The first anniversary of The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 passed on 26 June 2018. Larger firms are addressing the requirement in Regulation 21 for an independent audit function (‘where appropriate with regard to the size and nature of its business’). While this does not have to be external, the AML Guidance for the Legal Sector says at 3.4.2 that it must be independent of those responsible for the AML policies, controls and procedures, and we are auditing a number of City firms and others.
The Law Commission has published ‘Anti-Money Laundering: the SARS Regime consultation paper’. The consultation is open until 5 October 2018. The paper examines the Defence Against Money Laundering (DAML) or consent regime and parallel provisions relating to counter terrorism financing.
The Fifth Anti-Money Laundering Directive, which amends the 4th Anti-Money Laundering Directive was published in the Official Journal of the European Union on 19 June 2018. Member States must transpose this Directive by 10 January 2020. This will introduce a number of changes to the Fourth Directive, and is aimed at tackling terrorist financing, following the Paris attacks, and increasing the transparency of financial transactions and legal entities.
Key amendments address requirements for enhanced due diligence (EDD) relating to high risk third countries, establishing central mechanisms to identify holders and controllers of bank and payment accounts, requiring member states to maintain a list of exact functions they consider to be prominent public functions, and expanding the beneficial ownership regime to a wider range of trusts and trust-like arrangements. The government has confirmed that the provisions will be implemented notwithstanding Brexit.
A draft Registration of Overseas Entities Bill makes provision for foreign companies owning UK properties to reveal their ultimate owners on the world’s first public register. Proposed sanctions include up to 5 years imprisonment.
Even smaller firms are experiencing an increase in exposure to Politically Exposed Persons (PEPs) and sanctions. The Solicitors Disciplinary Tribunal recently found a solicitor found guilty of failure to carry out EDD on a PEP.
The Law Society has published updated guidance on the European Commission list of High Risk Third Countries.