15/01/24

Money Laundering Regulations | Due Diligence

Money Laundering Regulations | Due Diligence
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The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, (‘the Regulations’), which came into force on 26 June 2017 imposed strict duties on various businesses to implement and supervise anti-money laundering measures with the intent, inter alia, of preventing the financing of terrorism.

Any breach of the Regulations may result in the imposition of large fines, public censuring or criminal prosecution.

John Veale comments on some of the obligations.

A Relevant Person

Responsibility for the conduct falls to a ‘relevant person’ covered by the Regulations as follows:

‘8.(1) Parts 1 to 6 and 8 to 11 apply to the persons (“relevant persons”) acting in the course of business carried on by them in the United Kingdom, who:

(a) are listed in paragraph (2); and
(b) do not come within the exclusions set out in regulation 15.

(2) The persons listed in this paragraph are:

(a) credit institutions;
(b) financial institutions;
(c) auditors, insolvency practitioners, external accountants and tax advisers;
(d) independent legal professionals;
(e) trust or company service providers;
(f) estate agents;
(g) high value dealers;
(h) casinos.

When Must Due Diligence be Applied?

Regulation 27(1) states that a relevant person must apply customer due diligence measures if the person:

  • establishes a business relationship;
  • carries out an occasional qualifying transaction that amounts to a transfer of funds exceeding 1,000 euros;
  • suspects money laundering or terrorist financing; or
  • doubts the veracity or adequacy of documents or information previously obtained for the purposes of identification or verification.

The Regulations also state that a relevant person who is not a:

  • letting agent,
  • high value dealer, 
  • art market participant,
  • crypto-asset exchange provider or
  • casino,

must also apply customer due diligence measures if the person carries out an occasional transaction that amounts to 15,000 euros or more, whether the transaction is executed in a single operation or in several operations which appear to be linked.

In respect of potential high-risk areas, Regulation 27 also provides that customer due diligence measures must be applied where:

  • a high value dealer carries out an occasional transaction in cash that amounts to 10,000 euros or more, whether the transaction is executed in a single operation or in several operations which appear to be linked.
  • a casino conducts any transaction as specified in the Regulations that amounts to 2,000 euros or more, whether the transaction is executed in a single operation or in several operations which appear to be linked.
  • a letting agent, in relation to any transaction which consists of the conclusion of an agreement for the letting of land for a term of a month or more, and at a rent which during at least part of the term is, or is equivalent to, a monthly rent of 10,000 euros or more. The Regulations must be applied to both the person by whom the land is being let and the person who is renting the land.
  • an art market participant in relation to any trade in a work of art, when the firm or sole practitioner carries out, or acts in respect of, any such transaction, or series of linked transactions, whose value amounts to 10,000 euros or more;
  • in relation to the storage of a work of art involving a Freeport and the value of the works of art so stored for a person, or series of linked persons, amounts to 10,000 euros or more.

A crypto-asset exchange provider in certain circumstances.

Additionally:

Regulation 27 also provides that the relevant person must apply customer due diligence measures:

  • to existing customers including for the purposes of reviewing that customer’s risk assessment, or if further information is available in regard to beneficial ownership, control or structure of the client/client business or company.
  • if there is a change of ownership, or in relation to transactions that are not reasonably consistent with the relevant person’s knowledge of the customer or there is a change in the relationship with the customer.
  • in relation to ‘any other matter which might affect the relevant person's assessment of the money laundering or terrorist financing risk in relation to the customer’.

How Can We Help?

KANGS fields an expert Team experienced in representing clients operating in the above-mentioned ‘high risk’ sectors who face investigation by HMRC or other financial investigators in relation to allegations of money laundering and financial misconduct.

If you need help in relation to any HMRC investigation or prosecution or need assistance in relation to the due diligence procedures that you should be carrying out, please do not hesitate to contact our Team.

We welcome enquiries by:

Telephone: 0333 370 4333

Email: hkang@kangssolicitors.co.uk

Hamraj Kang

Hamraj Kang
Senior Partner

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John Veale

John Veale
Partner

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Tim Thompson

Tim Thompson
Partner

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