Anti-Money Laundering Seminar

ANTI-MONEY LAUNDERING 18th MAY 2012

INTRODUCTION

OUR PRESENTER• ICAI – • Advising Practices • Technical compliance • Regulatory compliance • General Advisory• Private practice• Consultancy

1. Latest legislation2. Solicitors and AML3. Credit Unions and AML4. Reporting suspicions5. Practical approach6. Where can it all go wrong?

• Applicable from 15 July 2010• Anti Money Laundering Compliance Unit of the Department of Justice• Http://www.antimoneylaundering.gov.ie/en/A ML/Pages/Home

Obtain information reasonably warranted...on thepurpose and intended nature of a business relationshipwith a customer prior to the establishment of a businessrelationship S.35(1)If unable to obtain such information.....shall not providethe service.... S. 35(2)Monitor dealings, scrutinise source of wealth or of fundsused for transactions to check: – Consistency with knowledge of business patterns – Any knowledge of involvement in ML or terrorist financing

Prior to establishing business relationshipSection 33(2) –Identify the customerVerify the documents can be relied upon to confirmcustomer’s identityIdentify any beneficial owner ..and taking any measures‘reasonably warranted by the risk of money laundering orterrorism’Section 33(5) ...the designated person shall takereasonable steps to verify the identity of the customer orbeneficial owner, .....as soon as practicable

Beneficial owner direct or indirectly ownsmore than 25 per cent of shares/votes/control– S 26-30Politically Exposed Persons (PEPs) – S37

1. Verification of identity of at least two of those who direct the business or entity (Directors/partners/sole trader/executor/trustee) – photo ID/at least one recent utility bill2. Name/address of beneficial owners noted3. Categorise all clients/customers (even pre 15/9/2003 or pre 1994)4. Document procedures5. Report suspicions internally to MLRO6. MLRO reports externally, where necessary7. Keep records for at least 5 years after last business transaction - Section 55(4)

1. Exempt from reporting when providing services not included in Section 24 (1) of the legislation2. Legal activities falling outside this list are exempt3. Exempt where legal privilege arises4. Solicitors allowed to cease to act for a client if they have made an AML report and it will net be deemed ‘tipping off’ Law Society Guidance Notes paras 1.36 to 1.39

AML reporting obligations only arise where asolicitor participates in certain types of legal workThis work is specified in the definition of the term“relevant independent legal professional” as abarrister, solicitor or notary who carries out certainspecified services Section 24 (1)

Have a Risk Committee (as required n the FinalReport of the Commission on Credit Unions – April2012)Customers with no ID – pre 1994The need to classify all customers into low,medium and high risk and say whyJunior member accounts – get ID ofparent/guardianDormant accounts – being closed after a period orcommence usage again unexpectedly

Trigger events e.g.:Large lodgements over €5k or €10kLoans paid back earlyDoes your computer software produce anautomated report if these events occur?No-face to face transactions – internet bankingSanctions list countriesPEPs – use C6 of VeriphyRegular MLRO reports for board – Central Bank willinspect

What are my responsibilities?

Actual knowledgeKnowledge of circumstances which would haveraised suspicion with reasonable or honest personMore than speculation but less than proofNot required to have hard evidence – that’s up tothe authoritiesNo obligations to search for suspicious activityNot limited to transactions activity

Sudden and unexplained drop in income of cashbusiness after change in ownershipDividing large transaction values into smalleramounts for no apparent reasonClients using more > bank a/c than necessaryClient preferring cash rather than chequesSenior manager being sole signatory on client a/cand authorisation procedures not followed

High incidence of international transactions for noapparent purposeAny transaction activity which did not appear to makesenseA client who is always changing their mind about whatthe transactions in the business are forLodgements made from distant branches for no realreasonClient reluctant to give Know Your Clint (KYC)informationThird party payments for no apparent reason

Repayment of loans within short periodAny activity which might generate a different taxoutcome if all facts were known to the RevenueCustomer whose lifestyle is at odds with knownsources of incomeLong standing employees/customers/suppliers ofclients

Falsified invoices/lack of proper booksInsurance broker struck off by CRO for consistentlylate annual returns – duty to tell the FinancialRegulator – breach of licensing requirement –‘money laundering’ as wellIllegal directors’ loansCharity giving ‘overseas’ aid – is the subject of theaid legitimate? How robust are the charity’sclearance procedures?Hotel/restaurant not implementing fire safetyregulations due to the recession

Minister for Justice may designate certain places outside theEU if ‘satisfied that they do not have adequate procedures inplace for the detection and prevention of money laundering orterrorist financing’It’s compulsory (under S 43) to report clients who do businesswith these territorieshttp://www.finance.gov.ie/viewdoc.asp?fn=/documents/FinancialSanctions2008/Finsanctionsindex08.htmhttp://www.centralbank.ie/regulation/processes/Intfs/Pages/Notifications.aspxFATF list

Afghanistan LiberiaBelarus LibyaBurma (Myanmar) Somalia SudanDemocratic Republic of SyriaCongo Terrorist GroupsCote d’Ivoire - Usama bin Laden, the Al-Egypt Qaida network and the Taliban - Counter TerrorismEritrea TunisiaRepublic of Guinea Uzbekistan - revokedIran YugoslaviaIraq - Slobodan Milosevic and Associated PersonsDemocratic People’s Republic - International Criminalof Korea (North Korea) Tribunal for the formerLebanon Yugoslavia (ICTY) Zimbabwe

Staff member is suspicious Staff member has legal obligation to report under section 42(1) Act Internal notification completed: By following internal procedures,Flowchart of an •dated and signed staff member discharges personalExample Firm’s •give relevant facts & background obligation sec 44 Act (sec 57(3)Procedure for Reporting & basis for suspicion 1994). And must not tip-off (sec 49 ActSuspicious Transactions’ MLRO acknowledges receipt Good Practice of report Whatever decision is MLRO determines whether made, the decision the report & other information must be recorded as it gives rise to a suspicion relates to a transaction: sec 55 Act Report filed with GardaNo report & Revenue (sec 43 Act) NB: May not complete transaction unless Report filed (Sec 42(7) Act) Respond to queries, court orders etc Part 3 Act 29

1. Stratify clients into ‘low’, ‘medium’ and ‘high’ risk based on the likelihood they may be involved in money laundering and/or terrorist financing2. If non face to face contact = ‘high risk’3. Then document the above4. Then say why they are in each category5. Then ongoing monitoring of business transactions of clients/customers6. Appoint MLRO to supervise the process

Train staff - All client/customer facing and any backoffice staff who process timerecords/billing/cash/new accountsAt the very least, staff should be made aware of:Money laundering legislation and their personalobligationsInternal reporting procedures/manualCDD proceduresRecord-keeping extremely importantConsider how to evidence comprehension – quizRemember the "training defence"...Employer/MLRO in the frame

Start dealing with clients/customers before the ID obtainedIn a Credit Union – just cannot do itIn a service business - put clients without full ID on a watchlist/restricted listOnce you have billed them and got paid, you have laundered theirmoneyAccepting ID by post or faxAccepting certified ID from a non-designated or independent personAccepting ID from another professional/financial institution withoutactually obtaining the documentsNot assessing clients/customers into risk categories and saying whyNot identifying PEPs and treating them as ‘high’ riskAccepting cash up front from a clientSpecial AML training required by FexCo for handling foreign exchangetransactions in a credit union

Why today?• Need for technical update• Opportunities from the legislation!!!• Opportunities from today - networking• Share our marketing strategy

LEGAL FIRMS• Law Society • Helping firms support their• Profitability clients• Cash Flow • CAT - Planning – Filing Tax• Monthly/Annual Reporting returns• Tax compliance • CGT – complex issues• Advice on • Buying/Selling a Business• Tax - Strategy –Succession • Buying/Selling a property• Payroll services • Dealing with an insolvency • Setting up a business • Forensic accounting – litigation support

CREDIT UNIONS• Audit • Advice on:• Accounting – Corporate Governance• Internal Audit – Amalgamations• Support supervisors – Results improvement – Tax issues• Monthly Reporting – Capital Projects• Tax compliance• Payroll

WHAT CAN CREDIT UNIONS DO?• Market to solicitors – Loans to clients for legal cases – Budgeting accounts for their personal clients – Deposits for their clients• Market to Accountants – Loans for small business clients – Loans for asset finance – Personal credit for tax payments – Promote savings – Promote family finance – Promote Gifts to children/grandchildren• Advertise on their website• Have information at their premises

WHAT CAN SOLICITORS DO?Market to CREDIT UNIONS Market to ACCOUNTANTS• Regulatory compliance • Specialist services• Review Legal Agreements • Debt collection • Family law advice• Property issues • Commercial agreements• Debt collection • Look for relationships with• Security for loans their clients• Information for their clients • Contribute to accountant’s• Advice desk for members newsletters• Wills service for members Advertise on their websites Have information at their premises

CONCLUSIONHELP OURSELVES HELP OTHERS BY: • RECOMMEND• EXCEEDING MUTUAL OTHERS EXPECTATIONS SUPPORT • MAKE• ASKING FOR INTRODUCTIONS REFERRALS • SHARE• NETWORKING INFORMATION EFFECTIVELY • CORPORATE• RECOMMENDING SOCIAL OTHERS RESPONSIBILITY

Anti-Money Laundering Seminar

by McInerney Saunders on May 21, 2012

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Anti-Money Laundering Seminar Presentation Transcript