The wicked and the criminals are continuously innovating, and creating new ways to make money out of crime. They are also money laundering, on an epic scale. The scale of illicit finance in the UK is thought to be £90bn a year.
2017 was a year of change in AML and financial crime, with the long-awaited Money Laundering, Terrorist Financing, Transfer of Funds (Information on the Payer) Regulations 2017, and the Criminal Finances Act. There was plenty to think about and do.
But it doesn’t stop there.
Here are 5 facts that will impact your approach to AML in 2018:
1. SRA collection of data
On 22 January the SRA opened a data collection exercise, where firms have 10 working days to provide information about the type of work the firm does, who the MLRO is, and if the firm requires one, the compliance officer. The SRA have put together useful FAQs to help firms complete the questionnaire.
2. Final guidance
The Legal Sector Affinity Group have prepared guidance for firms on MLR 2017, which is currently in draft form on the Law Society’s website. The guidance has been submitted to HM Treasury, and is currently going through the approval process. It is hoped the guidance will be finalised within the next couple of months. Once the final guidance is released, firms will need to take steps to finalise their policies and procedures.
3. Independent audit function
Regulation 21 MLR requires that a firm — where appropriate to the size and nature of its business — establish an independent audit function to examine and evaluate the adequacy and effectiveness of the policies, controls and procedures. Firms will need to consider how to resource this, whether they can do that internally or externally, and consider the scope. Many firms already include customer due diligence (CDD) in their file review process, but audit may be much wider, reviewing accounts and risk assessment processes.
4. Implementation of the Criminal Finances Act
2017 saw the introduction of the Criminal Finances Act (CFA), and the Corporate Offence of Failing to Prevent the Criminal Facilitation of Tax Evasion. Firms also need to be aware of the provisions around the extension to the Moratorium Period (r10), the new Information Sharing Powers (r11) and Further Information Orders (r12) which came into force on 31 October 2017. Policies and procedures for dealing with these may need to be introduced, and staff training, particularly in relation to the Information Sharing Powers, and how to respond should someone seek to share information about a client with them.
5. Amending Directive to the Fourth Money Laundering Directive (4th MLD)
On 15 December 2017, the amending directive to the 4th MLD was agreed. This revision of the Directive, aims to:
- increase transparency on who really owns companies and trusts by establishing beneficial ownership registers;
- prevent risks associated with the use of virtual currencies for terrorist financing and limiting the use of pre-paid cards;
- improve the safeguards for financial transactions to and from high-risk third countries;
- and enhance the access of Financial Intelligence Units to information, including centralised bank account registers.
Member states will have 18 months to implement these changes, so firms may need to make further changes to their policies and procedures in the not too distant future. It is clear we are a long way off from 'business as usual' in AML, with a lot of change still to navigate and embed.
Amy Bell will be speaking about these issues and more at Anti-Money Laundering Compliance for Law Firms 2018 on 28 February 2018. Find out more about this event.