Financial Institution Faces Increased Risk Assessment Pressure Amid Money Laundering, Terrorist Financing Concerns
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A recent risk assessment conducted by a prominent financial institution has highlighted the need for enhanced policies, controls, and procedures to mitigate the risks of money laundering, terrorist financing, and proliferation financing. The institution operates in various sectors, including banking, insurance, and securities trading, and acknowledged the significance of applying customer due diligence (CDD) measures on a risk-based approach.
Sanctions Imposed for Non-Compliance
Financial Conduct Authority’s Stance
The Financial Conduct Authority (FCA) has taken a stern stance against institutions that fail to comply with anti-money laundering regulations. The consequences of non-compliance include:
- Criminal sanctions
- Civil penalties, such as:
- Removal of “fit and proper” status from individuals
- Suspension or cancellation of business registration
- Public statements censuring non-compliant businesses
- Temporary or permanent prohibitions on management roles
Warning Notices and Disqualification
The FCA has issued warning notices in certain instances, while convicted money launderers may face disqualification from acting as company directors for a fixed period. The institution emphasized the importance of adhering to regulatory requirements and avoiding any actions that could prejudice investigations or compromise documents related to anti-money laundering activities.
Criminal Sanctions Under POCA
The Proceeds of Crime Act (POCA) contains criminal offences related to money laundering activity, including:
- Breaching regulations
- Making false disclosures
- Providing misleading information
These offences apply to both corporates and individuals, with corporate officers also held accountable if an offence is committed with their consent or connivance.
Appeal Process for Sanctions
The institution recognized that each supervisory authority follows its own guidance and processes for assessing and collecting sanctions, as well as appealing administrative decisions. Decisions may be appealed to the High Court or Upper Tribunal, with public statements issued unless there are exceptional circumstances.
Anti-Money Laundering Requirements
Regulated Firms
Financial institutions and non-financial businesses subject to anti-money laundering requirements include:
- Credit institutions
- Financial institutions
- Auditors
- Insolvency practitioners
- External accountants
- Tax advisers
- Independent legal professionals
- Trust or company service providers
- Estate agents
- High-value dealers
- Casinos
- Art market participants
- Crypto-asset exchange providers
- Custodian wallet providers
Obligations of Regulated Firms
Regulated firms must:
- Conduct risk assessments
- Implement policies and procedures
- Know their customers
- Address guidance from regulators
The FCA’s Senior Management Arrangements, Systems and Controls section imposes additional obligations on financial institutions to ensure effective management and control of their affairs.
Payments Subject to Anti-Money Laundering Requirements
Money Service Businesses (MSBs)
Money service businesses (MSBs) may be registered with HMRC and/or the FCA, subject to various payment and money transmission activities. However, some exceptions apply, including transactions below a certain threshold or those involving specific financial instruments.
Commitment to Anti-Money Laundering Measures
The institution emphasized its commitment to maintaining robust anti-money laundering measures, ensuring compliance with regulatory requirements, and minimizing the risks of money laundering, terrorist financing, and proliferation financing.