EFFECTIVE DATE
This Policy Statement is effective from 1 April 2011 and replaces all other statements on this subject issued for dates prior.
REASONS FOR ISSUE
Legislation was first incorporated within the 1991 European Money Laundering Directive and the 1993 UK Money Laundering Regulations which implemented the requirements on financial and credit institutions with regard to record keeping on certain types of financial transactions and the person(s) carrying them out. More recently, new legislation has been introduced through The Proceeds Of Crime Act 2002 and The Anti-Terrorism, Crime and Security Act 2001.These Acts apply to all persons, individual or corporate who are UK resident or who carry out work in the UK. There are criminal offences and penalties embodied within these Acts which apply to anyone assisting in the laundering of the proceeds of crime.
EFFECT ON THE PRACTICE
The Company has, since the introduction of Money Laundering procedural compliance sought to employ best practice in its record keeping, particularly with regard to establishing the true identity of new clients to the practice. We shall as a matter of policy continue to identify and implement best practice in the light of the changes brought about by the latest statutory changes outlined above and any subsequent amendments thereto. In all matters it should be borne in mind that actions and responsibilities are to be appropriate to the size of our business but with the clear understanding that we should aim for best application of the regulations and not simply pay lip service to them.
WHAT IS MONEY LAUNDERING
It is generally expected that everyone has a basic idea of what constitutes money laundering. They must appreciate that it involves some form, directly or indirectly, of illegal activity.
By definition, Money Laundering is the process whereby criminals attempt to conceal the true origin and ownership of the proceeds of criminal activity. If undertaken successfully it allows them to maintain control over the proceeds and ultimately to provide a legitimate cover for their source and any financing of criminal activity.
STAGES OF ACTIVITY
Placement – the physical lodgement of criminal proceeds into bank accounts etc. This is now quite difficult to achieve given the identification checks and other measures now undertaken by financial institutions.
Layering – the stage at which placed monies are moved around a series of transactions with the sole intention of producing a complex audit trail such that any investigation or re-creation of that trail proves difficult or impossible.
Integration – the final stage where , if the first two stages have been successful , the funds are integrated back into the legitimate economy or re-utilised into the financing of further criminal activity.
EXCEPTIONS
For Money Laundering to exist there must de facto have been a crime already committed in the first place. There are two exceptions –
Tax Evasion where original funds could actually be derived from legitimate earnings
and
Terrorist financing where original funds could be derived from seemingly innocent donations.
In both these cases, money laundering only occurs at the point when the funds are turned to criminal use eg Terrorism or withheld from the rightful owner eg tax withheld from the Revenue.
FUNDAMENTAL ISSUES
Staff must be aware of the following key areas where obligations are placed upon them both as individuals and as employees of the practice.
Not to assist in any money laundering process through acquiring, concealing, disguising, retaining or using the proceeds of crime.
Not to prejudice any investigations and
Not to tip off someone who has been suspected of and/or reported for possible money laundering.
OBJECTIVE TESTING
Staff cannot say that they were not suspicious that money laundering was taking place without giving a reply to a follow up question of “why not ?” The approach to be taken is that of the reasonable person presented with the facts and in the case of accountants it will be assumed that they have a higher level of training and competence and that it would be more difficult to argue that negligence did not occur.
LEGISLATURE
All types of crime, not only serious crime, are covered by money laundering laws and regulations BUT the underlying offence must have taken place in the UK or have been related to an offence which, if carried out in the UK, would have been treated as a crime.
OUR OBLIGATIONS AS A FIRM
As part of the practice’s day to day working staff will be within the scope of the Money Laundering Regulations and our responsibilities are as follows :-
- To appoint a Nominated Officer who will act as the key person with overall responsibility for money laundering prevention
- To have in place policies , controls , and procedures to prevent the firm being used as a vehicle for laundering by clients or other third parties
- To positively carry out identification of clients
- To establish arrangements whereby staff may report any suspicions to the Reporting Officer
- To provide adequate training for all relevant staff when joining the firm or when moving to a role within the firm where laundering is a higher risk area and to maintain training at regular intervals thereafter.
- To maintain adequate and appropriate records of business undertaken, identity checks and all suspicions reported.
The way in which we will meet these obligations is set out in a separate operational statement which will be addressed as part of the training regime.
RESPONSIBILITY
Under the revised Regulations, the Company has a joint and several responsibility for compliance and although one Director will undertake the role of Nominated Officer, there is no defence for culpability on the basis of delegated responsibility. Therefore, it is the responsibility of the Directors to know and to understand the policies and practical procedures which the practice undertakes.
CLIENT CONFIDENTIALITY
Certain lawyers have offered various arguments to suggest that client confidentiality and privilege overrides certain parts of the Regulations. This is not our view, and whilst the utmost care and sensitivity must be exercised in dealing with suspicions and if appropriate reporting to the relevant authority, there is no reason for non-compliance with a statutory obligation which would itself constitute a criminal offence.
Last Updated 13 April 2011