Money laundering regulations (better known as MLR) are designed to prevent businesses from engaging in the exchange of criminally obtained money or assets, and ensure they conform to UK financial law.
Some businesses are monitored by a supervisory authority, such as the ACCA, CIOT and IFA. HMRC watches over money service businesses, high-value dealers, trust or company service providers, accountancy service providers, estate agencies, bull payment service providers, and telecommunications, digital and IT payment service providers.
Complying with money laundering regulations (MLR) is vital – and this article sheds some light on what’s involved.
Money laundering and terrorist financing risk assessment
Money laundering regulations require companies to carry out a written risk assessment to identify and assess the possibility of money laundering and any potential terrorist financing. Whilst conducting this assessment, companies should consider a number of different factors that may affect them specifically.
- Client turnover rates
- Client location (are they in jurisdictions where there is a higher risk of money laundering or terrorist financing?)
- Client sector
- The types of work or tasks you perform.
Your risk assessment should also list a series of steps you plan to take in order to tackle any potential threat of money laundering or terrorist financing so that you continue complying with money laundering regulations.
Internal control measures
Companies must also initiate a series of internal control measures to ensure everyone within the organisation is complying with money laundering regulations. These differ depending on the size of the business, but can include:
- Hiring an officer responsible for compliance (known as a money laundering compliance principal)
- Creating written policies for staff and conducting employee screening to ensure they are aware of the policies
- Establishing an independent audit function to see if your business is following through on policies effectively
- Enrolling staff in relevant training sessions to learn more about complying with money laundering regulations.
Complying with money laundering regulations also involves performing three key types of due diligence.
This includes client due diligence, which must be done before establishing a business relationship and if factors related to client risk assessment have changed. Simplified due diligence can be applied if the client shows a low risk of money laundering, and enhanced due diligence should be initiated if there is a higher degree of threat.
Stay in the clear with HMRC
If you’re an accountant or bookkeeper, HMRC may decide to launch a random investigation into your business to determine whether you have been complying with money laundering regulations.
Any visiting officer will want to see financial records and evidence that you have been taking all the necessary precautions to adhere to MLR. This makes it vital to keep your books up to date and register with HMRC for money laundering supervision if your professional body does not offer it.
For more information, visit gov.uk.
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