What is proliferation financing and what does it mean to you?

What is Proliferation Financing and what does it mean to you?

  1. Proliferation Financing (PF): Providing money or financial services to aggressive actors seeking chemical, biological, radiological, and nuclear (CBRN) weapons.

    2. Increased Risk: International bodies like the UN Security Council and FATF believe the risk of these actors acquiring CBRN weapons has risen, demanding disruption of their financial support.

    3. UK’s Vulnerabilities: Identified by the National Risk Assessment of PF (NRAPF) due to the UK’s openness for investments, strong financial sector, and ease of forming companies.

    4. Regulation Changes: The Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022, effective from 1st September 2022, aim to enhance UK’s ability to combat money laundering, terrorist financing, and destabilising actors.

    5. New Responsibilities: Firms now must assess their exposure to PF, report ‘material discrepancies’ to Companies House, and adhere to updated AML policies.

    6. Risk Assessment Criteria: Firms should consider client types, geographic ties, services, transactions, and delivery channels when evaluating PF risk.

    7. Red Flags to Consider: Factors like involvement in sensitive sectors, unclear end-users, transactions lacking information, and dealings in crypto assets can indicate PF risk.

    8. TCSPs and Off-the-shelf Companies: Risks associated with Trust and Company Service Providers (TCSPs) and the creation of seemingly legitimate companies by nefarious actors are highlighted.

Implications for Accountant/Bookkeepers:

– Increased responsibilities in assessing PF risks, updating AML policies, and maintaining vigilance in client dealings.

– Caution and scepticism advised, especially with new company formations, nominee shareholders, and sudden changes in ownership.

– The aim of these changes is to safeguard against the misuse of financial services by aggressive actors seeking materials for weapons of mass destruction.