Get ready for the Fourth Money Laundering Directive, which has significant consequences for all regulated firms. You can look forward to:
• A requirement for firms to take appropriate steps to identify and assess the risks of money laundering and terrorist financing to their business. Firms will be required to document these risk assessments and keep them up-to- date
Assessments will also need to be made available to the FCA on request. The FCA is contacting a selection of small firms to conduct assessments of their anti-money laundering and financial sanctions systems and controls against the prevailing standards. This work is likely to continue once 4MLD is in place
• A revised definition for politically exposed persons to formally include individuals entrusted with prominent public functions based in the UK. A risk-based approach to the treatment of politically exposed persons and their family members is encouraged
• Beefed-up guidance on when and how to assess the identity, address and source of funds of existing clients
• Extinction of “simplified due diligence” except where the firm has first established that the business relationship or transaction presents a lower degree of risk of money laundering occurring.
• Clarification on how to handle clients in high-risk countries
Expect finalised FCA guidance this month, followed by updates from the Treasury and the Joint Money Laundering Steering Group, which should enable firms to update procedures in line with the new requirements.
Identity and address verification is only one part of the anti-financial crime framework. Staff awareness and diligent fact finding are essential. Add all this to your summer holiday reading list.
Phil Young is managing director at Threesixty