Money laundering is the process criminal organisations use to convert or disguise the proceeds of significant crime transactions into “untainted, clean money” that is unconnected with and clear of any substantial wrongdoing.
The UK anti-money laundering requirements today are governed by the following legislation, amongst others:
- Proceeds of Crime Act 2002, as amended by the Serious Organised Crime and Police Act 2005.
- The Terrorism Act 2000, as amended by the Anti-Terrorism Crime and Security Act 2001 and Terrorism Act 2006.
- The Money Laundering Regulations 2007.
Within the UK, money laundering is defined by the Proceeds of Crimes Act 2002 (part 7) as “the many forms of possessing or handling criminal property, including the proceeds of a person’s crime, and facilitating the handling or possession of any other criminal property by a person or corporate body”.
The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017) and the 2019 Money Laundering and Terrorist Financing (Amendment) Regulations (MLR 2019) form a significant part of an organisation’s obligations towards avoiding money laundering issues.
The aim of the MLR 2017 is to stop organised crime, drug dealers, terrorists, arms dealers, and other criminals from operating and expanding their criminal enterprises by using professional services to launder money. The obligations of the MLR 2017 and the MLR 2019 apply to individuals and organisations that provide services, accountancy, trust and related services such as audit, insolvency or tax advice.
Organisations must implement systems, procedures, and policies to prevent money laundering, adopt a risk-based approach to assess, identify, and understand the risks to which they are exposed and put measures in place to identify at-risk customers and suppliers to monitor how they use the organisations' services for money laundering. It is a criminal offence within the UK to fail to comply with the obligations to prevent, recognise and report money laundering.
Organisational policies must dictate the accurate recording and retention of financial transactions, suspicious activity reports, consent requests, personal data, third-party arrangements and training records. Staff responsible for managing organisations' financial resources must be trained and aware of terrorist financing and money laundering risks to identify and deal with activities, transactions or situations related to money laundering and terrorist financing.
Organisations have a duty of care to ensure that Suppliers who Tender for their business are vetted to ensure that they are not, or have not recently been, involved in any form of financial crime. Suppliers are explicitly barred from public sector tenders if they have been convicted within the last five years for taking part in:
- Organised crime.
- Corruption.
- Acts of terrorism.
- Money laundering.
- Child labour or human trafficking.
- Environmental.
- Social law.
- Labour law.
- Bankruptcy.
- Professional misconduct.
- Distortion of competition.
- Conflict of interest.
Due diligence must be carried out with customers and suppliers to identify organisations and their business operations. Suspicious activities concerning money laundering and terrorist financing must be reported internally within the organisation and to the National Crime Agency.
Organisations have a duty of care to ensure that trading transactions are safeguarded from any involvement in financial crimes. Monies received from customers or paid to suppliers must be risk assessed, and actions taken to minimise and mitigate any associated financial crime risks.
Major and high-value payments should only be made to suppliers registered at Companies House within the UK or otherwise registered in the country where they undertake business activities. They must also be registered for tax purposes and operate banking facilities that can be audited through third-party validation services.
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