Professionals across all industries and sectors must familiarize themselves with the Money Laundering Regulations 2017 (MLR2017) which has introduced a variety of new provisions to replace and expand the requirements of the existing Money Laundering Regulations 2007 (MLR2007). This newest compliance law was presented to parliament one day prior to the deadline which left little time for improvements to be made under MLR2017.
There are multiple key changes that must be reflected in any anti-money laundering (AML) policies and procedures already in place. For example, a risk based approach is now mandatory under MLR2017 whereby people who are relevant in regards to the regulations must undertake risk assessments of their businesses to evaluate their policies and procedures in order to ensure that they correspond with the risks.
Risk assessment tests should consider all business relationships, geographic location of customers, products and services, and the nature and type of transactions and delivery channels that the business and its customers are participating in.
Furthermore, the Money Laundering Compliance Principal (MLCP), usually senior management and board members, will be responsible for safeguarding appropriate training to relevant staff, risk mitigation, due diligence, and reporting responsibilities. All of which will allow for proper prevention and detection of money laundering.
Customer due diligence is one of the most important components to the new framework and must be performed prior to the establishment of any new business relationships. MLR2017 introduces new changes to the previous due diligence requirements for proper identification of customers by mandating that, at a minimum, the “name, registration number, registered address, principal place of business, the law to which it is subject, its constitution and names of senior management” be obtained, verified, and documented for all prospective customers that are companies. All individuals purporting to act on behalf of a customer and the identity of all owners and beneficial owners must also be verified. A key factor is that risk is properly assessed and documented in order for decisions on due diligence efforts to be justified.
Enhanced due diligence efforts must be undertaken in circumstances where a high risk of money laundering is identified. Such instances can include if “the customer’s business relationships are conducted in unusual circumstances; the customer is a resident in a region considered high risk; the business relationship is or appears to be a vehicle for holding personal assets; the customer is a cash intensive business; the corporate structure is unusually or excessively complex or diffuse; or payments are offered or received from unknown third parties.”
Politically exposed persons (PEPs), individuals who are entrusted with prominent public functions, must have enhanced due diligence applied to them as well. MLR2017 not only requires that due diligence is extended to PEP’s, but also their family members and close associates. Furthermore, enhanced due diligence is required for a 12 month period after a PEP leaves their position and, although family members and close associates are not included in this legacy requirement, appropriate risk assessments should still be taken including ongoing monitoring.
Subsidiaries operating outside of the European Union (EU) will also have to follow regulations and policies put in place by MLR2017, but foreign legislation will be taken into consideration; whichever has the higher standard will be implemented. For any subsidiaries located within the EU, the domestic legislation that implements the fourth money laundering directive is applied.
In addition to the already existing regulations regarding criminal offenses, the MLR2017 introduces a new offense that states any person who makes a false or misleading statement in the context of a money laundering investigation can be punished by a fine, a maximum of two years imprisonment, or both.
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