How do you comply with AML Directives and the 5th AMLD
Prevention of Money Laundering Act, 2002, or the money laundering terrorist financing and transfer of funds 2017. If, as an institution, you must comply with these laws you must determine the identity of your customers and verify who the ultimate beneficial owner (UBO) of a transaction is. When you have found the UBO, you must check whether there are any sanctions against this person and whether this person has been publicised negatively. In many cases, you are also required to check whether the stakeholder is a Politically Exposed Person (PEP).
It is important that you document this process after you have conducted this study. Cddcheck has created a solution that allows you to conduct and document this research in an efficient manner.
In addition, reporting entities must report unusual transactions to Financial Crimes Enforcement network (FINcen), National Crime Agency (NCA) or the HMRC. These are transactions that meet certain indicators. These authorities assess whether a transaction is indeed suspicious and can then pass this on to an investigation service.
Follow these 10 steps
Check whether you must comply with the AML laws.
Do you fall under the AML laws including the 6thAML Directive? If you are a financial institution, Accountant, Bookkeeper, Lawyer, Estate Agent, Art Dealer, Casino, then you do.
Identify your client.
Before you start your service, you ask your client for the identity details and record them.
Verify the data.
You have to verify that the identity details (step 2) correspond to the actual identity of your client before starting the service.
Investigate who the ultimate beneficial owner (UBO) is.
If your client is a legal entity, you must identify the UBO and verify his or her identity. The UBO is a natural person who can exercise more than 25% of the shares or voting rights or the beneficiary of 25% or more of the assets of a foundation or trust. Having “significant influence” is also a point where someone can be a UBO. In addition, you should investigate the control and ownership structure of your client.
Investigate whether the UBO (s) is on an international sanctions list or is a politically exposed person (PEP) and document this investigation.
Check whether your client or your client’s UBO holds a certain public position within or outside/Inside the country your business resides. Also include family members and loved ones in this research. Also investigate whether your client or your client’s UBO is on an international sanction list or appears in any adverse media.
Estimate the risks.
Assess the purpose and nature of the business relationship, the nature of the transaction and the origin and destination of resources to make a risk assessment. Obtain information from your client. What does your client want, why, how, and does this make sense? This is known as a Risk Based Approach.
Continue to monitor your customer.
Even after the initial risk assessment, you must continue to pay attention to your client’s risk profile. Check whether transactions deviate from your client’s normal behaviour pattern. Does your client still meet the risk profile you have drawn up?
If your client is introduced by another advisor, you can take over identification and verification from that other party.
However, you must check whether identification and verification have been carried out correctly by another advisor: request information about this. You are responsible. You must carry out steps 6 and 7 yourself.
Assess whether transactions are unusual.
You must report unusual transactions to the FINcen, NCA or HMRC. A transaction is unusual when it meets one or more indicators. Specific obligations apply to each reporting group.
Report unusual transactions via your MLRO. (Money laundering Reporting Officer)
Do you notice an unusual transaction? An intended or already performed unusual transaction must be reported immediately to the relevant authorities.
AML Abbreviated terms
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
The AML Legal guidelines
If you want to read more about the AML, you can consult the following sources: