Anti money laundering (aml) and financial crime

1. Anti-Money
Laundering (AML) and
Financial Crime

2. Introduction to the Money Laundering Regulations
• Everyone who works in the regulated business sector must
put in place systems and controls to prevent financial crime,
in particular, that of money laundering and terror financing.
• It's estimated that money laundering is equivalent to 2.7%
of global GDP. or 1.6 trillion US dollars. The National Crime
Agency (NCA) says that many hundreds of billions of pounds
of international criminal money is laundered through UK
banks, including their subsidiaries, each year.
• This Anti-Money Laundering and Financial Crime course
aims to raise your awareness of money laundering how to
recognise it and how to prevent it from occurring in your
business.

3. Course Aim
By the end of this course, you will:
• Understand what constitutes money laundering and terror financing
and understand their impact on business and the economy.
• Have knowledge of the legal position and offences which fall
underneath the anti-money laundering umbrella.
• Understand how the law, in relation to financial crime, impacts upon
the work you carry out in terms of procedures and responsibilities.
• Know how to fulfil your responsibilities in respect of anti money
laundering and counter-terror financing

4. Topics to be covered in this section :
 Key definitions.
 Background.
 What is money laundering?
 Key stages of money laundering.
 Money laundering regulations.
 Registered business.

5. Key Definitions
What is a regulated business?
There's no absolute definition of regulated businesses but put broadly, It includes
those in the financial sector such as accountants and bookkeepers it also covers
places where substantial sums of money form a part of the business, such as
estate agents and those in the betting and gambling industries.
What is financial crime?
There are many crimes which involve money, most obviously theft, robbery and
fraud, but there is also a range of offences which involve money laundering and
terror financing. Some of these are specifically associated with regulated
businesses and some are not.
This course aims to shed light specifically on money laundering and terror
financing and looks at your responsibilities and how to discharge them.

6. Background
 There we are various legislative provisions and regulations which specifically seek to
target criminals and terrorists who are laundering money and financing acts of terror.
 The law imposes certain duties on businesses in various sectors. including finance and
insurances. Penalties for offences under the statutory provisions are serious, and there
are also administrative and professional penalties.
 There are various agencies including the Financial Conduct Authority (FCA), HAMARE, the
Solicitors Regulatory Authority and the Bar Council which in the context of anti-money
laundering supervisory authorities for their professions.
 Regulators are now working together more closely than ever with the National Crime
Agency.
 As part of its approach to tackling high-end money laundering the NCA cooperates with
the private sector and relevant professional and regulatory bodies.
 In February 2015, the Joint Money Laundering Intelligence Taskforce (JMLIT) was
established as an NCA initiative created in partnership with the financial sector, to tackle
high end money laundering.
 The JMLIT has been developed with partners in Government the British Bankers
Association law enforcement and over 20 major UK and international banks.

7. What is money Laundering
 Crimes often associated with money laundering include, but
are not limited to drug trafficking slavery and terrorism
 Money laundering is the process where the proceeds of crime,
and their true origin and ownership, are changed so they appear
legitimate. This process is an attempt to make the funds appear
clean. In UK law, money laundering is defined by the Proceeds
of Crimes Act 2002 (POCA) as
 A Concealing disguising converting transferring or removing
criminal property out of the jurisdiction.
 Entering or becoming concerned in an arrangement that
facilitates the acquisition ,retention use or control of criminal
property.
 Acquiring using or possessing criminal property.
These are known as the principal offences and they also Include
conspiracy or attempts to commit such an offence.
People involved in criminal activity launder money that has been
obtained through committing other offences, such as Importing
drugs, so they can use the proceeds of those crimes without the
original source of the money being detected.

8. What is Money Laundering
 For example, it's an offence to arrange for the proceeds of
crime to be transferred out of the UK or to act with others to
make this happen.
 The Terrorism Act 2000 also offers a further definition and
creates separate offences) of which its important to be aware:
To enter or become concerned in an arrangement that
facilitates the retention or control by or on behalf of another
person of terrorist property:
 By concealment.
 By removal from the jurisdiction.
 By transfer to nominees.
 In any other way.
Money laundering offences also include counselling. aiding or
abetting, or procuring any of the offences listed on the previous
page

9. Key Stages of Money Laundering
Money laundering is usually a three-stage process:
1. Placement - Illegal funds are paid Into legitimate financial arrangements with reputable Institutions
such as life assurance policies, building society accounts or the purchase of property. This can be done
by breaking up large sums into smaller amounts and by using various or a series of locations to make
deposits or transactions.
2 . Layering - This involves a number of transactions to hide the original source of the criminal funds.
The number of transactions is unlimited, and they are often complex in arrangement.
3 . Integration - This the process by which funds reappear as legitimate funds. They are often
transferred into legitimate business investments such as property purchases or used to set up trusts.

10. Money Laundering Regulations
The Money Laundering Regulations 2017 (MLR) set administrative
requirements for the anti-money laundering regime within the regulated
sector and outline the scope of customer due diligence.
The MLR aims to prevent the use of professional services for money laundering
by requiring professionals to know their customers and monitor the use of
their services. Key provisions include the following:
 The regulated sector includes all businesses where large amounts of
illegally obtained cash property or goods could be bought sold or
exchanged and where it may be difficult to trace where it comes from or is
likely to end up.
 HMRC can (and do) visit higher risk estate agents who deal with non-UK
resident cash buyers.
 Lenders and estate agents so need to check whether buyers and sellers
are political exposed person both in the UK and abroad.
Anti-Money laundering and terrorist financing constantly under review. The
5th EU Money Laundering Directive (5MLD),enforceable as of the 10th January
2020, is the latest directive

11. Money Laundering Regulations
The MLR applies to those in regulated businesses. This means any relevant
persons in:-
Credit institutions.
Financial institutions.
Auditors, insolvency practitioners' external accountants and tax
advisers.
Independent legal professionals.
Trust or company service providers.
Estate agents.
High-value dealers.
Casinos.
Businesses that carry out any of the following activities are also included:
Lending.
Safe custody services.
Financial leasing.
Offering guarantees and commitments.
Participation in securities Issues.
Advising on capital structures.
Money broking.
A Portfolio management and advice.
Safekeeping and administration of securities.

12. Following the implementation of the Money Laundering Regulations, certain
business activities must be registered with the FCA. These activities include:
 Lending and financial leasing.
 Money transmission services.
 Issuing and administering means of payment
 Firms offering guarantees and commitments.
 Trading of own account or for the account of customers in certain financial
instruments.
 Participation in securities issues and the provision of services related to such
issues.
 Advice to undertakings on capital structure Industrial strategy and related
questions and advice, as well as services related to mergers and acquisitions.
 Money broking.
 Portfolio management and advice.
 Safekeeping and administration of securities
 Safe custody services.
Money Laundering Regulations

13. Registered Business
Following the implementation of the Money Laundering Regulations, certain
business activities must be registered with the FCA. These activities include:
• Lending and financial leasing.
• Money transmission services.
• Issuing and administering means of payment
• Firms offering guarantees and commitments.
• Trading of own account or for the account of customers in certain financial
instruments.
• Participation in securities issues and the provision of services related to such
issues.
• Advice to undertakings on capital structure Industrial strategy and related
questions and advice, as well as services related to mergers and acquisitions.
• Money broking.
• Portfolio management and advice.
• Safekeeping and administration of securities
• Safe custody services.

14. Registered Business
Registered businesses need to have their compliance with the money
laundering regulations scrutinised by the relevant regulator.
Authorised firms, such as banks insurance companies and financial advisers that are
regulated already under the Financial Services and Markets Act 2000, have scrutiny
across all aspects of their regulated activities.
There are two other differences between registered businesses and firms authorised
by the financial regulators
1. Registered businesses are not members of the Financial Services
Compensation Scheme. Therefore if a customer of a registered business loses
money, the customer cannot seek compensation from the scheme
2. If a customer becomes involved in a dispute with a registered business, the
customer will not be able to approach the Financial Ombudsman Service to
help resolve the disagreement.

15. Summary
1
Regulated
businesses are
those that working
the financial sectors
where substantial
Sums of money
form a part of the
business.
2
The Joint Money
Laundering
Intelligence Taskforce
(JMLIT),was created in
partnership with the
financial sectors to
tackle high end money
laundering.
3
Money Laundering is the
process where the
proceeds of crime , and
their true origin and
ownership are changed
so they appear
legitimate. This process
is an attempt to make
the fund appear ‘clean’.
4
Money
Laundering is
usually a three-
stage process :-
placement ,
layering, and
integration.
5
Registered business
need to have their
compliance with
the money
laundering
regulations
scrutinised by the
relevant regulator.

16. Regulatory Requirements
• There is a range of requirements that regulated sector businesses must
comply with in order to satisfy the provisions of the money laundering
regulations.
• The module looks at some of the requirements specific to financial firms
and those offering financial advice. It sets out the main requirements
for everyone in a regulated business to help you understand how to
comply.

17. Topics to be
covered
Regulation
Requirement
Customer
Due Diligence
Ongoing
Monitoring

18. Regulatory Requirement
 It's a criminal offence if businesses and individuals within the regulated sector fail to comply with the Money Laundering
Regulations 2017.
• In England and Wales, the offences are prosecuted under the Proceeds of Crime Act 2002.
 Since 2010, businesses supervised by HM Revenue & Customs (HMRC) have been subject to:
 The fit and proper test- This is part of the registration process for Money Service Businesses and Trust and Company Service
Providers. It also applies to individuals within these businesses. The decision as to whether an individual is fit and proper is
based on the risk of money laundering or terrorist financing.
 Registration - A registration will be cancelled Where after registration, the relevant person is no longer able to meet the
conditions for registration or where the relevant person has taled to provide HMRC with information that it has requested by
notice.
 This applies, for example financial states and estate agents but also others.

19. Regulatory Requirement
Supervised businesses are also subject to:
1. A relevant person - This is a person or business to whom the regulation apply. The definition has
been widened to include those persons whom HMRC believes or suspected to be relevant
person.
2 . Penalties – A penalty can now be imposed for failure to provide information require by notice.
3 . Disclosure – A legal gateway now exists between supervisory authorities which allow them to
share information subject to certain conditions.

20. Customer Due Diligence
 The requirements for CDD underpin the Money Laundering
Terrorist Financing and Transfer of Funds (information on the
Payer) Regulations 2017.
 You must conduct CDD on customers who instruct you in relation
to regulated activities.
There is no obligation to conduct CDD on customers who instruct you
in relation to non-regulated activities. For example, where an
instruction does not involve a financial element such as a public
access barrister being instructed to draft an advice on neighbour
dispute.
The money laundering regulations allow a risk-based approach to
some components of the CDD process:
• The intensity of due diligence that you apply to the
customer.
• The types of measures you implement for ongoing
monitoring of customers
In practice, this means that you can decide the level of due diligence
and how you perform ongoing monitoring, but you must always
undertake the relevant level based on your risk assessment.
There are three levels of CDD
• Simplified SOD
• Enhanced EDD.
• Regular - RDD
Customer Due Diligence (CDD) is a key part of the
anti-money laundering and counter-terrorist financing
regime.

21. Ongoing Monitoring
 Ongoing monitoring must be performed on all business relationships, no
matter what risk rating you have given them under your risk-based
approach That said, the degree and nature of monitoring will depend on
the risk rating of the customer and the service provided.
 Ongoing monitoring is often undertaken by the employee with day to-day
conduct of the work so appropriate training is essential
 You must conduct ongoing monitoring of a business relationship so that
you can detect unusual or suspicious transaction is in practice this means
that you must always:
 Keep eye on transactions undertaken throughout the course of the
business relationship, ensuring that the transaction are consistent with
the knowledge and understanding of the particular customer , business
and risk analysis.
 Be aware of any changes that give rise to suspicion.
 Keep all CDD document information up to date.
You only need to undertake ongoing
monitoring where you have a business
relationship.

22. Ongoing monitoring does not need to apply to occasional transactions.
That said. it's a good idea to apply the same ongoing monitoring to
occasional transactions where these take place over an extended period
of time.
• When thinking about ongoing monitoring for existing clients the joint
Money Laundering Steering Group states the following “Where the
identity of an existing customer has already been verified to a previously
applicable standard then, there in the absence of circumstances indicating
the contrary the risk is likely to be low A range of trigger events such as an
existing customer applying to open a new account or establish new
relationship might prompt a firm to seek appropriate evidence”.
• Therefore requesting new identity checks every year can be frustrating
for the client and be an inadequate use of your resources. That said,
waiting five years to request new copies of identity documents is a higher
risk because a lot can change in a five-year period.

23. Summary
1
There is an explicit requirement
for all regulated businesses to
undertake customer due
diligence (CO01, including the
formal identification of new.
customers and to monitor the
Business relationship with them.
2
There are three levels or CDD:
simplified (low-risk) enhanced (high-
risk )and regular.
Regular applies were simplified and
enhanced do not.
3
You must apply enhanced due diligence
measures and enhanced ongoing
monitoring where you have determined
that the client is PEP a family member or
close associate of PEP

24. Assessing Risk
• Money laundering and financial
crime can sometimes go
undetected and you may never be
aware that it's happening but there
are often warning signs (known as
'red flags') to look out for that may
indicate criminal behaviour
• In this module, you'll learn more
about how to identify high and low
risk situations in your business so
that you know what to be aware of.

25. The topics covered in this
section are:
• Indicators of money laundering
• Red flags
• Low-risk indicators
• Assessing risk

26. Indicatory of
Money
Laundering
 Making illegal transactions via legitimate transactions, such as financial
services products, is one method often favored by criminals when trying to
hide the source of illicit funds
 If an investment is made, such as when it's converted into money, a legitimate
source of funds is established.
 An obvious suspicion might be raised where a high value premium is paid for
insurance which is then quickly cancelled, and the repayment paid by cheque
into a legitimate account.
 These funds could then be mad through the system using a series of other
transactions.

27. Indicatory of Money Laundering
The following are accepted indicators that money
laundering may be taking place and so should raise
suspicion:
• Expensive policies or purchases are taken out and then
cancelled.
• Transactions which seem odd or where there is no
logic attached.
• Obstructive or secretive customers or clients.
• Reluctance or difficulties in providing information or A
identification.
• Large claims shortly after an insurance policy has been
effected.
• An unusual interest in early surrender values.
• A large cash payments or over-payments.
• An investments and savings particularly with options
for early surrender.

28. Red Flags
Some examples of things to look out for amongst customers and clients are:
• Obstructive or secretive behaviour and reluctance to provide information.
• Providing false or stolen identification documents.
• Avoiding meeting in person.
• Difficulty in finding the person or any business they are involved in, for example, on Google search.
• Being overly interested in anti-money laundering or an unusual knowledge of AML systems.
• Being physically located at a distance from you or your business.
• They are known to have criminals' associates.
• No apparent business association but connections to other Parties
• Repeatedly asking for services outs de their area of expertise.
• They are located a high country
There are further recognized indicators of activity
that might be suspicious, known as 'red flags, and
they can appear differently depending on which
sector you work in.

29. Low Risk Indicator
 When assessing something as low-risk, you must keep in mind that the
presence of one or more risk factors may not always indicate that there
is a low risk of money laundering and terrorist financing in a particular
situation.
 You must take into account your organisation wide risk assessment any
relevant information made available to you by your supervisory
authority and the following risk factors, among other things.
The first factor to consider is customer risk including whether the
customers is :
 Public administration or publicly owned enterprise.
 Person who lives in geographical area of lower risks.
 Credit institution or a financial institution that subject
requirements of the 4th Money Laundering Directive and
supervised for compliance with those requirements
 A company whose securities are listed on a regulated market and the
location of regulated market.

30. Low Risk Indicator
In terms of the product service, transaction or delivery channel, you
should consider whether the product or service is:
• Alife insurance policy for which the premium is low.
• An insurance policy for a pension scheme which does not provide for
an early surrender option, and cannot be used as collateral
• A pension, superannuation or similar scheme which satisfies various
conditions
• A financial product or service that provides appropriately defined and
limited services to certain types of customers which increases access for
financial inclusion purposes in a European Economic Area (EEA) state.
• V product where the risks of money laundering and terrorist financing
are managed by other factors such as purse limits or transparency of
ownership.
• VA product storing electronic money used exclusively to carry out
humanitarian and charitable activities or as vehicle for benefit payment
• A child trust funds
• A junior IAS

31. Assessing Risk
When thinking about risk, it's useful to keep in mind the following
questions
 who is involved in the matter and are there people involved in the
matter who are not present or obviously involved? Where are the
proceeds of the transaction going .
 where is the money coming from to undertake the transaction ?Is
there any the connection to high-risk countries?
 How does the customer expect to benefit from the transaction.
 what is the scale of the deal or transaction.

32. Summary
• Typical indicators of money laundering Include the
cancellation of expensive policies. illogical transactions,
large insurance claims, secretive customers and large cash
payments
• Red flags are Indicators of suspicious activity and include
face ID documents, difficulty identifying a person,
unexpected changes in instructions and complex
• In terms of money, red tags include ole bar accounts,
unusual sources value transactions unusual requests era
the involvement of high-risk countries
• when assessing something as low-risk, consider all factors
relating to the customers.
• In terms of people red flags include connections to high-risk
countries attempts to disguise a person's involvement,
unusual ages or strange connections between people