The National Crime Agency has recently said in its 2017 assessment of serious and organised crime that previous estimates of £36bn to £90bn are a significant underestimate. This is a dramatic increase from previous estimates (£24bn in 2015), despite the UK having one of the toughest Anti-Money Laundering (AML) regimes in the world.
The Government’s National Risk Assessment (NRA) for Money Laundering published in October 2017 estimated that there are 5,900 organised crime groups operating with the UK, consisting of somewhere in the region of 39,400 individuals.
I find myself curious about that. We are, as a regulated sector, acutely aware of the potential for our services to be used by money launderers, and we have implemented, at vast expense, client identification procedures. I wonder why, then, is there a worsening of the situation?
There could be many reasons; the estimates are more accurate than before, the criminals are getting much better at it, new technology is giving the criminals more opportunity. I, however, have been considering whether the AML measures we have already put in place, that are required by the law, are effective.
Not to state the obvious, but the Money Laundering Regulations 2017 require us to establish policies, controls and procedures to prevent money laundering. Client Due Diligence is part of that, but I emphasise “part”. Client Due Diligence is more than establishing the identity of a client.
Establishing that your client is who they say they are is important, for many reasons, not just AML. Identifying a client can deter identity fraudsters as well as criminals. The police may, if investigating a client, ask you for your Client ID information in order to know where to find the client, and sometimes, what they look like.
However, Client ID is only part of the picture. The regulations also require that a regulated person “understands the purpose and nature of the business relationship” and conducts “ongoing monitoring”. This is about understanding much more about your client than their date of birth and address, it’s about Knowing Your Customer/Know Your Client (KYC).
In addition to the verification of the identity of the client, other enquiries might include:
It is clear that vast efforts are already put into identifying clients, but by conducting thorough due diligence you will be better able to identify possible money laundering and either report it or withdraw from acting, which may deny the criminals access to what they want; access to services to launder their illicit funds.
Amy worked for many years as a solicitor before moving into compliance and eventually launching her own firm. A leading figure helping law firms adapt to the changing legal landscape, Amy is also the author of The Law Society’s Elearning and Toolkit on the Bribery Act, and current Chair of their Anti-Money Laundering Task Force.
Amy specialises in AML regulations mainly professional services and runs ABC Consultancy.
Connect with Amy on LinkedIn.
Founded in 2012 by entrepreneurs Roger Carson and Wayne Johnson, and operating from the UK, encompass is the creator of unique, innovative Know Your Customer (KYC) software for banking, finance, legal and accountancy that enable better, faster commercial decisions. The company is driven by the belief that the best decisions are made when people understand the full picture.
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