The European Union's Fourth Anti-Money Laundering Directive was implemented into UK law on 26 June. As a result there are changes to how law firms must conduct customer due diligence and an increased focus on the need to incorporate ongoing and documented risk assessment.
What's the risk?
There are regulatory and legal/criminal penalties in place for non-compliance. This includes fines of up to £1million and prison sentences from two to seven years.
1. Customer due diligence and risk assessment
Under the new legislation the choice regarding level of due diligence is more limited. There is no longer any automatic exemption from enhanced due diligence. A decision to apply simplified due diligence needs to be evidenced by a documented risk assessment. In simple terms, this means that all conveyancing clients must be risk-assessed, regardless of country of origin, services purchased or delivery channels. Moreover, the risk assessment now needs to include Politically Exposed Persons (PEPs) and Financial Sanctions screening.
2. Ongoing record keeping and transparency
Risk assessments must be kept and made available to regulators. This is worth noting as it is the first time that firms are explicitly being told to document and file risks in this way.
How an electronic AML search can help
An AML search facilitates risk assessment by combining all processes and records in one automated system. It enables firms to search for adverse information on a client more thoroughly than they would be able to do manually, and it ensures that compliance procedures are adopted firm-wide.
A typical AML search offers:
Automated risk assessment - this includes automated screening of sanctions, PEPs and alert lists and multiple confirmation of identity, address and birth.
Choice of due diligence level - users can opt for either simplified or enhanced due diligence. Simplified due diligence is typically for 'low risk' transactions whereas enhanced due diligence is for 'medium or high risk work'. Opting for enhanced due diligence ensures the most comprehensive range of electronic data (including positive and negative verification) is used to confirm the client's identity, date of birth and address.
On-going compliance - the system continues to monitor risk-assessed clients, alerting you if documentation or data may affect the result of the original assessment.
Automated record keeping - an AML search also automates record-keeping and audit. Users have the option to add, certify and manage customer documents within the due diligence record.
Geodesys offers an AML search at a cost of £6 (inc VAT) for enhance due diligence. The search is not restricted to conveyancing transactions, but offers valuable due diligence cover in dealings where there is any risk of money laundering, identity theft, fraud or misrepresentation, for example, in probate cases.