Financial Crime & AML
Financial crime, as defined by the FCA and FSMA is any kind of criminal conduct relating to money or to financial services or markets, including any offence involving: –
a) Fraud or dishonesty; or
b) Misconduct in, or misuse of information relating to, a financial market; or
c) Handling the proceeds of crime; or
d) The financing of terrorism
The company aim to identify, mitigate against and prevent financial crime within its business activities by implementing policies and procedures that identify, assess, monitor and manage money laundering risks and any other associated financial crime risks.
Money laundering is the term used to describe the process or act of disguising or hiding the original ownership of money that has been obtained through criminal acts such as terrorism, corruption or fraud. Such monies are then moved through legitimate businesses and sources to make it appear ‘clean’.
The UK has numerous Acts made by Parliament and regulations that govern money laundering and terrorist funding. These include: –
- The Terrorism Act 2000 and Proceeds of Crime Act 2002
- Serious Organised Crime & Police Act 2005
- Anti-Terrorism, Crime & Security Act 2001
- The Serious Crime Act 2007
- The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017
The Serious Organised Crime & Police Act 2005 came into effect on April 7, 2005 and created the National Crime Agency (NCA). Firms who are subject to the money laundering regulations and laws should be familiar with the NCA, as they are the agency associated with reporting suspicious activity and transactions. Suspicious Activity Reports (SARs) are made by a Money Laundering Reporting Officer (MLRO) to NCA.
The NCA is responsible for gathering intelligence regarding the proceeds of crime and financial information arising from suspicions of money laundering.
In the UK, relevant laws and regulations regarding money laundering became effective in 1994 (subsequently amended in 2003, 2007 and 2017). The Money Laundering Regulations 2007 came into force in the UK on 15/12/2007 and The Money Laundering (Amendment) Regulations 2012 extended the scope of the Regulations. However, with the progression of technology and the digital age, a more risk-based approach was needed to combat terrorist financing and financial crime.
In June 2015, the European Union’s Fourth Anti-Money Laundering Directive (EU) (2015/849) (MLD4) came into force, requiring member states to update their current money laundering regulations and transpose the changes into local law.
In response to this Directive, the UK drafted The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 which come into effect on 26th June 2017.
[If your firm has any other obligations under the Terrorism Act 2000, the Proceeds of Crime Act 2002 or the Money Laundering Regulations that have not been specified in this document, it is a legal and regulatory requirement that include your procedures in relations to your other obligations.]
9.1.1 Proceeds of Crime Act
The Proceeds of Crime Act 2002 (POCA) is an act of Parliament which provides for the confiscation or recovery of any proceeds from crime and contains the main money laundering legislation. It sets out the legislative scheme for the recovery of criminal assets with criminal confiscation being the most commonly used power. Confiscation occurs after a conviction has taken place. Other means of recovering the proceeds of crime which do not require a conviction are provided for in the Act, namely civil recovery, cash seizure and taxation powers.
The money laundering provision in this Act, which is referred to in Part 7, is supported by the UK Money Laundering Regulations 2007. Part 7 provides for various money laundering offences. A person commits an offence if he or she:
- conceals, disguises, converts or transfers criminal property or removes it from England and Wales or Scotland or Northern Ireland
- enters in to or becomes concerned in an arrangement which he or she knows, or suspects facilitates the acquisition, retention, use or control of criminal property
- acquires, uses or has possession of criminal property
Part 7 of POCA requires financial institutions and businesses in the regulated sector to report to the UK Financial Intelligence Unit, which is part of the NCA, any suspicions about criminal property or money laundering.