Information – a key weapon in the fight against money laundering

We are pleased to have Adam Wadsley, Assistant Manager of Jordans Corporate Law Limited, sharing his insight into Anti-Money Laundering regulations on the Jordans Limited blog.

By Adam Wadsley

Money laundering is the process by which the proceeds of crime are converted into legitimate assets, distancing them from their original source. Estimates vary and by their very nature the figures are difficult to quantify, but it is believed that up to £57 billion is laundered through the UK each year. When former Prime Minister David Cameron announced that “London is not a place to stash your dodgy cash”, he reaffirmed the UK’s commitment to tackling the issue.

Key to any investigation of suspected money laundering is information. In the event of any such activity, how can an investigation proceed without information on who is, or may be, doing it? This, then, is the focus of all money laundering legislation. Who to check, how, and to what extent.

For the last decade or so, all professionals working in or close to the financial sector have become accustomed to identifying their clients. But what information is required?

The Money Laundering Regulations 2007 now mandate that a risk-based approach is used (known as Customer Due Diligence “CDD”), which is a development on the more broad brush approach of Know Your Client (“KYC”). The idea is that professionals should be aware of the nature of the services being provided to the client and use that to determine what information they require from their client and how far they need to maintain the CDD.

For example, lawyers overseeing a gift of shares in a UK Company by a husband to his wife may decide to identify them, if they haven’t already, but will probably leave it at that, as they could reasonably judge that the risk of money laundering is relatively slight.

Consider though if the shareholder selling the shares is a Russian company to a BVI company, and the consideration for the shares is a property in Spain. In this case, the lawyers would be likely to take a more rigorous approach, so as to understand the structure of each company (and each group of companies if necessary), to identify the ultimate beneficiaries and to establish where the value of the shares and of the property in question came from. Furthermore, it is just this sort of transaction that would lend itself to on-going CDD, with the aim being to keep track of any changes in the parties involved.

So the aim of the legislation is to give professionals the flexibility to focus on the high-risk transactions rather than worrying excessively about an already identified or easily identifiable client. In either case, instant access to accurate information is a key tool for today’s professional, and an integral part of the UK’s preventative framework.

Jordans Identity and Anti-Money Laundering verification checks have been created specifically for the legal and accountancy profession to help your firm make better-informed decisions. For more information or to get these services for your firm, please get in touch.


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