Are your staff able to spot suspicious transactions when it comes to money laundering?
There are many ways that someone will try to launder money, meaning that spotting the crime before it’s too late can sometimes be challenging. Here is some guidance on how to spot suspicious transactions and best practice on how to deal with such suspicions.
Seven ways people may launder money
The guidance below is taken from our interactive e-learning course, Anti-Money Laundering: Know Your Risk. You can demo the course for free here.
Definition: payment for a service or product online through a credit card and other electronic payment systems.
The risk: e-commerce payments create ample opportunity for money laundering and terrorist financing. Selling counterfeit goods online or no goods at all or making payments and transfers where the credit card or the user does not need to be verified are often a blind spot in AML prevention measures.
Tip: have strong identity verification measures and transaction monitoring in place. Using technology to uncover suspicious activity can help reduce the money laundering risk of online payments.
What to expect this year in AML
2017 was a big year in money laundering. The EU deadline for the implementation of the Fourth Money Laundering Directive came and went, with the UK passing its Money Laundering Regulations 2017 just in time, even as other EU nations rushed to catch up. However, the ink hadn’t even dried on the bills as the EU reached an agreement on the Fifth Money Laundering Directive late in December 2017, with the final text due to be agreed upon sometime in 2018.
Download an anti-money laundering compliance timeline for 2018
There are some important money laundering milestones to bear in mind for 2018. VinciWorks has published a month by month guide to anti-money laundering in 2018. The guide, 2018 – the year in money laundering, includes some of the key upcoming moments that relate to money laundering in 2018, including the fallout from the Fourth Directive, preparing for other crucial changes such as GDPR, and the expected FATF review of the UK.
Anti-money laundering e-learning training
VinciWorks’ latest anti-money laundering course, AML: Know Your Risk, covers six interactive modules and allows users to delve into realistic anti-money laundering scenarios. Users can also receive instant feedback on their answers to the questions in the course. You can demo the course for free here.
Under the Fourth Directive, the rules involving politically exposed persons (PEPs) are no longer limited to foreign officials. Local PEPs will now be subject to the same scrutiny as foreign PEPs. Here are some key guidelines regarding PEPs, the regulations regarding them and how to spot red flags.
What is a PEP?
A politically exposed person is defined as an individual who is entrusted with prominent public functions, including members of legislative bodies, government ministers, judges, high ranking members of the armed forces and senior officials of state-owned enterprises. The Fourth Directive extended the definition of politically exposed persons to include domestic citizens, as well as foreign ones.
The European Union’s Fourth Anti-Money Laundering Directive came into force on 26th June 2017.
The Directive includes some fundamental changes to the anti-money laundering procedures, including changes to CDD, a central register for beneficial owners and a focus on risk assessments. However, with proper preparation and training, the transition to the new regime should be seamless for most firms.
The Money Laundering Regulations 2017 require relevant businesses to:
- Make employees aware of the laws relating to money laundering and terrorist financing
- Regularly provide training on how to recognise and deal with transactions and other activities which may be related to money laundering or terrorist financing
What is a relevant business?
Money laundering regulations apply to various business sectors, including financial services, accountants and estate agents, and other businesses such as law firms undertaking regulated work.
Today, Section 11 of the Criminal Finances Act 2017 comes into force. It amends the Proceeds of Crime Act (POCA) and affects the regulated sector. The new data sharing regime enables regulated persons to request and share information with their regulated peers, free in most respects from contravening data protection regulations. Any disclosure “made in good faith” that does not breach any duties of confidence or “any other restriction on the disclosure of information.”
The purpose is to encourage the sharing of information from different entities in the regulated sector and better enable the collation of multiple reports of potential money laundering into a single Suspicious Activity Report.
In light of the new Money Laundering Regulations having come into full effect in June, VinciWorks has made available a free anti-money laundering and counter-terrorist financing policy template. The policy can easily be edited to suite your law firm or organisation, your industry and staff.
Here are some guidelines for what should be included in an anti-money laundering policy:
- Introduction and an explanation of what money laundering and terrorist financing is
- How does money get laundered?
- Guidelines on differentiating between money laundering and terror financing
At least £57 billion is laundered through the UK each and every year. It’s not just criminals turning their illicit money from crime clean. Terrorist financing is often overlooked when it comes to anti-money laundering efforts, but acts of terror in the UK and around the world are being bankrolled in the same way as money is laundered.
Law firms, as well as other professional services such as accountants, estate agents and financial services, are at high risk of being patsies for criminals and terrorists. Because their accounts are seen as “clean,” sending dirty money into a law firm’s client account and having it sent back out again is a sure fire way to launder dirty cash.
The Fourth Anti-Money Laundering Directive, which came into force on 26th June 2017, brings some key changes to the anti-money laundering policies in law firms and organisations. Recent high profile money laundering scandals demonstrate the importance of having the right procedures in place to prevent money laundering. This blog gives some examples of the money laundering convictions that have damaged the reputations of firms and organisations.
Deutsche Bank learns anti-money laundering lessons the hard way
In January, Deutsche Bank, Europe’s largest investment bank, was hit with an incredible £500 million from multiple regulators. The bank ran a $10bn money laundering scheme involving the Moscow, New York and London branches shifting roubles between Cyprus, Estonia and Latvia in a manner that was “highly suggestive of financial crime.” The regulators said “the bank missed numerous opportunities to detect, investigate and stop the [money laundering] scheme due to extensive compliance failures, allowing the scheme to continue for years.”
On 26th June 2017, the UK met the EU’s deadline and transposed the Fourth Money Laundering Directive into national legislation.
On Monday 2nd July over 200 law firms and organisations joined Director of Best Practice Gary Yantin and anti-money laundering expert Amy Bell to discuss the implementation of The Fourth Directive and the new Anti-Money Laundering Regulations 2017.
The webinar covered some key questions surrounding the new regulations such as:
- What must firms do to comply with the Fourth Directive?
- How do the changes to pooled client accounts affect me and how likely are the changes to come into force?
- How do you carry out a risk assessment?
- Is there Law Society guidance on how to approach risk-based CDD?
- How will new legislation such as the Criminal Finances Act affect you?