Playing a leading role in world finance, the United Kingdom is one of the most powerful global actors in the fight money laundering and terrorist financing. AML / CTF is a significant risk in the UK due to the size and complexity of the financial and real estate markets. The UK is one of the most developed countries in the fight against financial crimes such as fraud, money laundering, and terrorist financing. The UK's strict and advanced AML laws aim to detect financial crimes and anti-money laundering.
AML Regulators for The Uk
There are several regulators and authorities in the UK to prevent financial crimes such as money laundering and terrorist financing. These regulations aim to minimize the negative effects of crime on the economy by reducing the money laundering risks with the laws they have determined. Institutions that do not comply with these laws, which have relatively strict rules, receive certain administrative penalties. The regulator monitors companies 'AML vulnerabilities and presents companies' AML requirements accordingly. Some of the AML Regulators available in the UK are:
Financial Action Task Force (FATF)
The final Mutual Evaluation Report of Financial Action Task Force (FATF) on the implementation of money laundering and counter-terrorism financing standards in the UK was made in 2018. This assessment is largely in line with 15 of the FATF 40 Recommendations in the UK and is not included in the FATF Country List with AML deficiencies. According to the FATF report, the UK financial intelligence unit needs to increase resources and reorganize and modernize suspicious activity reporting processes. Apart from financial institutions such as banks in the UK, professions such as non-financial businesses, accountants, real estate agents, and lawyers are subject to extensive AML / CFT requirements and all ML / FT risks that may occur in these institutions need to be identified.
The Financial Conduct Authority (FCA)
The Financial Conduct Authority (FCA) in the UK is responsible for the regulation of the financial service industry and acts independently of the UK government. FCA aims to regulate the behavior of financial companies in the retail and wholesale sectors. Among the institutions organized by FCA are stock exchanges, investment, e-money organizations, payment institutions, banks, credit companies, asset managers, building cooperative. FCA's regulations require the implementation of Customer Due Diligence (CDD) measures that adopt a risk-based approach. Regulations also aim to detect and prevent financial crimes such as money laundering and terrorist financing. All institutions subject to the Money Laundering Regulations in the UK have to meet their policy and procedural obligations to minimize the risk of money laundering. FCA monitors and audits these organizations through regular checks. AML controls at institutions should be structured depending on the size, services, and products offered by the company.
Furthermore, there is a need for a manager in institutions to manage anti-money laundering activities. In addition, the institutions should have a Money Laundering Reporting Officer (MLRO) focusing on AML activity. MLRO firm also monitors compliance with AML obligations. They should know your company's money laundering risks and ensure that steps are taken to effectively mitigate these risks. According to FCA regulations, the most important factor in fulfilling AML obligations is to regularly conduct a risk assessment within the company. When all procedures are performed, it is necessary to make sure that the company employees understand and follow these processes.
HM Revenue and Customs (HMRC)
Her Majesty's Revenue and Customs (HMRC) in the UK government's tax authority. HMRC is generally responsible for collecting taxes, protecting the UK borders against illegal activities, and ensuring that minimum wage is paid by employers. In addition to all these responsibilities, HMRC is working with FCA to investigate money laundering offenses. HMRC produces legislation to combat financial crime and there are regulations aiming to launder money within these regulations. HMRC institutions also aim to reduce the threat of money laundering. For example to verify the identity of customers, to follow the details of the transactions performed, and to have a responsible person within the organization to oversee the AML regulations. It has also made it imperative for financial institutions in the UK to submit a report on suspicious transactions detected.
National Crime Agency (NCA)
NCA leads the way in the struggles to prevent the activities of major organized crime in the UK. NCA's senior officers serve the front lines of law enforcement officers, tracking the most serious and dangerous criminals. It destroys the crimes it detects and imposes severe penalties for every person and institution required. It is money laundering and terrorist financing in a crime that the NCA is fighting. NCA's UK also has some activities and arrangements to destroy money laundering activities. For example, to prosecute people who are dealing with money laundering, to disrupt the techniques they apply, to recover and seize money laundering assets and also prevent the UK from abusing its financial system.
NCA collaborates with local and international partners to anti-money laundering and terrorist financing threats. NCA can detect money launders and arrest them in order to disrupt criminal activities. Thus, it makes the UK a difficult environment for those who want to use it for money laundering. NCA aims to provide financial staff with training and insight to help them identify signs of money laundering and to develop new ways to identify criminals.
Proceeds of Crime Act (POCA) in the UK
The Proceeds of Crime Act (POCA) addresses the process of recovering and freezing assets obtained illegally. POCA continues its efforts to minimize criminals by hiding money and assets from crime. With this law, money launders are arrested because they are both a punishment and deterrent for illegal behavior. The purpose of the law is to prevent criminals from engaging in black money activities. According to the 2002 POCA, activities such as the concealment of criminal property and the conversion of criminal property are considered a crime in the UK. According to the law, a suspicious report should be prepared for money laundering activities carried out in all institutions subject to regulations.
If the money laundering officer working in regulated institutions such as banks does not prepare a report for the suspicious situation, a criminal offense can be imposed on this institution and the person leading to prison terms. At the same time, POCA emphasized that measures such as Know Your Customer (KYC), Customer Due Diligence (CDD), Transaction Monitoring should be taken for an appropriate AML Compliance Program. The implementation of these procedures in institutions is effective in determining suspicious persons and activities.
The Fifth Anti Money Laundering Directive (5AMLD) for the UK
The Fifth Anti Money Laundering Directive (5AMLD) entered into force on 10 January 2020 for the Member States of the EU. Although the UK left the EU this year, it still agreed to pursue this directive. 5AMLD is the amendment to the Fourth Money Laundering Directive (4AMLD) to prevent abuse of the financial system along with money laundering and terrorist financing. According to 5AMLD, before establishing a business relationship with a new customer, it requires 'strict Customer Due Diligence (CDD) measures' to be taken to check the current company and useful property information. All organizations that detect any inconsistency between the information they have obtained from the customer and the registered beneficial property information should report this to all necessary competent authorities. 5AMLD also requires that trust records be extended to the public, but also to expand all trusts from the tax consequences trusts in the UK. The UK government expects this directive, the UK's anti-money laundering and counter-terrorism financing regime to effectively tackle these crimes and manage burdens on businesses.
Compliance With UK AML Regulations
In The UK, we mentioned that regulators have introduced some laws to prevent money laundering and terrorist financing, and there are many organizations that are subject to regulation. If these organizations do not comply with these regulations or if they delay complying with these regulations, some criminal proceedings are initiated by the competent authorities. These penalties can be financial penalties depending on the nature and severity of the crime, as well as up to 14 years in prison. Regulated institutions should also comply with a risk-based approach for the organization to comply with these laws, they should conduct risk assessments and risk management, as a result of which their institutions should establish a special AML Compliance Program.
Organizations should follow Customer Due Diligence (CDD) procedures when dealing with a new client or organization. Adverse Media, Political Exposed Person (PEP), and Sanction screening should take place about these people. Thus, they can evaluate the risks of the people they do business with and take an action step accordingly. CDD procedures should be repeated periodically. At the same time, customers' transactions should be monitored so that institutions follow AML Transaction Monitoring procedures. Transaction Monitoring generates an alarm in any suspicious transaction and informs the institution. When suspicious situations occur, Money Laundering Reporting Officer (MLRO) should prepare a Suspicious Activity Report (SAR) for this process and submit it to the National Crime Agency (NCA). In addition, institutions should implement a training program for AML staff and inform them about changing regulations.
Sanction Scanner's AML Solutions for The UK
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