance on operational AML/financial crime-related queries occurring in the course of your day-to-day business as a solicitor, please call the Society’s Professional Practice team on Tel: 0131 226 8896
  • For in-depth guidance regarding strategic AML/financial crime issues (for example FATF/HMT/NCA-related queries, AML trends, sanctions-related advice) or guidance relating to AML policies, procedures, systems or training, please call Graham MacKenzie, AML Auditor on Tel: 0131 476 8176