Businesses in the financial sector and law firms will find the term money laundering all too familiar. Money laundering costs the UK economy millions of pounds annually and can also be accredited with terrorist financing and organised crime. The UK government has regulations and guidelines to ensure all businesses within these sectors are legally obliged to monitor and report their clients for any suspected money laundering activity. Before we discuss who firms must register with for anti-money laundering purposes, let's outline what Money Laundering is.
Any financial gain from illegal or illicit activities such as embezzlement, gambling, drug trafficking or any other proceeds of crime that are cancelled and then converted into a legitimate source of funds is called money laundering. This could be for personal gain, to avoid tax, and in the worst cases, these funds are used to fund terrorism and criminal organisations.
There are several categorised offences and prosecutions associated with it outlined here by the CPS, The Crown Prosecution Service.
If a sole practitioner, firm or business operating in the financial sector provides any of the following services:
A business that is licensed and conducts statutory audits for legal entities and other businesses
A business that is licensed to deal with liquidations or extract profits from a company facing insolvency or financial distress.
A business that is licensed to provide services or advice to another company, such as tax returns or general tax advice regarding things like payroll.
A business that is licensed to provide services such as recording, reviewing, analysing, calculating or reporting any or all financial information provided to them via their client.
Then they must be registered for anti-money laundering (AML) supervision.
Anti-money laundering (AML) is the act that legal firms and financial institutions perform to monitor and report activity that could be considered suspicious or in breach of Anti-money laundering AML regulations.
This is part of the legal compliance process business must follow to identify and prevent money laundering and terrorist financing. You can read more about anti-money laundering here.
These regulations apply to all of the following:
If a firm or business meets the criteria of any above, then it will need to be monitored by a supervisory authority such as HMRC. However, a company may already be under the supervision of the Financial Conduct Authority (FCA) or, if it is a legal practice, perhaps the Law Society. If you are considering starting your own firm, we have outlined some of the laws and regulations you might come across here.
To see who firms must register with for anti-money laundering purposes, click here.
It's important to know that a business that falls under the above requirements does not operate or trade without registering for anti-money laundering supervision. It is a criminal offence for these businesses to trade without it and may result in prosecution.
Registering for anti-money laundering supervision is only half the battle; a firm or a regulated business in the financial sector should have a robust and compliant Anti-Money Laundering (AML) policy when dealing with new and existing clients. You can read more about how to maintain compliance in a business here.
Automating these AML checks has become the norm within the industry, with many solutions available that speed up the process and reduce cost, all while operating at the highest level of due diligence. Meaning a firm is not only improving its services but remaining compliant and protecting itself.
Validient offer fully automated Anti-Money Laundering AML and Know Your Customer KYC Identity verification checks for Law Firms and regulated business. We have created a simplified digital onboarding platform where we collect your client's documents, verify their identities and check if they are a Politically Exposed Person (PEP)
We provide proof of funds checks for clients seeking conveyancing, allowing businesses to meet their AML and KYC requirements. Allowing firms to look for suspicious transactions within bank statements and report any suspicious activities. We also verify commercial clients where we can identify beneficial ownership and verify directors and officers within the company structure.
We offer ongoing monitoring of clients where we notify firms of any changes such as change of address and insolvencies, giving firms and regulated businesses the tools to make informed judgements on the clients they have and want to do business with.
To find out more, and try the Validient product out for yourself, book a demo today.