It separates itself from the obvious areas from which FATF will review their 40 recommendations such as PEP’s and expansion of the regime. These changes will result in the 4th Directive; however with a proposed implementation date of 1 April 2012 we could be in for two sets of new regulations in a short space of time.

After going through the document there is lots of discussions. However the main ones are

• Removal of criminal sanctions
• Increase supervisor powers to mitigate the risk of the removal of the above
• Reliance to be extended to all professional bodies in Schedule 3
• De-minimus exclusion to small businesses of euro 15,000 or below annual turnover
• UK estate agents selling offshore property to be bought into the Regulations, though not letting agents
• Powers for all supervisors to impose penalties when not allowed to enter business premises
• Powers to impose penalties for unreasonable behaviour to provide information
• Supervisor powers to enforce payment of fees and powers of de-registration
• More freedom for the exchange of information for supervisors.

There are a lot of general discussions surrounding policies and procedures and general guidance coupled with the risk based approach and the various sectors. Generally it is perceived that it is not so much as “on the shelf” guidance that does any good but those that promote active participation, the ‘toolkits’, that works. In 7.11 on this subject, I think I can take some pride here, since I believe they may be talking about the one I wrote for one of the supervisors and which is possibly going to adopted by two more.

In reality the document is a reinforcement of the risk based approach, almost a plea to work in that less rigid way, the end of the tick box approach whilst working without fear of prosecution if we should not always get it right. An approach that can only be undertaken if law enforcement, our supervisors and the regulated businesses themselves work towards the same outcome together. If achieved, it should increase compliance at a reduced cost.

Firstly, the FATF 4th round of evaluation, which proposes changes to the way we approach PEP’s and beneficial owners, reinforcing the risk based approach and importantly, including tax evasion, of both direct and indirect taxation as predicate reportable offences of the money laundering regime. These changes will be formally approved at the February 2012 Plenary. It is expected the EEC will have the 4th European directive passed by the end of 2012 to reflect the changes, prompting the UK to adopt the 2013 or 2014 Money Laundering Regulations. 

Further to these changes HM Treasury will shortly issue there proposals for changes to the UK’s own regime following their ‘call for evidence’ and other reviews of the regime. These proposals will be made available for review and consultation by all interested parties and on finalisation will be included with the implementation of the 4th directive. 

The proposed changes will include amendments such as including into the regime businesses that offer high value services for cash and a tightening up of how to demonstrate compliance to a supervisor through formal policies and procedures, amongst other adjustments to the regime.

Also included will be the two proposals made by the Chancellor in his budget speech which caused a bit of a debate. Firstly, it will be the Governments intent to remove criminality from the Regulations aimed at the private sector. This approach was confirmed by the Attorney General and further expanded to aspects of PoCA, namely sections 330 to 332, for the failure to report SAR’s it would not generally be in the public’s interest to take criminal action against the private sector, but instead make a referral to the relevant supervisor for them to deal with or commence civil proceedings for the breach. S336 concerning consent, is also an area on concern which will see an overhaul making life easier for the reporter.  

Lastly, the one that got everybody excited, is there going to be an exemption to the Regime for smaller businesses? Yes, they want to propose a £15,000 annual turnover exemption from the requirements of the regulations.  This will help many in the accountancy sector who are caught by the regime, such as part time bookkeepers, semi-retired practitioners and those staff members who do a bit extra on weekends and evenings in their own name.  This will also allow new business to get started, before firstly having to the implement ML Regulations.

I would suggest that the accountancy sector more than any other would benefit from this piece of deregulation.

Carrying on business having failed to do so could result in the imposition of a fine by the OFT, a prison sentence, or both.

Money laundering controls help prevent legitimate businesses being used to launder money, which is where cash or assets obtained by criminal activities are exchanged for clean money or assets with no obvious link to their criminal origins.

John Parker, OFT Director of Anti Money Laundering, said:

‘The consequences for estate agents and consumer credit financial institutions of not registering under anti-money laundering regulations are severe. It is important that businesses register immediately to avoid breaking the law.

Visit the BTC website for compliance help and support for firms in the regulated sector

HMRC has published its Code of Practice for supervisory purposes for visits to businesses under Money Laundering Regulations (COP28). This Code of Practice tells you what you can expect from HMRC Supervisory staff and what they expect of you when they visit your business under the Money Laundering Regulations 2007.

This is a simple but very helpful document for preparing for a supervisory visit under the Regulations, however one item contained within the documents raised concern for Steve O’Neill of BTC, namely;

 Examples of business records the officer is likely to want to see include:

“Records/copies of suspicious transactions, action taken, copies of any Suspicious Activity Reports (SAR’s) submitted to the Serious Organised Crime Agency and any correspondence from them concerning consent.  We will look at Suspicious Activity Reports for anti-money laundering legislation purposes only and not for tax purposes”.

It is Steve O’Neill’s (Business Tax Centre’s BTC) understanding that SAR’s are an individual’s obligations covered under the Proceeds of Crime Act and not covered under the Money Laundering Regulations which covers a ‘Firms’ obligations to put into place appropriate policies and procedures for the prevention, detection and reporting of suspicious activity, and not the actual SAR itself which has a subjective test  and offences which are covered in PoCA.

When HMRC regulatory team was asked about their powers to view a SAR, they responded by way of reference to two sections of the Regulations. One of these references was to CDD only and the other to refers to the ‘Policy and Procedures’ for reporting.

These correspondences have been passed on to other supervisory authorities who can confirm that their opinion also states that the ML Regulations do not give authority for a supervisor to view a SAR, which should only be done by an accredited and trained financial investigator.   

We understand from a response received from these bodies that this subject will be raised with HMRC at the next ‘affinity group’ meeting of accountancy and taxation supervisors.

If HMRC point of view is upheld, then the Treasury approved CCAB guidance and the notes of each professional boy will need to be updated accordingly. We will post updates as we receive them.

Visit the BTC website for compliance help and support for firms in the regulated sector.

The type of businesses that is required to register with HMRC under the Money Laundering Regulations and be supervised accordingly are;

• Money Service Businesses
• Trust or Company Service Providers
• Accountancy Service Providers
• High Value Dealers

The focus of the visit will be on your business’s risk sensitive anti-money laundering policies and procedures to make sure they successfully manage and reduce the money laundering and terrorist financing risks faced by your business.

During a visit HMRC supervisory staff we will always:

• check that the information held on the HMRC register is correct
• check that the right people within Money Service Businesses and Trust or Company Service Providers have undergone the fit and proper test
• ask you to explain how your risk sensitive anti-money laundering policies and procedures work
• answer any questions you have on your legal responsibilities under anti- money laundering legislation
• look at your risk assessment of the business’s customers, products and services
• look at the anti-money laundering policies, procedures and training you have implemented to manage and reduce the risks you have identified.

They may also:

• examine transaction records and related documents to check that the customer due diligence measures have been adequately applied
• evaluate your systems for identifying and reporting suspicious activity to the Serious Organised Crime Agency
• check that your staff are aware of the law relating to money laundering and terrorist financing and are sufficiently trained to recognise and deal with suspicious activity
• ensure you have adequate systems in place to manage your compliance with the Money Laundering Regulations 2007.

If you are a Money Service Business or High Value Dealer HMRC may inspect any cash found on the premises.

The full document can be downloaded in PDF format by clicking on the following link  HMRC Guidance COP28

Visit the BTC website for compliance help and support for firms in the regulated sector.

Over recent months, the JMLSG carried out a review of its Money Laundering Guidance (“Guidance”) for the financial sector. The newly released amendments cover Part 1 of the text.  Further amendments to Part 2 are still under consideration.

Important revisions to the Guidance have taken place at various stages in order to reflect the implementation of AML and CTF laws and regulations. Amendments to Part 1 of the text are minor in nature and include, inter alia, the following:

• Further clarification of the MLRO’s role has been introduced and the Guidance now states that the decision over whether to make a SAR should not be subject to the review of others. It clearly sets out that any decision made must be that of the MLRO and should not be exposed to the direction or approval of other parties within the firm.
• An additional category of customer has been added to the Guidance at paragraph 4.16. It is suggested that along with PEPs and activities involving large amounts of cash, firms should also be on alert when faced with customers who are engaged in industries that might relate to proliferation activities (transfer or export of nuclear, chemical or biological weapons, their means of delivery and related materials).
• At chapter 5, a new category of customer is added to the Guidance. ‘Clients who are listed on exchanges that are not equivalent’ are still subject to some degree of accountability and transparency. The Guidance suggests that as part of their risk-based approach, firms should have regard to the listing conditions that apply in the relevant jurisdiction when deciding whether that company falls into the private company category and consequently one that is deemed to have clear and comprehensive structure, ownership, purposes and activities.
• Other amendments to this chapter comment on PEPs and make it clear that it is for each firm to decide the steps required to implement EDD in respect of higher risk customers. Examples are provided of some jurisdictions that make it illegal for (a generally defined list of) PEPs to hold foreign bank accounts, some require asset declarations to be made and others will make this information publicly available.
• The Guidance now states that the power for firms to carry out EDD is contained within section 7 of the Counter-Terrorism Act 2008. Following the Royal Assent of this piece of legislation in February 2008, section 5.8 was added to the Guidance. The Guidance sets out the circumstances in which HM Treasury has the power to issue directions to firms in the financial sector in relation to their CDD. The Guidance also sets out the types of directions that may be imposed.

Firms must remain vigilant when it comes to updating their AML/CTF policies and procedures. A constant awareness of the changing legislation and resulting amendments to the Guidance is essential. By remaining sufficiently flexible, responsive and well resourced, firms will ensure they better protect themselves from the risks associated with financial crime.

Visit the BTC website for compliance help and support for firms in the regulated sector.

The Prevention of Money Laundering (Amendment) Bill, 2009, passed by the Rajya Sabha last week, seeks to ensure a legal framework to check such crimes. Winding up a discussion on the Bill in the Lok Sabha, minister of state for finance PK Bansal assured the House that the government would not be found wanting in taking action against those indulging in money-laundering. The new law seeks to check use of black money for financing terror activities.

Financial intermediaries like full-fledged money changer, money transfer service providers such as Western Union and International Payment gateways, including VISA and MasterCard have also been brought under the ambit of The Prevention of Money-Laundering Act.

Consequently, these intermediaries, as also casinos, will be brought under the reporting regime of the enforcement authorities. It would also check the misuse of promissory notes by FIIs, who would now be required to furnish all details of their source.

Bansal said the Act would check misuse of “proceeds of crime” be it from sale of banned narcotic substances or breach of the Unlawful Activities (Prevention) Act.

The passage of the Prevention of Money Laundering (Amendment) Bill, 2009 will enable India’s entry into Financial Action Task Force (FATF), an inter-governmental body that has the mandate to combat money laundering and terrorist financing.

The Bill, after becoming an Act, will address India’s international obligation and empower the enforcement directorate to search the premises immediately after the offences are committed and police have filed a report.

Visit the BTC website for compliance help and support for firms in the regulated sector.

The event, run by ‘Payback’ and hosted by the UK Financial Intelligence Unit of SOCA, will be held on Thursday March 12 at the National Motorcycle Museum, Birmingham and is aimed at small and medium sized businesses that are covered by the Money Laundering Regulations.

Such businesses – by their very nature – are vulnerable to abuse by those attempting to launder the proceeds of crime, and the aim of the conference is to make businesses more aware of their role in identifying any suspicious activity taking place during their day-to-day work, thereby making a difference in reducing harm caused to communities by serious organised crime and also protecting their business.

The programme of event is specifically designed to reflect the needs of those within an organisation that have a working interest in combating money laundering, to ensure their business is compliant, to share ideas and help mitigate against the possibility of criminals using businesses to launder the proceeds of crime.

The day will run from 9.30am ton 4.30pm and anyone interested should contact fiudialogue@soca.x.gsi.gov.uk for an application form. It is a first come, first served basis.

Visit the BTC website for compliance help and support for firms in the regulated sector.

To avoid penalties or prosecution, however, make an unprompted disclosure and send HMRC your completed application form MLR100 and appropriate fee (£95.00) without further delay. Forms and fees should be sent to:

Money Laundering Regulations Registration Team.

7th Floor, Alexander House, 21 Victoria Avenue Southend–on-Sea, SS99 1AG

If you are prompted over non registration by your supervisor either by letter or by phone, the minimum penalty will be £500.

The penalty for breaches of the registration  process is up to a maximum of £5,000 if the breach was a failure to take reasonable steps. However this can be increased if the breach was deliberate. This will also include future amendments to your registration details.

Visit the BTC website for compliance help and support for firms in the regulated sector.

A SAR should be made as soon as the knowledge or suspicion that criminal proceeds exist has arisen, especially if consent may be required, or at the earliest opportunity thereafter.

SOCA’s preferred method for reporters to submit their suspicion is the SOCA Suspicious Activity Report Form. SOCA prefers these forms to be submitted electronically but hardcopy versions of the forms (including Limited Intelligence Value Reports) can be found on the SOCA website or obtained directly from SOCA. These can then be posted to the address below. Hardcopy consent requests should be faxed to 0207 238 8286.

If you currently submit by post but would like to report electronically visit the SAR Online System or alternatively contact the Money.web support team

Acknowledgement Letters
SOCA will not acknowledge any SAR sent by fax, post, or by letter. Electronic submissions through money.web, bulk submission or through the SAR Online system, will receive an acknowledgment which will include an automatically generated ELMER reference number.

If you have submitted a consent request, the Consent Team will contact you directly with the decision by telephone within the seven day notice period, and then post the appropriate letter to you as confirmation.

If you have any queries relating to acknowledgments please write to the SAR Team at UKFIU, PO BOX 8000, London, SE11 5EN.

Visit the BTC website for compliance help and support for firms in the regulated sector.