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  • Mike Russell

EAG: Anti Money Laundering Policy

Updated: Aug 25, 2023

EAG Anti Money Laundering (AML) Policy

Everest Assets Group Ltd (EAG), a company registered in the UK, must adhere to the UK's anti-money laundering (AML) regulations. The Directors of EAG recognise the need for AML and will inmitially undertake such duties themselves, in association with our professional legal and accountancy advisors. Following the receipt of investment funds, EAG will develop detailed methodolgies and training programmes to cover all of the relevant AML legislations and requirements, as noted below:


The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017):

This is the primary legislation governing AML practices in the UK. It requires firms to:

  • Conduct a risk assessment to understand the potential risks of money laundering and terrorist financing.

  • Implement policies, controls, and procedures to mitigate and manage effectively the risks identified in the risk assessment.

  • Conduct due diligence on customers, including enhanced due diligence for high-risk customers.

  • Report suspicious activities to the National Crime Agency (NCA).


Proceeds of Crime Act 2002 (POCA): This act provides the legal framework for the UK to recover the proceeds of crime. It includes provisions that require businesses to report suspicious activities that might indicate money laundering.


Financial Services and Markets Act 2000 (FSMA): While primarily focused on the regulation of financial markets, FSMA also contains provisions related to money laundering in the financial services sector.


The Terrorism Act 2000: This act requires businesses to report any suspicion of funds being related to terrorism.


The UK Financial Conduct Authority (FCA) Rules: The FCA has set out detailed rules and guidance for firms on how to comply with their obligations under the MLR 2017. This includes conducting regular audits, training staff, and ensuring that senior management is involved in the firm's AML compliance.


Sanctions: The UK has various sanctions regimes in place, which prohibit firms from dealing with certain individuals, entities, or countries. Firms must ensure they do not breach these sanctions.

International Requirements: If EAG is dealing with investors from other countries, it may also need to comply with the AML regulations of those jurisdictions. For instance, if dealing with US investors, compliance with the US Bank Secrecy Act and the Foreign Account Tax Compliance Act (FATCA) might be necessary.


It's crucial for EAG to ensure compliance with these regulations not only to avoid legal repercussions but also to maintain its reputation in the market. Non-compliance can lead to hefty fines, legal actions, and reputational damage. It's advisable for EAG to consult with a legal expert specializing in AML regulations to ensure full compliance.


The Proceeds of Crime Act 2002 (POCA)

is a pivotal piece of legislation in the UK's arsenal against money laundering, organized crime, and the illicit use of proceeds derived from criminal activities.


Asset Recovery:

Confiscation Orders: One of the primary tools under POCA is the ability for courts to issue confiscation orders. These orders compel individuals convicted of criminal activities to pay a sum of money equivalent to the benefit they derived from their crimes.


Civil Recovery: Even in cases where a criminal conviction isn't secured, POCA allows for the recovery of assets that are believed to have been obtained through unlawful conduct. This is done through a civil process, and the standard of proof is the balance of probabilities, which is lower than the criminal standard of beyond reasonable doubt.


Cash Seizure: Authorities can seize cash amounts of £1,000 or more if they suspect the money is the proceeds of crime or intended for use in unlawful activities. Once seized, the authorities have 48 hours to decide whether to return the cash or ask a court for permission to retain it while they investigate further.


Money Laundering Offences:

Primary Offences: POCA defines three primary money laundering offences: concealing, disguising, converting, or transferring criminal property; entering into or becoming concerned in an arrangement which facilitates the acquisition, retention, use, or control of criminal property; and acquiring, using, or possessing criminal property.


Failure to Report: If someone working in the regulated sector (e.g., banks, financial institutions) knows or suspects that another person is engaged in money laundering, they are obligated to report this. Failure to do so is an offence under POCA.


Tipping Off: After a suspicious activity report (SAR) is made, it's an offence to act in a way that might "tip off" someone involved that they are under suspicion or that an investigation is underway.


Suspicious Activity Reports (SARs):

Businesses, especially those in the financial sector, are required to submit SARs to the National Crime Agency (NCA) if they suspect money laundering or terrorist financing. These reports play a crucial role in helping law enforcement agencies identify and investigate potential criminal activities.


Information Sharing:

POCA facilitates greater collaboration between financial institutions and the UK authorities. It allows for joint disclosure reports, where two or more regulated entities can share information with each other and with the NCA to determine any connection between transactions that appear suspicious.


Regulated Sector and Due Diligence:

Certain businesses and professions fall under the "regulated sector" as defined by POCA. These include banks, credit institutions, accountants, tax advisors, lawyers, and estate agents, among others. Entities within this sector have specific obligations, including conducting due diligence on customers, maintaining records, and ensuring staff are trained in AML procedures.


In essence, the Proceeds of Crime Act 2002 provides a comprehensive framework that not only targets the criminals but also the assets and wealth they accumulate from their illegal activities. It places a significant onus on businesses, especially those in the financial sector, to be vigilant, conduct due diligence, and report any suspicious activities, ensuring that the UK's financial system remains robust and resistant to illicit activities.


The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017): This is the primary legislation governing AML practices in the UK. It requires firms to:

  • Conduct a risk assessment to understand the potential risks of money laundering and terrorist financing.

  • Implement policies, controls, and procedures to mitigate and manage effectively the risks identified in the risk assessment.

  • Conduct due diligence on customers, including enhanced due diligence for high-risk customers.

  • Report suspicious activities to the National Crime Agency (NCA).

The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017) is a cornerstone of the UK's efforts to combat money laundering and terrorist financing. Here's a more detailed breakdown of its key provisions:


Conduct a Risk Assessment:

Purpose: To identify and assess the potential risks of money laundering and terrorist financing specific to the firm's operations.

Factors to Consider: The assessment should take into account the firm's size, nature of business, types of customers, geographical areas of operation, products and services offered, and delivery channels.

Review and Update: The risk assessment isn't a one-time activity. Firms should regularly review and update their risk assessments, especially when there are significant changes in business operations or the external risk environment.


Implement Policies, Controls, and Procedures:

Risk-Based Approach: Policies and procedures should be tailored based on the risks identified in the risk assessment. This means that higher risk areas should receive more stringent controls.


Senior Management Approval: Senior management should approve the firm's AML policies and procedures, ensuring that they have the necessary resources and are effectively implemented.


Training: Employees should be trained on these policies and procedures, ensuring they understand their AML responsibilities and can identify signs of money laundering or terrorist financing.


Conduct Due Diligence on Customers:

Customer Due Diligence (CDD): Before establishing a business relationship, firms should gather information to verify the customer's identity. This includes collecting data like name, address, date of birth, and understanding the nature of the customer's business.

Enhanced Due Diligence (EDD): For customers deemed to be high-risk (e.g., politically exposed persons, customers from high-risk jurisdictions), firms should take additional measures. This might include gathering more detailed information, understanding the source of funds, and conducting more frequent transaction monitoring.

Simplified Due Diligence (SDD): In situations where the risk of money laundering or terrorist financing is low, firms can apply reduced due diligence measures. However, the decision to apply SDD should be based on the firm's risk assessment.


Report Suspicious Activities:

Internal Reporting: Employees should report any suspicious activities to the firm's designated Money Laundering Reporting Officer (MLRO).


External Reporting to the NCA: The MLRO evaluates the internal reports and, if deemed necessary, submits a Suspicious Activity Report (SAR) to the National Crime Agency (NCA). This is a critical step as it allows law enforcement agencies to investigate potential criminal activities.


Tipping Off: After a SAR is filed, employees should not disclose or "tip off" the customer or other third parties about the report. Doing so can obstruct potential investigations and is a criminal offence.


In summary, the MLR 2017 provides a comprehensive framework for firms to detect, prevent, and report potential money laundering and terrorist financing activities. Adherence to these regulations is crucial for maintaining the integrity of the UK's financial system and for firms to avoid significant penalties and reputational damage.


Financial Services and Markets Act 2000 (FSMA):

Primary Objective: FSMA is the primary legislation that regulates the financial services industry in the UK. Its main goal is to ensure the integrity, stability, and transparency of the UK's financial markets.


AML Provisions: While its primary focus is on the regulation of financial markets, FSMA also emphasizes the importance of anti-money laundering (AML) controls within financial institutions. It grants powers to the Financial Conduct Authority (FCA) to create rules and guidelines for firms to prevent money laundering.

Supervisory Role: Under FSMA, the FCA has the authority to supervise and enforce AML regulations, ensuring that financial institutions have robust systems and controls in place to detect and prevent money laundering activities.


The Terrorism Act 2000:

Primary Objective: This act provides the legal framework to combat terrorism in the UK.


Financial Provisions: The act recognizes that financial transactions can facilitate terrorist activities. As such, it mandates businesses, especially those in the financial sector, to report any suspicions of funds being used to support terrorism.


Terrorist Property: The act defines "terrorist property" as money or other property which is likely to be used for the purposes of terrorism, proceeds from the commission of acts of terrorism, or proceeds from acts carried out for the purposes of terrorism.


Offences: Failure to disclose suspicions related to terrorist financing is an offence under this act, and individuals or entities can face severe penalties for non-compliance.


The UK Financial Conduct Authority (FCA) Rules:

Regulatory Role:

The FCA is the primary regulatory body overseeing the financial services sector in the UK.


AML Guidance:

Risk-Based AML Policies:

Tailored Approach: The FCA emphasizes that firms should adopt a risk-based approach to AML. This means that firms should assess the specific money laundering risks they face and tailor their AML policies and procedures accordingly.


Factors to Consider: In determining risk, firms should consider various factors, including the nature of their business, the types of customers they serve, the products and services they offer, their size, and their geographical reach.


Regular Review: Firms are expected to regularly review and update their risk assessments, especially when there are significant changes in their business operations or the external risk environment.


Customer Due Diligence (CDD):

Initial Verification: Before establishing a business relationship, firms should gather sufficient information to verify the identity of their customers. This could include collecting personal details, understanding the nature of the customer's business, and verifying the source of funds.


Ongoing Due Diligence: CDD isn't a one-off process. Firms should continuously monitor their business relationships and ensure that the information they hold on customers remains accurate and up-to-date.


Enhanced Due Diligence (EDD): For higher-risk customers, such as politically exposed persons (PEPs) or those from high-risk jurisdictions, firms should undertake EDD. This involves gathering additional information, understanding the source of wealth, and conducting more in-depth and frequent transaction monitoring.


Monitoring Transactions:

Continuous Oversight: Firms should have systems in place to continuously monitor customer transactions. This helps in identifying unusual or suspicious patterns that might indicate money laundering or other illicit activities.

Threshold-Based Monitoring: Some firms set specific transaction thresholds, and any transaction exceeding this limit is automatically flagged for further review.

Behavioural Monitoring: Advanced systems can analyze customer behavior over time, flagging deviations from typical transaction patterns or behaviors.


Training and Awareness:

Employee Training: The FCA expects firms to provide regular AML training to their staff. This ensures that employees are aware of the latest AML regulations, understand their responsibilities, and can identify signs of potential money laundering.

Senior Management Responsibility: The FCA emphasizes that senior management should be actively involved in a firm's AML efforts. They should be aware of the risks the firm faces and ensure that adequate resources are allocated to AML compliance.


Record Keeping:

Firms are required to maintain records of their customer due diligence checks and transactions for a specified period, typically five years. This ensures that they can provide evidence of their AML efforts if required by regulators or law enforcement agencies.


In essence, the FCA's guidance on AML is comprehensive, ensuring that firms not only comply with the letter of the law but also adopt a proactive approach to identifying and mitigating money laundering risks. This proactive stance is crucial in maintaining the integrity and reputation of the UK's financial sector.


Oversight and Enforcement: The FCA conducts regular audits of financial institutions to ensure compliance with AML regulations. Non-compliance can result in hefty fines, sanctions, and even the revocation of operating licenses.


Sanctions:

Purpose: Sanctions are measures imposed by governments or international bodies to achieve specific foreign policy or national security objectives.

Types of Sanctions: The UK's sanctions regimes can be categorized into financial sanctions, immigration sanctions, trade sanctions, and others. Financial sanctions, for instance, may freeze assets or prohibit transactions with certain individuals or entities.

Sanctions Lists: The UK maintains lists of individuals, entities, and countries subject to sanctions. Firms are prohibited from dealing with those on these lists.

Office of Financial Sanctions Implementation (OFSI): Part of HM Treasury, the OFSI is responsible for implementing and enforcing the UK's financial sanctions. Firms are required to report any breaches or potential breaches of sanctions to the OFSI.


In summary, while each of these points focuses on different aspects of the financial and regulatory landscape, they collectively underscore the UK's commitment to ensuring the integrity of its financial system, combating money laundering and terrorist financing, and adhering to international obligations related to sanctions.


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