How confident are you in identifying Money Laundering red flags?
In January, hundreds of migrants were arrested during a UK wide sweep to crack down on illegal working. These interventions shine a spotlight on this issue but, as a high-risk service provider, how confident are you at spotting these situations?
As finance professionals you are on the front line of exposure to money laundering threats. Accountancy, bookkeeping, and payroll services are deemed particularly susceptible to being exploited through illegal operations.
As an individual if you are found to be involved (even unwittingly) in a money laundering operation you could face a prison sentence, therefore it is imperative that you are able to spot the signs.
The IAB provide a range of resources to support you in being compliant, the most recent being AML Edit a quarterly newsletter to our supervised members and of course the AML Complete platform. A key feature of the Complete platform is the automation of Firm Risk and Client Risk assessments. By following the structure in the platform, you automatically provide the relevant information to establish the risks and can gain further direction in how to be compliant.
But what are some of the warning signs you should look out for when working with clients?
- Staffing irregularities – Are staffing levels incompatible with the size and nature of the business?
- Cash-heavy operations – Are they mostly operating in cash?
- Do they have portfolios with high-risk? Do they have a business or a range of businesses in high-risk sectors (nail salons, hairdressers, takeaways, car washes)
- Lack of transparency of ownership, unclear beneficial owners.
- Is their workforce poorly paid? There are range of payment red flags to look out for.
- Irregular hours but all staff get the same pay.
- Round sum salaries
- Differences in wages among the workforce without clear distinction in roles or business structure.
- Client location, are they in a high-risk country or do they conduct business in one?
- Behavioural signals, when asked, the client avoids giving you information, you have never met them despite asking for meetings.
Despite AML Complete providing structure to your compliance responsibilities we understand that situations arise. Here we have compiled a list of FAQ’s and further guidance.
Q: How often should I perform a review on my clients?
A: We suggest you conduct a full review for your client once a year, your annual supervision renewal is a good marker. It is also important to ensure you are conducting regular check-ins with the client in the event of any significant changes to their business or ownership structure.
Q: What records should I maintain to prove AML compliance?
A: Keep a record of all clients due diligence (CDD), risk assessments, ongoing monitoring activities, and suspicious activity reports. The IAB advises retaining these for a minimum of five years.
Q: What if the company structure is complex, how can I check who the beneficial owners are?
A: The IAB offers members access to ownership verification resources. AML Complete provides guidance on how to navigate complex corporate structures.
Q: What do I do if I suspect a client is money laundering?
A: You need to report it via a Suspicious Activity Report (SAR) to the National Crime Agency. The IAB provides members with guidance on proper preparation and filing of these reports.
Not yet AML Supervised by the IAB and interested?
Have questions on AML Complete?
Want to know more about Risk Assessments or Client Due Diligence do one of our AML modules.
Read the original BBC report on this event here.
