To adhere to international Anti-Money Laundering (AML) regulations, it is crucial to establish and maintain compliance with the relevant laws, regardless of geographical location. Whether it is the Prevention of Money Laundering Act, 2002, or the money laundering, terrorist financing, and transfer of funds regulations of 2017, organizations must prioritize certain key steps to ensure compliance.
Identity verification and determination of the ultimate beneficial owner (UBO) play a significant role in AML compliance. It is essential to accurately identify your customers and verify their UBOs within a transaction. Additionally, conducting checks for sanctions and negative publicity related to the UBO is critical.
Furthermore, it is often necessary to ascertain whether a stakeholder is a Politically Exposed Person (PEP). PEP status requires additional scrutiny due to the potential risk associated with individuals holding prominent public positions.
By implementing robust processes and leveraging technological solutions, organizations can effectively comply with AML directives and the 6th AMLD. These measures help mitigate the risk of money laundering, terrorist financing, and other illicit activities while promoting transparency and integrity in the global financial landscape.
Determine applicability to AML laws.
Assess whether your organization, irrespective of location, falls under AML laws, including the 6th AML Directive. Financial institutions, accountants, bookkeepers, lawyers, estate agents, art dealers, and casinos typically fall under these regulations.
Perform client identification.
Request and record identity details from your clients before initiating any services.
Verify the data.
Thoroughly verify the identity details provided by the client before commencing the service.
Investigate who the ultimate beneficial owner (UBO) is.
For clients who are legal entities, identify and verify the UBO’s identity. The UBO is a natural person who holds more than 25% of shares or voting rights, or is the beneficiary of 25% or more of a foundation or trust’s assets. Investigate the control and ownership structure of the client.
Screen UBO for sanctions and PEP status.
Conduct due diligence on the UBO(s) to determine if they hold any public positions and assess whether they appear on international sanctions lists or adverse media. Extend this research to include family members and close associates.
Evaluate risks.
Assess the purpose, nature of the business relationship, transaction details, and origin/destination of resources to perform a risk assessment. Gather information from the client to understand their intentions, motivations, and the overall coherence of the business relationship. Adopt a Risk-Based Approach.
Implement ongoing monitoring.
Continuously monitor your clients’ risk profiles even after the initial assessment. Stay vigilant for any deviations in transaction patterns and ensure that the client’s risk profile remains accurate.
Assume identification and verification from third parties.
If the client is introduced by another advisor, verify the correctness of their identification and verification process. Take responsibility for steps 6 and 7 and ensure compliance.
Identify unusual transactions.
Report any unusual transactions to the relevant authorities, such as FINCEN, NCA, or HMRC. Identify transactions that meet one or more indicators of being unusual, as specific reporting obligations may vary across different jurisdictions.
Report unusual transactions via your MLRO. (Money laundering Reporting Officer)
Promptly report any intended or completed unusual transactions to the appropriate authorities through your Money Laundering Reporting Officer (MLRO).
There are many abbreviation terms that form the AML directive.
AML = Anti Money Laundering
CDD = Customer Due Diligence
KYC = Know Your Customer
KYB = Know Your Business
HMRC = Her Majesties Revenue and Customs (They supervise and auditEA)
MLRO = Money laundering reporting officer
STR = Suspicious transaction report
EDD = Enhanced due Diligence
FATF = Financial Action Task Force
PEP = Politically Exposed person
5th AMLD = 5th Anti Money Laundering Directive
UBO = Ultimate Beneficial Owner (Any one that owns more than 25%)
UK FIU = Financial investigation unit (these guys investigate the STR)
PSC = Person with Significant Control, similar to UBO
