Money Laundering Regulations | Enhanced Due Diligence

Money Laundering Regulations | Enhanced Due Diligence

In previous articles

Money Laundering Regulations |Customer Due Diligence and MLR | Due Diligence, we outlined the manner in which The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, (‘the Regulations’) imposed strict duties on various businesses to implement and supervise anti-money laundering measures and also the identification and verification due diligence measures which have to be implemented by the ‘Relevant Person’.

Regulation 33 provides obligations which are imposed upon the Relevant Person to apply, in certain circumstances, enhanced customer due diligence.

We have assisted clients with all stages of any financial criminal investigation or prosecution whether being conducted by the Police, HMRC, SFO, FCA or another investigating authority.

John Veale outlines the circumstances when such enhanced due diligence measures should be applied and their nature.

Circumstances Requiring Enhanced Customer Due Diligence

The requirements of Regulation 33 are in addition to those contained in Regulations 28 and 29

A Relevant Person must apply enhanced customer due diligence measures and enhanced ongoing monitoring to manage and mitigate the risks that arise:

  • in any case where a high risk of money laundering or terrorist financing has been identified,
  • in any business relationship with or transaction with a person established in a high-risk third country, (unless that relationship is with a branch or majority owned subsidiary of an entity which is established in the European Economic Area (EEA) and that branch/subsidiary procedures/policy together with the legislation in that high-risk country is compliant with EEA regulations and the Relevant Person wishes to proceed with the transaction),
  • where a credit or financial institution is establishing a business relationship with another such institution,
  • where a Relevant Person discovers that a customer or potential customer is a Politically Exposed Person (‘PEP’) or a family member or known close associate of such a PEP,
  • where it is discovered that a customer has provided false or stolen identification documentation or information and a Relevant Person proposes to continue dealing with that customer,
  • where a transaction is complex and unusually large, or there is an unusual pattern of transactions which have no apparent economic or legal purpose,
  • in any other case which by its nature can present a higher risk of money laundering or terrorist financing.

Enhanced Due Diligence Measures

Regulation 33 also sets out the following possible measures to take and risk factors to consider depending on the requirements of the case:

  • seeking additional independent, reliable sources to verify information provided or made available to the Relevant Person,
  • taking additional measures to better understand the background, ownership and financial situation of the customer, and other parties to the transaction,
  • taking further steps to be satisfied that the transaction is consistent with the purpose and intended nature of the business relationship,
  • increasing the monitoring of the business relationship, including greater scrutiny of transactions.

When assessing if there is a high risk of money laundering or terrorist financing, in a particular situation and the extent of the measures which should be taken to manage and lessen that risk, a Relevant Person should consider:

customer risk factors, including whether:

  • the business relationship is conducted in unusual circumstances,
  • the customer is located in a geographical area of high-risk country,
  • the customer is a legal person or legal arrangement that is a vehicle for holding personal assets,
  • the customer is a company that has nominee shareholders, a business that is cash intensive, or the corporate structure of the customer is excessively complex.

product, service, transaction or delivery channel risk factors, including whether:

  • private banking is involved,
  • the product or transaction is one which might favour anonymity,
  • there are non-face-to-face business relationships or transactions without safeguards, such as electronic signatures,
  • payments will be received from unknown third parties.
  • new products and business practices introduce new or developing technology.

geographical risk factors such as dealing with businesses in countries:

  • where there is no credible regulatory framework for dealing with finances or money laundering,
  • that have high levels of crime or corruption,
  • on sanctions and embargo lists,
  • home to prescribed terrorist organisations.

How Can We Help?

The Team at KANGS is nationally recognised for its experience gained from many years defending clients facing allegations of financial misconduct of every nature and also guiding and supporting them through financial investigations conducted by HMRC and other prosecuting bodies

If you need help in relation to any such investigation, please do not hesitate to contact our Team through any of the following who will be delighted to hear from you.

We welcome enquiries by:

Telephone:  0333 370 4333

Email:  info@kangssolicitors.co.uk

Hamraj Kang

Hamraj Kang
Senior Partner

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John Veale

John Veale

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Tim Thompson

Tim Thompson

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