Risk assessment clip boardWhen your organisation is using third parties, it is essential to complete your own due diligence equal to the risk faced from the said relationship. With businesses and partnerships around the world growing, it is essential to make sure all your relationships and third parties are legal and legitimate. VinciWorks’ guide to risk based third party due diligence will give you a clearer understanding of how to conduct a detailed and genuine risk assessment.

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Image implying money laundering
Under the Fourth Money Laundering Directive, CDD is required by anyone trading goods in cash with a value over €10,000, down from previous amount of €15,000

Customer Due Diligence and Anti-Money Laundering

Ensuring your staff are able to carry out effective customer due diligence goes a long way to ensuring your staff and clients are not are not facilitating money laundering. Such processes to be aware of and understand include submitting a suspicious activity report (SAR), understanding what is required to take a risk based approach and the supporting documents that should be requested from clients. Here is some guidance to carrying out customer due diligence and how to deal with potential red flags.

The guidance is taken from our interactive e-learning course, Anti-Money Laundering: Know Your Risk. You can demo the course for free here. The course is in line with the Fourth and Fifth Money Laundering Directive and will be updated when the Fifth Directive comes into force.

What is customer due diligence?

Customer due diligence is the process of identifying your customers and checking they are who they say they are. In practice, this means obtaining a customer’s name, photograph on an official document which confirms their identity and residential address and date of birth. There are three levels of customer due diligence: standard, simplified and enhanced.

Learn more: VinciWorks’ AML client onboarding and ongoing monitoring software solution

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Sanctions list
The new allows for the UK to add or remove people, entities and organisations from targeted sanctions list if there are reasonable grounds to suspect involvement in activities that can trigger sanctions

The UK parliament recently enacted a new piece of sanctions and money laundering legislation designed to Brexit-proof the UK’s ability to implement international and European sanctions. To help organisations comply, VinciWorks has released a brand new scenario based training course Sanctions: Know Your Transaction. Following the success of our anti-bribery and anti-money laundering training, this course drops users into a set of immersive scenarios to test their knowledge, understanding and ability to comply with the new sanctions law.

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Geurnsey, one of the Crown Dependencies

UK’s Sanctions and AML Act 2018

The UK’s Sanctions and Anti-Money Laundering (AML) Act 2018 is a legislative framework that strengthens the country’s ability to implement sanctions and AML measures. The act provides the legal basis for the UK government to impose and enforce sanctions on individuals, entities, and countries deemed to pose a threat to national security or involved in illicit activities. The act expands the powers of the relevant authorities to investigate, prevent, and prosecute money laundering offences and reinforces cooperation and information sharing between public and private sectors.

Impact of UK’s Sanctions and AML Act 2018 on Crown Dependencies and Overseas Territories

Impact of the Sanctions and Anti-Money Laundering 2018 Act on the Crown Dependencies and British Overseas Territories

Following an amendment to the recently enacted Sanctions and Anti-Money Laundering Act which will introduce public ownership registers in British Overseas Territories, the amendments sponsors Andrew Mitchell and Dame Margaret Hodge will visit the Isle of Man to persuade the government to create a publicly accessible register of beneficial ownership.

Currently, the Manx Government’s central register is only accessible to law enforcement and tax officials, but the UK government is keen for the Crown Dependencies to adopt the approach being set out in the EU’s Fifth Anti-Money Laundering Directive.

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A lock on a computer keyboard

New US Anti-Money Laundering rules will cause a data deluge while the EU General Data Protection Regulation turns data combustible.

May 2018 is not a long way off, and it’s going to be an explosive month for compliance. Two earth-shattering changes are coming. Firstly, on 11 May, new client due diligence (CDD) rules for beneficial owners come into effect. Secondly, on 25 May, GDPR goes live. The first change requires mass amounts of data to be collected, while the second change greatly restricts how that data can be used and introduces eye-watering fines for getting it wrong.

What’s changing for CDD in the US?

The United States Financial Crimes Enforcement Network (FinCEN) is requiring financial institutions operating in the US to process and vet sanctions data, negative-news data, corporate associations, individual associations and more on ultimate beneficial owners (UBO). Essentially, institutions will need to be able to track the entire relationship from customer to UBO, and all the corporate vehicles in between them.

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Dollars from a suspicious transaction

Are your staff able to spot suspicious transactions when it comes to money laundering?

Suspicious transactions in money laundering

A suspicious transaction is any transaction or business dealing which raisis in the mind of a person involved any concerns or indicators that there may be something illegal or something related to money launering or terrorist financing involved the the transaction or dealing.

Examples of the money laundering suspicious activity

A few examples of suspicious transactions include the following:

  • Abnormally large transactions
  • Cash payments or deposits where this has not been the norm
  • Customer is reluctant to provide personal information or provides insufficient, hard to trace, or fictitious information
  • Any transaction whose nature, size, or frequency appears unusual or out of the norm for that customer or account
  • Accounts opened in offshore or high risk locations where, for example, drugs or drug trafficking may be prevalent
  • Transfer of investments to apparently unrelated third parties
  • Evidence of customer being a PEP
  • Use of multiple currencies in a transaction

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.

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.

7 ways to identify suspicious transactions

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.

E-commerce

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.

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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.

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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.

Money in water

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.

Politically Exposed Person (PEP) Definition

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.

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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.

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What you need to know sign

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.

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