Articles
In January we saw some quite significant changes to the Anti Money Laundering
and the Combating the Financing of Terrorism regimes in the UK. More commonly
know as AML and CFT.
The long awaited new version of the Joint Money Laundering Steering Group’s
Guidance to Best Practice in the Financial Services Industry was issued, and
is freely available on the JMLSG website (www.jmlsg.org.uk).
This was a total rewrite of the guidance issued in February 2003 and is now
split into two sections; the second providing “Sectoral Guidance” to various
different types of firms in the industry.
The UK Treasury approved the guidance notes on 13th February.
Regulated firms now have 6 months from this date to introduce the changes into
their policies, systems and controls.
Having received ministerial approval, the courts must take into account the
extent to which they have been complied with when considering failures to
report, under POCA and failures to comply, under the ML regulations 2003.
has also made changes to the Handbook. Policy Statement 06/1 “Reviewing our
Money Laundering regime” was issued in January and confirmed a shift toward high
level rules and guidance that would enable firms to develop a risk-based
approach to AML/CFT.
The ML part of the Sourcebook will be revoked with effect from 31st
August 2006, replaced by high level provisions in the “Senior Management
Arrangements Systems and Controls” Sourcebook (SYSC). The new SYSC provisions
will come into force on 1st march 2006.
This means that firms who chose to comply with the old ML provisions will be
deemed to be compliant with the new SYSC provisions.
The key changes resulting from all of this are:
- Greater emphasis on Senior Management responsibility;
- A more fully explained risk-based approach;
- Balance between ID and ongoing “Knowledge”;
- Streamlining the ID and Verification process;
- Reliance on others;
- Electronic verification;
- Sectoral guidance;
- Monitoring;
- Training;
- Ensuring the MLRO has a direct reporting line to a Senior Manager;
- Deciding at what depth and what frequency to receive reports form the MLRO;
- Ensuring timely action is taken on issues raised by the MLRO;
- Approving the firm’s risk based AML policies and procedures;
Firms should consider approaching this in four parts:
- Assess the risks;
- Document the risks;
- Implement systems and controls appropriate to the risks;
- Assess and monitor the risks continually;
For low-risk personal customers, for example, it may mean that just a single document could be sufficient. Of course, for high-risk customers, additional information may need to be verified. The requirement to obtain certified copies of documents has been removed.
The Guidance Notes sets out the suggested standards for this two-stage approach to KYC.
The new Guidance now extends the use of electronic verification, recognising that it is now an established medium and source of reliable information. It also allows firms to place greater reliance on others to have completed the verification of identity.
The need to continually monitor customer activity to enable a firm to detect unusual activity is emphasised in the Guidance. Allied to this is the need to ensure that staff remain alert to the potential for firms to be sued by criminals and that Senior Management ensure that all relevant staff are appropriately trained and the competence levels regularly assessed.
The changes outlined above will clearly have a significant impact on some firms and not so much on others. Adopting a risk based approach will not be totally new to many; however the streamlining of KYC may lead to a saving in time (and money!).
Clearly, Senior Management of all firms will need to carefully consider their approach to the changes. Getting it wrong could lead to FSA enforcement action against the firm and/or individuals. Not to mention of course “imprisonment and or unlimited fines!
MLROs.com thanks the CCL Partnership for the above article, CCL can be at the above web address below:
www.cclcompliance.com