Anti money laundering guidance
CCAB (the Consultative Committee of Accountancy Bodies) has issued guidance on anti money laundering procedures. ACCA has reproduced this as Technical Factsheet (see related links left). Firms need to review the guidance and update their internal procedures.
In particular section 4 of the guidance covering the ‘risk based approach’ and section 5 detailing the ‘customer due diligence’ will be of use.
The section 4 key points are:
- A risk based approach allows businesses to target resource and effort where the risk is greatest and, conversely, reduce requirements where the risk is low.
- Businesses must establish adequate and appropriate policies and procedures relating to risk assessment and management in order to prevent operations related to money laundering or terrorist financing.
- Businesses must—
(a) determine the extent of customer due diligence measures (section 5) on a risk-sensitive basis depending on the type of client, business relationship, or services to be provided;
(b) be able to demonstrate to their anti-money laundering supervisory authorities that the extent of customer due diligence measures is appropriate in view of the risks of money laundering and terrorist financing. - Businesses are required to take a risk-based approach and have adequate measures to verify the identity of beneficial owners so that they are satisfied that they know who the beneficial owner is and what the control structure is in respect of a client who is other than a natural person (Regulation 5(1)(b)).
- Businesses are required to undertake scrutiny of transactions and other activities throughout the course of a business relationship to ensure consistency with businesses’ and individuals’ knowledge of the client, his business and risk profile.
- Businesses must also keep up-to-date the information collected in applying customer due diligence measures.
- Businesses must apply customer due diligence measures at appropriate times to existing clients on a risk-sensitive basis.
The section 5 key points are:
- Effective ‘customer due diligence’ measures are an essential part of any system designed to prevent money laundering and are a cornerstone requirement of the Money Laundering Regulations 2007 (2007 Regulations).
- Businesses should take a risk-based approach to allow effort to be concentrated on higher risk areas (also see section 4). Risks must be assessed before the appropriate level of customer due diligence can be applied.
- Customer due diligence measures need to be carried out:
* when establishing a business relationship,
* when carrying out an occasional transaction,
* where there is a suspicion of money laundering or terrorist financing; and
* where there are doubts concerning the veracity of previous identification information. - Businesses are required to ensure customer due diligence procedures are applied to all clients, both new and existing. Customer due diligence must be applied to existing clients (ie those existing prior to the 2007Regulations coming into force) at appropriate times on a risk-sensitive basis.
- Before entering a business relationship, businesses must:
* identify and verify the client’s identity using documents or information from reliable and independent sources.
* identify the beneficial owner of the client (where required), including understanding
the ownership and control structure of the client and verifying, according to risk, the identity of the beneficial owner(s).
* obtain information on the purpose and intended nature of the business relationship. - Verification of identity may in certain circumstances be conducted during the establishment of a business relationship if this is necessary not to interrupt the normal course of business and there is little risk of moneylaundering or terrorist financing occurring, provided the verification is completed as soon as practicable after contact is first established.
- During a business relationship, businesses must monitor activity on an ongoing basis. This includes scrutiny of transactions, source of funds and other elements of knowledge collected in the customer due diligence process, to ensure the new information is consistent with other knowledge of the client and keeping the documentation concerning the client and the relationship updated.
- Businesses can use a variety of tools and methods to conduct customer due diligence; the onus is on them to satisfy themselves and to be able to demonstrate to their anti-money laundering supervisory authority the appropriateness of their approach.
The factsheet should also be supplemented by JMLSG guidance with the risk based approach and customer due diligence covered in Chapter’s 4 and 5 of part 1.