The UK Government has announced financial sanctions against the regimes in Libya and Zimbabwe and against anyone associated with either Al-Qaida or the Taliban.

Recent developments in the Middle East have highlighted the need for businesses to be vigilant and have robust systems and controls for dealing with actual or potential politically exposed persons. Your business needs to consider the possible impact these events may have on patterns of financial activity when assessing risks related to particular customers and flows of funds.

Businesses need to establish and maintain systems and controls to counter the risk that they might be used to further financial crime. This is covered in the Money Laundering Regulations (MLR). The Money Laundering Regulations 2007 (Regulations 14(4) and 20(2)) and transaction monitoring (Regulations 8 and 20)

If your business is registered under MLR you need to review your anti-money laundering policies and procedures risk assessment as a result of these developments. You will need to check your risk assessment and to take the steps necessary to ensure you continue to meet your legal and regulatory anti-money laundering and reporting obligations.

Find out how to subscribe to the HM Treasury mailing list (Opens new window) for latest announcements on anti-money laundering and counter terrorist financing.

The normal risk based approach and customer due diligence measures must be applied by money transmitters when an individual is sending their own money to either family members or to a relief organisation in Pakistan.

If money collected by a charity or religious organisation is being sent we recommend that you do the following.

• Check the identity of the person arranging to send the money.
• Obtain the name and address of the charity or religious body.
• Check on the Charity Commission website (Opens new window) to confirm the organisation is a registered charity and obtain confirmation that the person is a genuine representative of the charity or religious organisation. Many of the charitable and religious organisations with links to Pakistan are registered with the Charity Commission.

If the organisation is not on the register you may still undertake the transaction but you should make further enquiries to satisfy yourself that the money being transmitted is not terrorist financing or the proceeds of crime.

The further enquiries could include questions about how the money was collected and enquiring about who it is being sent to. If after making further enquiries you are not satisfied that this is genuine you should consider making a suspicious activity report to the Serious Organised Crime Agency.

The public’s support is crucial to enable charities to deliver desperately needed aid to Pakistan but it is vital that donations go to a genuine charity so that they reach those in need. Sadly, there are criminals who try to take advantage of the public’s generosity in response such disasters, and the Commission has been made aware in previous emergency appeals, such as the Haiti appeal, of online scams designed to steal charitable donations. These can take the form of fictitious appeal websites, email appeals that falsely use the name of genuine charities, or appeals from fictitious charities.

The Commission is urging the public to continue giving but to be vigilant, and has the following advice for those who wish to make a donation:

• Be careful when responding to emails or clicking links within them to ensure that they are genuine. If you have any concerns about the legitimacy of a request for donations that appears to come from a charity, don’t hesitate to contact that charity directly.
• If you are in any doubt about a charity collector, ask for their identification and the charity’s name and registration number. If you are not happy about giving then and there, you can check to see if the charity is on the public register of charities on the Commission’s website – www.charitycommission.gov.uk.
• If you are concerned that you may have been targeted by a fundraising scam, you should report this to the police. You should also contact the Charity Commission on 0845 300 0218 or via the website – www.charitycommission.gov.uk.
• If you want to donate online to a particular charity, visit the charity’s website.
  Think about how you are going to give. If you are a UK taxpayer and donate directly to a charity – whether online, over the phone, by post or by handing in a cheque at the charity’s office or shop – it can claim Gift Aid to maximise your donation.

An appeal for the Pakistan floods is being run by the Disasters Emergency Committee (DEC). The money raised will support the efforts of the DEC’s members, which are 13 of the major UK aid agencies and all UK registered charities. Information is on the DEC website – www.dec.org.uk. Numerous other registered charities are involved in the relief efforts and are currently fundraising.

There are laws around collecting money for charity in public which are there to protect donors and make sure that the money raised goes to a genuine charitable cause. If you want to fundraise for those who have been affected by the Pakistan floods, you should:

Have the necessary permission from your local authority or the Metropolitan Police if you live in a London borough.
Only collect using a sealed tin or container.

• Always make sure you state the name and registration number of the charity you are collecting for.
• Always make sure there is more than one person to count the collection proceeds and sign off the total amount
  Bank any cash as soon as possible, preferably straight into the charity account. Get a receipt from the Bank/Building Society.
• Report back to your community so they are reassured that the money has reached the good cause. You may wish to put notices in shops/post offices, or let your local paper know how much you raised and thank people for their support.

HM Treasury

HM Treasury today issues a Statement on Money Laundering controls in Overseas Jurisdictions  

The notice constitutes advice issued by HM Treasury about risks posed by unsatisfactory money laundering controls in a number of jurisdictions.

The Money Laundering Regulations 2007 require firms to put in place policies, procedures or systems in order to prevent money laundering or terrorist financing. Regulated businesses are also required to apply enhanced customer due diligence and enhanced ongoing monitoring on a risk-sensitive basis in certain defined situations and in “any other situation which by its nature can present a higher risk of money laundering or terrorist financing”.

This advice is in two parts, A and B. This advice is especially relevant if you conduct any business with any of the jurisdictions referred to in Part A or Part B or businesses based in those jurisdictions.

This advice supersedes previous advice issued by HM Treasury in connection with deficiencies in these areas.

Part A

On 18^th February 2010 the Financial Action Task Force (FATF) issued a public statement drawing attention to serious deficiencies in

• Iran,  
• Angola, the Democratic People’s Republic of Korea (DPRK), Ecuador and Ethiopia 
• Pakistan, Turkmenistan, and São Tomé and Príncipe.

 The UK fully supports the work of the FATF on these matters and HM Treasury agrees with the FATF’s assessments.

 IRAN

All UK businesses regulated under the Money Laundering Regulations 2007, whether financial institutions or other regulated persons should treat transactions associated with Iran as situations that by their nature can present a higher risk of money laundering or terrorist financing, and which therefore require increased scrutiny, enhanced due diligence, and ongoing monitoring, particularly in the case of correspondent relationships.

All other persons authorised by the Financial Services Authority should also take this advice into account in respect of their systems and controls to counter financial crime, and take appropriate actions to minimise the associated risks.

ANGOLA, THE DEMOCRATIC PEOPLE’S REPUBLIC OF KOREA (DPRK), ECUADOR AND ETHIOPIA

The attention of UK financial institutions and other persons regulated for money-laundering purposes is also drawn to the FATF statement in respect of Angola, the Democratic People’s Republic of Korea (DPRK), Ecuador and Ethiopia, and the risks that they present. They should take this advice into account in respect of their systems and controls to counter financial crime, and take appropriate actions to minimise the associated risks.

PAKISTAN, TURKMENISTAN, AND SÃO TOMÉ AND PRÍNCIPE

The FATF has also drawn attention to the continuing AML/CTF deficiencies in Pakistan, Turkmenistan, and São Tomé and Príncipe.

The attention of UK financial institutions and other persons regulated for money-laundering purposes is therefore drawn to the FATF statements in respect of those jurisdictions, and the risks that they continue to present. They should take this advice into account in respect of their systems and controls to counter financial crime, and take appropriate actions to minimise the associated risks.

Part B

In a separate statement on the ongoing process to improve global anti-money laundering and countering terrorist finance (AML/CTF) compliance the FATF has also drawn attention to deficiencies in the AML/CTF regimes in the following jurisdictions; Antigua and Barbuda, Azerbaijan, Bolivia, Greece, Indonesia, Kenya, Morocco, Myanmar, Nepal, Nigeria, Paraguay, Qatar, Sri Lanka, Sudan, Syria, Trinidad and Tobago, Thailand, Turkey, Ukraine and Yemen.

The attention of UK financial institutions and other persons regulated for money-laundering purposes is drawn to the FATF statements in respect of each of those jurisdictions. They should take this advice into account in respect of their systems and controls to counter financial crime.

This FATF statement is available at: http://www.fatf-gafi.org/dataoecd/34/28/44636196.pdf

The UK threat assessment of Organised Crime has been published on the Serious Organised Crime ( SOCA) website

The assessment describes the threats to the UK by organised crime and considers how these threats may develop. For businesses subject to the Money Laundering Regulations (MLR) this information will help you to assess the money laundering risk to your business and to develop effective anti money laundering policies and procedures.

Download the document.pdf

Gangs are stealing taxpayers’ passwords and submitting claims for tax refunds to be paid to them, HM Revenue and Customs has warned.

A series of attempted fraudulent claims through the self-assessment repayments system has been discovered.

No figures have been released outlining the extent of the fraud, but a HMRC spokesman said this was a new method of trying to extract money.

He urged people to ensure passwords sent to them by HMRC were kept secure.

“They should treat these details as carefully as they would a Pin for their bank account,” he said.

Attempt
More than 9.5 million taxpayers are in the self-assessment system, which was changed this year to encourage more people to submit their details via the internet.

Two-thirds of all filings for 2007-08 were submitted via the internet, rather than on paper.

When people apply to use the system they are sent a password through the mail which is then used when the taxpayer logs onto the HMRC website over the following 30 days.

However, fraudsters have been getting hold of these passwords and other personal details. This could have been by stealing the mail, tricking people out of the details or even finding the letters discarded in bins.

They then used these details to make fraudulent repayment claims, requesting funds be sent to other bank accounts.

The HMRC spokesman said this was different from so-called phishing e-mails which pretended to be from the tax authority and aimed to discover taxpayers’ banking details so their accounts could be raided.

Liability for any losses would be judged on a case-by-case basis, he added.

PESHAWAR: For the Taliban in Afghanistan and Pakistan, money is coming mostly from extortion, crime and drugs, an AP investigation claims

Funding for the Al Qaeda is more diverse and included money from new recruits, donations from sympathisers, and a cut of profits from honey dealers in Yemen and Pakistan.

“With respect to the Taliban, the narco-dollars are a major, if not majority, of their funding sources, and I think add in there as well extortion and kidnapping,” said Juan Carlos, a former US National Security Council adviser on terrorism who now works at the Centre for Strategic and International Studies in Washington.

Afghanistan produces more opium than any other country in the world. The Taliban charge drug kingpins to move the opium through their territory. The United Nations estimates their annual cut to be more than $300 million.

‘Taxes’: The Taliban refer to extortion money as tolls, taxes or zakat. Money from drugs and criminal gangs makes up roughly 85 to 90 percent of Taliban revenue, estimates John Solomon of the US Military Academy’s Counter Terrorism Centre. In Pakistan, the NWFP governor puts the Taliban’s annual earnings at roughly Rs 4 billion.

Taliban soldiers are paid nearly $100 a month, more than the average Pakistani policeman. A Taliban commander gets more than $350 a month.

The informal money transfer system known as hawala or hundi is flourishing in Pakistan and Afghanistan as well as the US. Former prime minister Shaukat Aziz said more than $5 billion went out of Pakistan every year through this system, which operates without regulation.

In three of the last five years, the top source of money transfer into Pakistan through hawala has been the US, a security official said.

After September 11, 2001, the financial crackdown closed some of Al Qaeda’s sources of funding. But with the help of the hawala system, it has since re-established its money line.

Over the last two years, it has turned up the call for donations, told new recruits to bring money with them, and shown signs of being more frugal. This can either mean that it is saving up for another 9/11-style attack, or that the crackdown has curbed its fundraising ability.

Estimates of Al Qaeda’s annual spending vary wildly from $300 million to as low as $10 million.

Carlos said its main expenses were payments to families; food and shelter to maintain operations; travel and logistics; money for cells engaged in plots; bribes, and expenses for long-term plans like anthrax research.

Some charities with alleged Al Qaeda connections have renamed themselves. In Kuwait, the Revival Islamic Heritage Society, believed by the US to be heavily financing Al Qaeda, is still operating.

Because of demands from the International Monetary Fund, Pakistan has removed restrictions on the amount of money that can be brought into the country. It has limited to $10,000 the money that can leave the country, cracking down on some of the biggest hawala dealers.

“Once the money is inside the country, it is difficult to locate it. Smugglers and transporters help finance the Taliban either out of sympathy for their cause or because they are being forced to give a share,” said a security official.

A cartel of honey dealers is back in business, laundering money and moving drugs but the scale is smaller than in 2001.

A former fighter with Gulbuddin Hekmatyar told AP honey is sent from Pakistan with an inflated price tag to markets in the Middle East and the profits sent by courier to Al Qaeda.

Honey dealers in Peshawar said that there was no Al Qaeda link to their sales. But one honey dealer said the outlawed Al Shifa Honey Press was still operating in Punjab. He said he knew of no Al Qaeda affiliation

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

Who is this guidance for?
This guidance is for MSBs supervised by HM Revenue & Customs (HMRC).
Purpose of this guidance. The purpose of this guidance is to provide MSBs that are supervised by HMRC with comprehensive guidance on complying with directions issued by HM Treasury (HMT) under the Counter Terrorism Act 2008 Schedule 7

The guidance:
• Outlines the legislation in the Counter Terrorism Act 2008 Schedule 7
• Explains the requirements of the Counter Terrorism Act 2008 Schedule 7 in relation to MSBs and how these should be applied in practice
• Explains the link between these requirements and those under the Money Laundering Regulations (MLR) 2007

The Counter Terrorism Act 2008 Schedule 7
Schedule 7 of this Act:
• addresses the risks from money laundering, terrorist financing and the proliferation of nuclear, radiological, biological or chemical weapons

• gives new powers to HMT to issue directions to firms in the financial sector including MSBs

• requires MSBs to comply with directions issued by HMT

• appoints HMRC as an enforcement authority and gives new powers to HMRC to supervise MSBs to ensure their compliance with the requirements imposed by any direction

What is a direction?
A direction will contain specific legal requirements imposed by HMT on businesses in the financial sector in relation to their transactions or business with:
• a person carrying on business in a country
• the government of a country
• a person resident or incorporated in a country

The requirements may be imposed on particular businesses in the financial sector, a category of businesses, or all businesses in the financial sector.
When can HM Treasury issue a direction under the Counter Terrorism Act Schedule 7?

HMT may give a direction if one or more of the following conditions is met in relation to a country outside the European Economic Area (EAA.)?
The Financial Action Task Force (FATF) has advised that measures should be taken in relation to the country because of the risk of terrorist financing or money laundering activities being carried on
- in the country
- by the government of the country
- by persons resident or incorporated in the country

HMT reasonably believes that there is a risk of terrorist financing or money laundering activities being carried on:
- in the country
- by the government of the country
- by persons resident or incorporated in the country

and that this poses a significant risk to the national interests of the UK
HMT reasonably believes that:
• the development or production of nuclear, radiological, biological or chemical weapons in the country
• or the doing in the country of anything that facilitates the development or production of any such weapons poses a significant risk to the national interests of the UK.

What is The Financial Action Task Force (FATF)?
FATF is an inter-governmental body which develops international standards to combat money laundering and terrorist financing. It also produces lists of countries that do not have sufficient legal and regulatory standards to combat money laundering and terrorist financing.

How will HM Treasury issue a direction?
HMT may issue a direction to a particular firm following a ministerial decision. In such cases it will communicate directly with the firm.
When a direction is issued to more than one firm, HMT will lay an order before parliament.

How often will directions be issued?
Directions can only be issued to counter significant threats from high risk jurisdictions and so will not be used frequently.

How long will a direction last?
A direction will last for one year. However, it may be withdrawn before this time.

Will HM Treasury take account of the impact on businesses when they issue a direction?

HMT has a duty to consider the proportionality of any direction, which includes the likely impact upon businesses.

When HMT gives a direction they will consider the administrative burdens it will impose on affected businesses and if possible will give businesses time to prepare.

Does HM Treasury have similar powers under the Money Laundering Regulations 2007 (MLR 2007)?

Under Regulation 18 of the MLR 2007 HMT can direct any relevant person
• not to enter into a business relationship
• not to carry out an occasional transaction
• not to proceed any further with a business relationship or occasional transaction

with a person who is situated or incorporated in a non-EEA state to which the FATF has decided to apply counter-measures. The powers to issue directions under the CT Act 2008 are broader, reflecting the range of counter measure options identified by the FATF. Under the CT Act 2008 HMT can issue directions where the FATF has only advised measures be taken and can only direct businesses operating in the financial sector. Under the MLR 2007 HMT can direct any relevant person, but only where the FATF has decided to apply counter measures.

What does this mean for MSBs?
HMT could issue directions to all MSBs, or to some types of MSBs or to a particular business. This means that you must be ready to deal with these directions by training your staff and including how to deal with them in your anti money laundering systems.

Will cheque cashers or bureaux de change be affected?
Cheque cashers and bureaux de change are MSBs and therefore fall within the scope of the Counter Terrorism Act. Directions may specify some or all types of MSB, but as the purpose of any direction will be to prevent the flow of money to and from the countries affected it is unlikely that cheque cashers or bureaux de change will be affected. Despite this they should always include how to deal with any directions in their anti money laundering polices and processes and sign up to the email alert system.

What will a direction say?
Directions can impose a range of requirements on a business in relation to their transactions or business with the targeted country or institution:
• enhanced due diligence
• enhanced ongoing monitoring
• systematic reporting
• limiting or ceasing business

The requirements to carry out enhanced customer due diligence and ongoing monitoring are in line with similar requirements under the MLR 2007. The requirements for systematic reporting and limiting or ceasing business are new.

What will I have to do?
Specific guidance will be issued with each direction and you will need to read the conditions imposed very carefully to find out what you need to do.
You will have to identify the customers or transactions that are affected and may need to carry out more detailed checks on them.
You may need to do one or more of the following:
• Carry out enhanced customer due diligence (see MLR 8 para. 7.12). You would normally do this in high risk situations such as when the customer is a politically exposed person.

• Carry out ongoing monitoring of customers in a business relationship (see MLR 8 Part 9). This is the kind of monitoring you would normally do in high risk situations.

• Report all transactions with these people and organisations. You may need to do this weekly.

• Cease or limit business with certain people and organisations.

If I have to impose additional requirements will I ‘tip off’ my customers?
There is no tipping off offence under the Counter Terrorism Act. The tipping off offences under the Proceeds of Crime Act and Terrorism Act will not apply when businesses identify affected transactions and carry out any of the four requirements.

Will there be any threshold for applying enhanced customer due diligence for affected transactions?
There will be no threshold for requiring enhanced customer due diligence unless this is specified in the direction.

What if I have to cease business with certain people or organisations?
Within the time set out in the direction you must not do business with the people or organisations specified. HMT may grant a licence to exempt certain transactions or types of transaction from the requirements of the direction. Either your customers or you can apply for a licence. HMT will provide further information on how to apply for licences when they issue a direction.

What will happen to the money if I have to stop a transaction?
Preferably, the money should be refused before a transaction can be started. HMT will issue specific guidance with each direction on what to do with transactions that are underway.

How will I carry out systematic reporting?
HMT will explain in each direction what information should be provided about transactions and business including where and when the documents and information should be sent.

Should I continue to submit Suspicious Activity Reports (SARs) in relation to these transactions and business?
Yes, you should continue to submit SARs where necessary alongside systematic reporting.

How will I know that a direction has been issued?
All MSBs should sign up to HM Treasury’s email alert system to receive copies of any directions. HMT will put an announcement on their web site and issue a press statement when they issue a direction and HMRC will put an announcement on their Money Laundering Regulations web site and may contact affected businesses by a mail shot where this is possible.

Will branches of my business based outside the UK be affected?
Yes the direction will apply to all branches of your business within the EEA but not to any subsidiaries legally incorporated in another jurisdiction.
Will the directions list the individuals within a business that I should not deal with?

No, where you are required to limit or cease business with another business or organisation the directions will identify the organisation or business only. Although individuals will not be named in order to comply with the requirements of the direction, you should not deal with any representative of the business or organisation.

What are the sanctions for non- compliance?
There are civil and criminal sanctions for failure to comply with the Counter Terrorism Act 2008 Schedule 7. These include unlimited fines and imprisonment for up to two years.

How will HMRC supervise compliance with the Counter Terrorism Act 2008?
We will integrate monitoring compliance with the Counter Terrorism Act into our existing risk based approach to compliance with the MLR 2007 and Transfer of Funds Regulations 2007.

How will this effect the assessment of customers and products under the MLR 2007?
Customers that are carrying out transactions or business with countries where the FATF has highlighted deficiencies in systems to prevent money laundering and terrorist financing, will be high risk. Where the MLRs require customer due diligence measures to be applied they should be subject to enhanced due diligence and enhanced monitoring even if HMT has not issued any formal direction.

Appendix 1
What countries are included in the European Economic Area EEA?
Austria, Belgium, Bulgaria, Republic of Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom. Iceland, Liechtenstein and Norway are EEA member states, but they are not members of the European Union (EU). Gibraltar is within the EAA.

What countries are not included in the EEA?
Any country that is not listed above including Switzerland which is not a member of the EU or the EEA. The Channel Islands and the Isle of Man are not part of the UK, EU or the EEA.

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

The FATF has called on its members to consider effective countermeasures to protect their financial sectors from risks emanating from Iran, and to protect against the use of correspondent banking relationships to bypass or evade counter-measures and risk mitigation practices.

All UK businesses regulated under the Money Laundering Regulations 2007, whether Money Service Businesses or other regulated persons should treat transactions associated with Iran as situations that by their nature can present a higher risk of money laundering or terrorist financing, and which therefore require increased scrutiny, enhanced due diligence, and ongoing monitoring. In the light of the call for countermeasures the UK is, in addition, considering what further action is required.

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