Anti Money Laundering policy

Financial crime FCA compliance procedures manual

General introduction

This Financial Crime Handbook sets out the procedures operated by BRYAN GARNIER & CO. LIMITED (“BRYAN GARNIER”) in order to ensure its compliance with the legal framework set up in the UK to prevent money laundering and terrorist financing. Money laundering, terrorist financing, fraud and the abuse of financial markets collectively provide the FCA’s definition of financial crime.

The policies and procedures recorded in this manual reflect UK market practice in that they embrace the combating of terrorist financing (“CTF”) as well as anti-money laundering (“AML”) and the manual should therefore be read throughout as embracing both types of crime.

The UK has had legislation in place since the early 1990s aimed at preventing and detecting money laundering. There is a similar regime in place, paralleling the anti-money laundering regime, aimed at detecting and preventing the financing of terrorist activities.

Most other major countries in the World have adopted similar approaches to the prevention and detection of both money laundering and the financing of terrorism.

The scope of the legislation has developed over the years and now covers the business activities undertaken in the whole of the UK’s financial services sector as well as, amongst others, accountants and solicitors in practice, tax advisers, estate agents and casinos.

Legislation

The current AML legislation in the UK, based on directives handed down from the European Parliament, are the proceeds of Crime Act 2002, as amended by the Serious Organised Crime and Police Act 2005, and the UK’s third version of the Money Laundering Regulations 2007.

The main law dealing with terrorism is the Terrorism Act 2002, as amended by the Anti-Terrorism, Crime and Security Act 2001.

Regulation

For the UK’s financial services sector, the regulator is the Financial Services Authority, the FCA. The FCA has had responsibility for overseeing the compliance by regulated firms with their anti-money laundering obligations longer than any other regulatory body.

Most other regulators provide guidance to their members on how to comply; the FCA ceased doing this as from 2006 but instead relies on member firms being aware of and following guidance issued by a body called the Joint Money Laundering Steering Group, the JMLSG (www.jmlsg.org.uk).

The JMLSG is made up of 18 trade association members from the financial services sector. The FCA has just a few high-level actual rules relevant to the prevention and detection of money laundering and countering the financing of terrorism. The overall purpose of these rules is to place prime responsibility for compliance at the senior manager level in a firm; the board in a company, the partners in a partnership, etc

Managerial responsibilities

In broad terms, there are five obligations for senior management in a firm subject to the Money Laundering Regulations 2007, which includes firms carrying out investment business.

The first of these is to appoint a suitable person to deal with receiving and processing Suspicious Activity Reports (SARs). In law, this person is referred to as the Nominated Officer but, for historic reasons, will invariably been known by the more meaningful title of Money Laundering Reporting Officer.

Next, management must arrange the putting in place of systems, controls and procedures to prevent money laundering and to counter the financing of terrorism. To start meeting this obligation, management must produce and sign off an assessment of the money laundering risks for their business, broken by types of customers/clients, the types of products and services offered, how the services are delivered and geographic risks.

Doing this produces base standards from which all of the policies, systems, controls and procedures can then be developed.

Management’s third obligation is to ensure that adequate Customer Due Diligence is undertaken on all new business relationships before business commences for them. The Customer Due Diligence obligation has been much more clearly defined in law since the latest Money Laundering Regulations than has previously been the case and the obligations are now tougher, including the requirement to keep due diligence records up to-date for as long as the relationship lasts.

Significant importance is attached to the training obligation coming from Regulation 21 of the Money Laundering Regulations; it is bolstered by FCA rules relating to training and competence. This requirement covers all relevant staff, this includes management and everyone else who could ever find themselves, in the course of doing their jobs, being suspicious of money laundering. Thus secretarial and HR staff need to be included and enough instances exist of firms’ receptionists becoming suspicious to warrant including such staff in the training obligation.

Staff are required to be trained on matters relating to anti money laundering and countering the finance of terrorism when they join the firm and at appropriate intervals thereafter. What intervals are appropriate are down to management to determine and different intervals may be appropriate for different jobs in a firm.

The fifth management responsibility for management is to keep records. There are only two explicit record keeping obligations in the Money Laundering Regulations. These are to keep Customer Due Diligence records until at least 5 years after the relationship has ended and transaction records for a minimum of 5 years after the transaction has been completed. Other record keeping requirements can exist in parallel form as a result of other legislative requirements (including fundamental corporate records to comply with Companies Acts and records relating to payroll issues for HM Revenue & Customs) and many more are simply a matter of common sense.

If senior management fail in any of these responsibilities, the firm can be fined and the individual managers can be fined or sent to prison for up to 2 years or both.

Personal responsibilities

The following information about individual, personal responsibilities applies to management and staff alike; references to money laundering should be read as applying equally to terrorist financing.

Whenever someone knows or suspects money laundering, they must report that promptly to their firm’s Nominated Officer/Money Laundering Reporting Officer. The law also requires that a report be made when there are reasonable grounds to know or suspect.

This means that someone who does not make a report can still be prosecuted when they did not know or suspect, a court can decide that there were reasonable grounds from which an accused person ought to have known or suspected and therefore should have made a report. It is no defence to a charge of failing to report to claim no knowledge or suspicion when there were reasonable grounds, as judged by a court.

Making a report discharges a statutory obligation and avoids the risk of being charged with failing to report. The potential penalty for failing to report is a fine or up to 5 years in prison or both.

Under no circumstances may anyone be a money launderer in their own right. They do not have to have committed the original crime and thereby acquired, taken possession of or control over such assets. Money laundering also includes any activity – which could be doing the normal day-to-day job – which assists a money launderer. Further, simply giving advice or guidance to a money launderer, so that their money laundering is progressed by them, is also money laundering. Taken together, these three represent what are known as the primary money laundering offences.

There is another condition that has to be met before anyone, be they the original criminal or not, can be accused of being a money launderer. That condition is that they must know or suspect money laundering and fail to report that knowledge or suspicion. Thus making a report, as soon as knowledge or suspicion is identified keeps a person on the right side of the law. Failure to do so can make the person liable not just to the failure to report offence (including the ‘reasonable grounds’ test) but also to penalties for being a money launderer which can be a fine or imprisonment up to 14 years or both.

The Tipping Off offence’s name is pretty well self-explanatory. If someone is aware, following submission of a Suspicious Activity Report (SAR), either from themselves or by someone else, then it is a criminal offence to cause the person under suspicion to become aware of that fact. Awareness can come by anything that is said or done and communication can be directly to the suspected person or via an intermediary. The effect of such an unauthorised disclosure to the suspected person is to compromise an actual or potential investigation of the suspicion by law enforcement. The penalties for the tipping off offence are a fine or up to 2 years in prison or both.

The summary above represents the anti-money laundering criminal offences to be avoided by management and staff. All should be aware of the absolute necessity of complying with their own firm’s anti money laundering regime in all of its aspects. An employer would be expected to invoke disciplinary processes in the event that an employee fails to comply. This could lead to allegations of gross misconduct and potentially to dismissal.