Anti-money Laundering Procedures

				laundering concern, or the person is a Politically
What is Money Laundering?				Exposed Persons or “PEPs” , employment or
Money Laundering is the process of hiding and				business type e.g. gambling. Bureau de change, casino,
disguising the true origin and ownership of the				arms trade.
proceeds of crime. It is usually linked to criminal				· Service Risk: Whether the services we
activities such as organised crime, corruption, drug				are providing will involve services identified as being
related crime and terrorism.				potentially high risk for money laundering.

Stages of money laundering				- In deciding what rating to set a client to, the
There are three stages of money laundering –				following will also be considered:
Placing, Layering and Integration. Placement is the				- Whether the entity is a listed company in the UK or
first stage and it involves the actual deposit of illegal				in a comparable jurisdiction.
cash into the financial system with the aim of				- Whether the entity is regulated by the FSA or a
distancing that cash from its original source.				comparable regulator.
Layering is the process of further disguising the origin				- Whether the client is using complex corporate
of the illegal money by means of bogus transactions				vehicles that have no clear commercial rationale or
and/or a series of bank account transfers.				result in a lack of transparency.
Integration is the final step when ‘clean’				- Whether we are familiar with the jurisdiction of
money is reintroduced into the economy.				origin
				- Whether we have a long standing relationship with
The methods of laundering money can be complex				the client.
and not altogether visible. Companies have to				- Whether we are dealing with the client face-to-face.
continue to be aware of the identity of their
customers and monitor and report unusual activities				Enhanced due diligence Measures and Controls for
– re-examine their staff training and even				High/Medium rated clients
consider an internal mystery-shopper attempt to				· Increased levels of KYC or enhanced
circumnavigate the system.				due diligence; Google search, search or independent
				public trusted source e.g. Companies House and other
Know your customers (KYC)				companies registries.
Companies would need to obtain information about				· Escalation for approval of the
the personal and financial circumstances of their				establishment of an account or relationship; to senior
customers. The details to obtain should include				management, identification of the identity of each
name, address, profession, nationality, source of				individual directors or beneficiaries.
income and whether the person is a Politically				· Increased monitoring of transactions;
Exposed Person. If the customer is a company,				and increased levels of ongoing controls and reviews
partnership or trust, there is the need to find out the				of relationships.
name of the entity, the trading and registered office,
the business activities, the source of income, the				Origin of Funds
main managers and the ultimate beneficial owner(s).
				You should verify the source of funds (i.e. where the
Identification of the customer				money came from) and the source of wealth (i.e.
Companies would need to identify the person to				how the money has been amassed).
whom they are delivering services or providing a
product, by obtaining a copy of the person’s				The Application Forms contains a separate section
passport and bank statement/utility bill, certified by a				requesting details of the origin of funds from
solicitor etc. If the customer is a company, then				prospective clients.
there is the need to obtain a copy of the certificate
of incorporation and other details showing the				Generic statements such as ‘earned income’
registered address and list of directors. Companies				‘sale of fixed property’,
can use an established independent trusted public				‘inheritance’ etc should be supported by
source of information e.g. company registry, any				details and evidenced. Ideally documentary evidence
website printout should be properly annotated.				should be provided to support the source of wealth.
There is also the need to find out who owns 25% of				The documentation should clearly outline the date and
the company or partnership (check the partnership				amount.
agreement), trust – (check the trust deed
showing settlor/beneficiary).				Description of Source of Wealth Documentation
				Required
Enhance checks for high risk customer				Sale of Property: Copy of sale documentation, Letter
If the (Customer)company or person’s business				from solicitor
activities is in arms dealing, gambling, casino, bureau				Inheritance: Copy of grant of probate,
de change, freight forwarding, real estate, or the				Documentation from executors or lawyers handling
entity operates in countries with weak or no money				deceased estate, Letter from solicitor or accountant
laundering legislation, such customers are to be				Gift: Copy of documentation to support gift (e.g. gift
regarded as high risk and an enhance identification				tax), Letter from solicitor or accountant.
process is usually carried out. This may involve				Accumulated Savings: Copy of recent pay slip,
conducting more thorough independent searches on				Confirmation from employer of income, Copy of
the names of individual via various verification				recent accounts, Copy of bank statements showing
sources, newspapers, articles, Google search, World				accumulation and growth of funds
check searches etc to be satisfied that the potential				Investment: fits with the client profile (i.e. occupation,
customer is not an unscrupulous person.				age and amount etc.)

Reporting knowledge and suspicion				Other Investment: Copy of contract note, Copy of
Companies need to have an individual to whom				statement, Letter from financial institution confirming
knowledge and suspicion of money laundering can be				details of investment/sale. Copy of tax return.
reported and who can report onward to the relevant
authorities. The test for reporting is to establish				Where the investment was not held by an authorised
whether a reasonable person possessing the same				institution in the UK or a FATF member country or
information as that available to the person required				within the EEA additional details may be required.
to report would have known or suspected that a
person was involved in money laundering.				Wire Transfer

Training of staff				In the case of wire transfer transactions, we should
Companies need to provide training and awareness				ensure that when weare sending client transfer
to explain and demonstrate to all staff the				messages, for example, SWIFT MT 100 messages,
anti-money laundering obligations. The training should				the fields for the ordering and beneficiary client
be in phases, dealing with buy-in and launch. A				should be completed including the names and
dedicated hotline needs to be available to field the				addresses of each. This should be completed for all
flood of questions and problems. File audit and				messages, both domestic and international, regardless
review is also needed to monitor that staff are				of the payment or message system used. In the
complying with requirement to identify and verify				case where this information is not contained in the
customers. Records should be kept in durable form				message, full records of the name and address of
and readily accessible to show compliance with the				both the ordering and beneficiary client should be
anti money laundering procedures.				retained by the firm. These records must be treated
				in the same way as any other records in support of
Account Opening Checks				entries in an account and kept for a period of at
				least five years.
Before any business is carried out for a new client
and before a business relationship is established the				Financial Sanctions/ Counter terrorist financing
relevant parties to the business must be identified by
using the Account Opening Checklists. Compliance				All new clients are checked against financial sanctions
approves all new clients.				list before they are approved for KYC. This is to
				counter terrorist financing. You should do this by
Know your customers (KYC) Application form duly				using the Complinet Global screening. If there is a
completed				match we must freeze any assets and this will have
				to be reported to HM Treasury as soon as possible.
- Check that the individual client has sent us the
application form, duly completed, signed and dated.				Third party payment

- From the application form ensure that you have				Once the account is opened, we cannot accept
sufficient information about the nature of the				money or funds from third parties in any
business that the client expects to undertake.				circumstances irrespective of whether the third party
Understand the purpose of the proposed business				is a spouse or parent of the client. Any
and the anticipated level and nature of activity to be				payments to The firm must be made by the Client
undertaken.				from an account of the Client and not by any third
				party from the account of any third party.
- You should also check that the application form
states the sources of funds to be used and contains				Verification of the client’s identity before dealing
information about the personal and financial				over the phone
circumstances of the client. Name, address, date of
birth, profession, nationality, source of income and				Before you deal with the client over the phone, you
whether the person is a Politically Exposed Person.				must take steps to verify their identify by asking
				them to confirm their date of birth, address or any
- For companies, partnerships or trusts, check that				memorable word they may have previously provided.
they have sent us the application form, duly
completed, signed and dated with details of the				Reporting knowledge and suspicion.
name of the entity, the trading and registered office,
the business activities, the source of income, the				The MLRO is the person to whom knowledge and
main managers and the ultimate beneficial owner(s).				suspicion of money laundering can be reported and
				who can report onward to the relevant authorities.(
- If they intend to authorise a third party to place				SOCA) The test for reporting is to establish whether
orders and trade the Company’s account, they				a reasonable person possessing the same information
have completed a Power of Attorney in favour of				as that available to the person required to report
that third party.				would have known or suspected that a person was
				involved in money laundering.
Identification and verification of the client
				Staff Training
- You must identify the person to whom we are				.
delivering services, by obtaining identification				All staff of the firm must take the online AML training
documentations as listed below.				and test. This provides them with knowledge of their
				obligations.
- UK RESIDENTS
If the individual is a UK resident, we will need to see				Monitoring & Review
one item from List A and one item from List B
below.				The Compliance and Risk management section is
				available to give guidance on any AML issues. The
- List A:				section will also conduct periodic file audit to monitor
Current signed passport				whether staff are complying with requirement to
Current full UK driving licence				identify and verify clients. Periodic review of clients is
Inland Revenue tax notification				also conducted to ensure KYC is up to date.
Firearms certificate
				Record keeping
- List B:
Recent utility bill				Records should be kept in durable form and
Local authority tax bill				accessible readily to show compliance with AML
Bank or building society statement or passbook				procedures.
Mortgage statement
				Third party completing KYC
- NON-UK RESIDENTS
If the individual is a non-UK resident, we will need to				We can provide our Certificate of incorporation, FSA
see one item from List C and one item from List D				website print out, last audited account, list of
below.				directors, list of authorised signatories as KYC on us.
				We do not accept KYC approvals of a client done by
- List C:				a third party; we must conduct our own
Current signed passport				independently. We will not provide KYC introduction
National identity card				to a third party.

- List D:				Annual MLRO report to the Board.
Current driving licence
Bank or building society statement				The report provides the following:
Recent utility bill
				1. Change in legislation and regulation
- Certified copies of documents are acceptable.				2. Recent FSA enforcement action against
However, these must be certified with the words				firms
“Original seen – certified true copy of the				3. Number of Suspicious report received.
original” .				4. Number of investigations undertaken
				5. AML training provided and number of staff
- In the case of UK resident companies or				yet to be trained.
individuals, documents must be certified by any of				6. Result of KYC reviews
the following: a doctor, teacher, accountant, UK				7. Result of monitoring
lawyer, banker, Commissioner of Oaths, Notary				8. Key risk to the firm.
Public, Justice of the Peace, Minister of Religion or
Postmaster.

- In the case of non UK resident companies or
individuals, documents must be certified by a lawyer,
an embassy official consulate or high commissioner of
the country of issue, or by a senior official (e.g.
branch manager) of the bank or financial institution
where you have an account.

- Certification must include the certifier’s name,				LIST OF COUNTRIES
certifying capacity, contact details, date of
certification and be independent of the party				All EEA countries have undertaken to implement the
concerned.				money laundering directive, and some are also FATF
				member countries.
- For corporate entities, obtain documentations that
will show the registered address and list of				EU members of FATF:
directors.				Other EU member states:
				Austria
- There is also the need to find out who owns 25%				� Bulgaria Lithuania
of the company or partnership (check the partnership				Belgium
agreement), trust – (check the trust deed				� Cyprus Malta
showing settlor/beneficiary), Ultimate beneficial				Denmark
ownership.				Luxembourg
				Czech Republic Poland
- Check that they have supplied :				Finland
				� Estonia Romania
- a certified copy of the Company’s				France
Memorandum and Articles of Association and its				� Hungary Slovakia
Certificate of Incorporation or similar government				Germany
registration document.				� Latvia Slovenia
				Greece Sweden
- Board Resolution (either an original or a certified
copy) authorising the opening of an account on
behalf of the Company and containing the names and
specimen signatures of those individuals who will be				EEA states:
authorised to operate the account				Iceland - Member of FATF
				Liechtenstein
- a copy of the Company’s latest audited				Norway - Member of FATF
financial statements.
				FATF members
- a list of the Company’s directors and its				All FATF members (those which are not EU/EEA
shareholders / beneficial owners evidence of the				member states/countries are listed below) undertake
identity and address of each individual who is or will				to implement the FATF anti-money laundering and
be an authorised signatory on the Company’s				counter-terrorism
account.
				Recommendations as part of their membership
· You can get				obligations.
additional verification by using an established				Argentina New Zealand
independent trusted public source of information e.g.				Australia Russian Federation
Complinet global screening, company registry. Any				Brazil Singapore
website printout should be properly annotated.				Canada South Africa
				China Switzerland
				Hong Kong Turkey
AML Risk assessment				Japan United States of
You must conduct and initial risk assessment of the				America
client, based on the information received. The ratings				Mexico
would be:
“Low”, “Medium” “High”				Regulatory fines
The Senior Management may refuse to have a				A major bank in 2003 was fined £2m for failure to
business relationship with a customer risk-rated as				ensure that suspicious activities reports were
High. The risk matrix is based on Country risk				promptly considered and reported to the relevant
Customer risk or Service risk as below:				authorities.
Country Risk: Whether the person or entity is
resident, operates in or has funds sourced from				In 2004 another big bank was fined £1.2m for
countries identified by the UK government, UN, FATF				failure to keep proper records of customer
as non cooperative jurisdictions or as having				identification and failure to retain evidence of KYC
significant levels of corruption, or other criminal				checks.
activity.
				In 2004 another major entity was fined for failure to
Customer Risk: Whether the client’s source of				act promptly to update its anti-money laundering
wealth emanates from activities known to be				procedures to reflect changes in legislation and failure
susceptible to money laundering or the person				to training staff to enable them comply with the
engages in any activity deemed to be of money				identification requirements.

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Anti-money Laundering Procedures