Spotlight on Money Laundering.

By Mark Jones, director of Carmarthen-based Clay Shaw Butler chartered accountants and business consultants.

Regular readers of Money Matters will recall that last week we started to turn the spotlight on money laundering.

We explained how some businesses and organisations were part of what is called ‘The regulated sector’.

Money laundering legislation relates to anyone in what is termed as the ‘regulated sector’, which includes but is not limited to:

• accountants and auditors
• tax advisers
• financial institutions
• credit institutions
• dealers in high value goods (including auctioneers dealing in goods) whenever a transaction involves accepting a total cash payment equivalent to 15,000 Euros or more, whether in a single operation or in several operations that are linked
• casinos
• estate agents
• some management consultancy services
• company formation agents
• insolvency practitioners
• legal professionals

As you can see from the list above, quite a wide range of professionals and other businesses are affected by money laundering legislation.

Those affected must comply with the laws or face the prospect of criminal liability (both fines and possible imprisonment) where they do not.

Under the money laundering regulations, if you operate in the regulated sector, you are required to undertake CDD (customer due diligence) procedures on your customers.

These CDD procedures need to be undertaken for both new and existing customers.

CDD procedures involve:

• identifying your customer and verifying their identity. This is based on documents or information obtained from reliable and independent sources
• identifying where there is a beneficial owner who is not the customer. It is necessary for you to take adequate measures on a risk sensitive basis, to verify the beneficial owner’s identity, so that you are satisfied that you know who the beneficial owner is. The beneficial owners of the business are those individuals who ultimately own or control the business
• obtaining information on the purpose and intended nature of the business relationship

You must apply CDD when you:

• establish a business relationship
• carry out an occasional transaction (one off transaction valued at 15,000 Euros or more)
• suspect money laundering or terrorist financing
• doubt the reliability or adequacy of documents or information previously obtained for identification.

CDD measures must also be applied on a risk sensitive basis at other times to existing customers. This could include when a customer requires a different service. Businesses must consider why the customer requires the service, the identities of any other parties involved and any potential for money laundering.

The purpose of the CDD is to confirm the identity of the customer. For the customer’s identity to be confirmed, independent and reliable information is required. Documents which give the strongest evidence are those issued by a Government department or agency or a Court including documents filed at Companies House. For individuals, documents from highly rated sources that contain photo identification, eg passports and photo driving licenses, as well as written details are a particularly strong source of verification.

The law requires the records obtained during the CDD to be maintained for five years after a customer relationship has ended.

Enhanced CDD and ongoing monitoring must be applied where:

• the client has not been met face to face
• the client is a politically exposed person
• there is a higher risk of money laundering or terrorist financing.

Additional procedures are required over and above those applied for normal due diligence in these circumstances.

As mentioned earlier, the definition of money laundering includes the proceeds of any crime. Those in the regulated sector are required to report knowledge or suspicion (or where they have reasonable grounds for knowing or suspecting) that a person is engaged in money laundering ie has committed a criminal offence and has benefited from the proceeds of that crime.

These reports should be made in accordance with agreed internal procedures, firstly to the MLNO (Money Laundering Monitoring Officer), who must decide whether or not to pass the report on to the National Crime Agency (NCA).

The defences for the MLNO are:

• reasonable excuse (reasons such as duress and threats to safety might be accepted although there is little case law in this area as yet)
• they followed Treasury approved guidance.

The Courts must take such guidance into account.

The legislation brings a number of professions and businesses into the regulated sector. Complying with the requirements of money laundering legislation requires those affected to introduce a number of new procedures to ensure that they meet their legal responsibilities. If you have a business in the Carmarthen area and would like to discuss how the legislation could affect you and your organisation please contact us at Clay Shaw Butler.

You can find out more about money matters on the Clay Shaw Butler website (under our news for business section) –

http://www.clayshawbutler.com/news/latest-news-for-business

We have a strong and experienced team with great local knowledge all geared-up to helping you get the very best from your finances – whether that is as an individual or as a business.

We stay ahead of the game by putting great store by continual professional development for our staff.

With Investors In People status at Clay Shaw Butler, we care passionately about making sure our staff have all the tools they need to serve you, our customers.

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The team at Clay Shaw Butler can be contacted on 01267 228500.

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