This additional support aims to provide more clarity and signposting around common AML issues.
Please note that the AML Toolkit page may also hold important items for you to consider.
We have compiled a short guide to highlight some of the key points of the AML compliance framework.
Though it shouldn't be regarded as an exhaustive presentation , it does signpost some of the most pertinent paragraphs and concepts contained in the statutory documents.
You must submit a SAR if you know, suspect or have reasonable grounds for suspecting that another person is engaged in money laundering.
SARS should be raised to your Nominated Officer / MLRO in the first instance and that officer should then consider filing a SAR with the NCA.
There are two types of SAR which should be submitted to the National Crime Agency. The simpler suspicious activity report alerts law enforcement to your suspicion or knowledge of money laundering. You do not necessarily need to be directly involved to submit a SAR on a transaction or individual. This is sometimes known as a required disclosure.
For example, an individual comes to you with a proposal for a transaction and you spot several red flags for money laundering. Should you become suspicious you would decline their business and file a SAR.
The DAML SAR (Defence Against Money Laundering) needs to be sent to the NCA where the reporter is looking to transact where there is a suspicion or knowledge that property they intend to deal with is in some way criminal, and that by dealing with it they risk committing one of the principal money laundering offences under the Proceeds of Crime Act 2002 (POCA). This is sometimes known as the authorised disclosure.
For example, a client may have already transferred money into your client account before you become suspicious. Upon becoming suspicious that the money is the proceeds of crime you wish to transfer the money back to them and end the relationship. SInce you would potentially be transferring the proceeds of crime, you would ordinarily be committing an offence. You must file a DAML SAR to the NCA and await their response. The NCA has a seven-day window in which to reply to you in the first instance.
Under the Proceeds of Crime Act, 'Consent' from the NCA on your DAML SAR will provide you with a defence against the principal money laundering offences when you carry out the underlying transaction.
It's important to keep in mind that the DAML regime and 'consent' do not -
- Assert that no criminality is invovled
- Assert that funds are clean
- Act as a substitute for completing due diligence
- Give 'permission' for any act
- Act as a defence for any action other than that listed on the DAML response
The NCA has produced a useful "signposts" document, which has useful links to SARs/DAML help and support.
The Home Office, in partnership with the National Crime Agency, has been working with the accountancy and legal professional bodies to raise awareness of the warning signs of money laundering, and help professionals protect themselves and their firms through the Flag It Up campaign.
Money laundering through the legal profession continues to be a real threat - please do take a look at their website Flag it Up - it may just help you protect your practice from becoming the unwitting victim of those with criminal intent.
A "politically exposed person" (PEP) is a term describing someone who has been entrusted with a prominent public function. They generally present a higher risk for potential involvement in bribery and corruption by virtue of their position and the influence that they may hold.
Such 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
This applies to both UK and foreign PEPs.
The identification of PEP status should form part of client onboarding and ongoing due diligence. Practice units 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 practice unit chooses to enter into such business, enhanced and on-going due diligence measures should be applied.
Historically there has been some confusion about these terms in their application to AML and, indeed, there remains some discussion around quite how to apply these concepts in practice.
Source of funds is the literal origin of the monies to be used. It is intended to provide the audit trail for the movement of money. The majority of the time, this will be the details of a remitting account. For example, we would generally expect to see -
Name of Bank Account Holder
Account and Sort Code Numbers
Amount of transfer
Type of transfer (CHAPs etc)
In lower risk transactions, you may wish to have the details of only the immediate transfer for the transaction. In higher risk transactions, or where you need to satisfy yourself that you are not suspicious of a transaction, you may wish to check some historic bank records for the remitting account to ensure that the account is not a "front" for the funds and there is some other beneficiary in the background. There is no easy answer to how far back to check - it is for you to assess these matters internally.
Though there may be some overlap, this is distinct from Source of Wealth.
Source of Wealth is the provenance of the accrued body wealth of a client. It is about taking reasonable steps to ensure that the funds being used are not the proceeds of crime.
Source of Wealth is a vital part of your Anti Money Laundering procedure.
For example, did your client make their money from a business portfolio? Are their funds a loan? Are they the beneficiary of a large inheritance?
For a low risk transaction, you may wish to ask the question around source of funds and record the answer. Where the transaction is of a high value or higher risk, you should obtain good evidence to back up the details around Source of Wealth. These might be business accounts, trust deeds, title deeds, loan agreements etc. In a higher value/risk transaction, you should consider the clients whole source of wealth, rather than just the particular funds to be used in a given transaction.
Again, there is no blanket guidance about how far to go in collecting evidence. You should be satisfied that there is no suspicion that the Source of Wealth are the proceeds of crime.
There are several jurisdictional risks which you should assess when considering receiving funds or establishing a business relationship. There is no single authority on these - some reports consider bribery while others consider Money Laundering controls, for example.
There is no magic bullet to risk assessing these countries and your related transactions, but you should consider the following resources as good signposts for risk.
Remember a high-risk jurisdiction is not the same as a sanctioned jurisdiction. You must not enter into any transaction with sanctioned jurisdictions or persons (without a HMRC license to do so).