Financial Crime Compliance
Counter Terror Financing
The EU’s Money Laundering Directive (4MLD/5MLD), the USA’s Financial Crimes Enforcement Network (FinCEN); the UAE’s Federal Laws on Anti-Money Laundering and Counter-Terrorist Financing, all require organisations to introduce a risk-based approach to Customer Due Diligence to meet financial crime compliance and anti-money laundering demands.
When assessing the risks of money laundering and terrorist financing, organisations should check, whether any high-risk factors apply.
How we can help:
When dealing with individuals or companies established in high-risk jurisdictions, or are exposed to other cases of high risk, we help organisations identify the areas of risk and apply enhanced customer due diligence measures to manage and mitigate those risks appropriately. Specifically, we help identify:
- whether any business relationships are conducted in unusual circumstances
- customers that operate in geographical areas of higher risk, including areas of non AML/CTF legislation, significant levels of corruption, countries subject to UN sanctions and/or countries harbouring designated terrorist organisations
- whether any individuals are using personal asset-holding vehicles
- customers who only have nominee shareholders or shares
- if any customers are cash-intensive
- ownership structures of customers who appear unusual or excessively complex given the nature of their business
- whether any business relationships are based on anonymity
- if your organisation has received funds from unknown parties
Corruption takes many forms, including bribery, kickbacks, illegal gratuities, economic extortion and collusion. It is an illegal practice and places law-abiding companies at a competitive disadvantage.
In particular, the UK Bribery Act 2010 introduced a new “strict liability” offence for corporate entities that fail to prevent bribery by their employees, agents or subsidiaries (both domestic and foreign).
The only defence available in the UK is that the corporate entity had in place “adequate procedures” to prevent bribery. This corporate liability is wide and far-reaching and has grave consequences for corporate entities and their executives, including unlimited fines.
Whilst in the USA, the FCPA requests that companies implement and maintain an effective compliance and ethics program to prevent, detect, remediate and report misconduct, including FCPA violations.
Despite various legislative measures, corruption is still a significant problem for organisations, particularly due to growing financial pressures and opportunities in unregulated markets.
How we can help:
- Our investigative analysis will examine whether corruption schemes exist within your organisation, procurement functions and supply chains
- We help implement robust anti-bribery and corruption provisions and policies, as well as guiding you through any subsequent investigations
- Review existing contractual terms with employees, agents and other parties in supply chains to ensure compliance
- Provide Enhanced Due Diligence and ongoing monitoring into an organisations’ supply chain and third parties
- Conduct internal investigations and gather the evidence required for private prosecution or disciplinary procedures
- Implement an effective FCPA compliance programme tailed to your organisation to help prevent, detect and report corruption
Ultimate Beneficial Owners & Politically Exposed Persons
Ultimate Beneficial Owners (UBOs)
The need for accurate, auditable and up-to-date information on beneficial owners is a powerful tool in deterring financial crime activity, and to help identify those who might hide their identity behind corporate structures.
A beneficial owner means any natural person or persons, who ultimately owns or controls the customer. Most AML regime directives state that a shareholding of 25% or more, whether it be a natural person or corporate entity, shall be an indication of direct ownership. Depending on an organisation’s risk-based approach, a lower percentage can be set depending on their criteria.
In exceptional cases, organisations, having exhausted all other means of identification, and provided there are no grounds for suspicion, may consider the senior managing officials to be the beneficial owners.
How we can help:
As part of the risk-based approach, we help organisations perform customer and enhanced due diligence and;
- identify the customer and verify the customer’s identity on the basis of documents, data or information obtained from a reliable and independent source
- take reasonable measures to verify the beneficial owner’s identity
- take reasonable measures to understand the ownership and control structure of the customer
- verify the control structure and ultimate beneficial owner
- conduct ongoing monitoring of the business relationship including scrutiny of transactions undertaken throughout the course of that relationship to ensure compliance
- verify that any person purporting to act on behalf of the customer is authorised and identify and verify the identity of that person
Politically Exposed Persons (PEPs)
With respect to transactions or business relationships with Politically Exposed Persons, organisations must implement appropriate risk-based procedures, to determine whether the customer or the beneficial owner of the customer, is a Politically Exposed Person (PEP). Approval from senior management to establish or continue business relationships with PEPs is required.
We help organisations satisfy PEP compliance on their behalf, by:
- checking and verifying sanction lists and registers to identify PEPs, close associates and subjects of interest
- establishing the source of wealth or funds that are involved in business relationships or transactions with PEPs
- conducting enhanced, ongoing monitoring of business relationships with PEPs
If a PEP is no longer entrusted with a prominent public role, organisations are still obliged, for a period of at least 12 months, to continue enhanced due diligence with respect to the PEP until such a time that the PEP is deemed to pose no further risk.
Note also, that EU Directive measures are of a preventative and not criminal nature and should not be interpreted as categorising a PEP as being involved in criminal activity. Although PEPs are considered a risk due to their public life making them vulnerable to corruption, organisations should not simply refuse a business relationship on the basis that he or she is a PEP, as this is contrary to the ethos of the Directive.
EU Directive measures also apply to family members or persons known to be close associates to the PEP.