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The impact of AML / CFT legislation (AML / CFT legislation has had a…
The impact of AML / CFT legislation
Terrorist financing refers to the direct or indirect act of providing or collecting property for terrorist acts, providing property and services for terrorist purposes, using or possessing property for terrorist purposes and dealing with property of terrorists
AML/ CFT legislation in many jurisdictions attempts to identify the flow of illegal funds across and within its own border and the disruption and dismantling of the money laundering and terrorist finance networks that move such funds
AML / CFT legislation has had a significant impact on the administrative environment in offshore jurisdictions. In general, one can expect
To operate in an ever increasingly regulated environment
To have to maintain numerous policies and procedures including those surrounding the CDD process, both at the acceptance of new business stage and on an ongoing basis
An increased standard of documentation and record keeping required in order to demonstrate compliance with the AML / CFT requirements
Staff to receive AML training on at least an annual basis
To work in an organisation which has an adequately staffed compliance department including a MLRO whose role it is to receive and deal with SARs and in some jurisdictions a money laundering compliance officer whose role it is to monitor compliance specifically with the money laundering regulations of the jurisdiction
Some resistance from historic client relationships who do not understand why a service provider with whom there is a long standing relationship is suddenly insisting on receiving a lot of information. There may also be resistance where there are increased costs arising from the work involved in bringing the client files up to todays standards
An increased desire to obtain new business via trusted intermediaries and introducers
A requirement to undertake regular reviews of client entities designed in parts to facilitate transaction monitoring and to ensure that the CDD documentation on file is still up to date
A reluctance to accept cash payments into the structure and a reluctance to make cash distributions to beneficiaries or shareholders
A reluctance to make payments to or receive funds from third parties who have not been subject to the CDD process
An increased awareness and use of open source public information to monitor for adverse information respect of customers
OSPs must put in place certain controls to prevent their business from being used for money laundering if they are covered by the Money Laundering Regulations. These include
assessing the risk of their business being used by criminals to launder money
checking the identity of your customers
checking the identity of 'beneficial owners' of corporate bodies and partnerships
monitoring their customers' business activities and reporting anything suspicious to their local authorities
making sure they have the necessary management control systems in place
keeping all documents that relate to financial transactions, the identity of their customers, risk assessment and management procedures and processes
making sure that their employees are aware of the regulations and have had the necessary training
The main role and function of the MLRO is to be responsible for evaluation and reporting any suspicious activities / transactions that may have been identified internally and are deemed to be reportable as they occur to the relevant authorities
In order for the MLRO to carry out this function there should be a clear and defined system or procedure for internal reporting of any suspicions and a process for deciding if any of these are reportable. For this system to work effectively, it should be part of the integral process of the compliance function and so by its very nature overlaps both job roles
The MLRO should maintain a record of any SAR detailing when why and how they were identified and whether or not they should be reported externally. If any suspicions were reported to the authorities, a note should be made of why this was thought necessary, by whom, and if not reported, why not and again who signed off
The MLRO in any organisation should be given the power and authority required to undertake the role, in order to carry out annual or regular internal inceptions and spot checks on procedures
Although it is the CSPs board that is responsible for compliance in their organisation, the MLRO is directly accountable for the actions of the organisation, as well as the individuals working within it, to the local regulator and law enforcement agencies
All regulated financial institutions should maintain records in respect of due diligence, during and after the customer has ceased to be a customer. Detailed documentation concerning identification procedure undertaken and the detailed audit trail of transactions should include the
date of the transaction
date the transaction became suspicious
amount involved
details of any linked transactions
form of instruction
authority
details of any third parties such as counter parties, introducers etc
The MLRO is responsible or ensuring that all employees, at all levels undertake regular and / or annual updated AML training programs covering the following topics
reporting procedures
record keeping and identification procedures
awareness of money laundering laws, local and global standards
be updated immediately in respect of their offences and penalties, changes to the laws and regulations
be trained so as to be able to identify suspicious transactions
be made aware of an latest scams or significant PEPs
Counter Terrorism and Security Act 2015
Part 1 deals with the temporary restrictions on travel including powers to seize travel documents (including passports) from persons suspected of involvement in terrorism and temporary exclusion from the UK
Part 2 deals with terrorism prevention and investigation measures
Part 3 deals with data retention