Documentation

High-value dealers, Pawnbrokers, Bureaux de Change and Money Transmitters are all in scope for anti-money laundering regulation.

The first obligation placed on supervised entities is to have a risk assessment. Then they must “establish and maintain policies, controls and procedures to mitigate and manage effectively the risks of money laundering and terrorist financing…”*

*The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.

How to make sure your documents are fit for purpose?

There is no mystery to the regulations. Here they are. They do, however, run to over 100 pages, and the language can sometimes be a bit dense. 

High-value dealers, Bureaux de Change and Money Transmitters are supervised by HMRC, who issue guidance here. Following guidance is not mandatory, but doing so is a defense in court. In other words, follow the guidance.

Pawnbrokers are supervised by the FCA, which issues guidance through the Joint Money Laundering Steering Group (JMLSG) here. As above, best you follow this. Oh – and it’s a whopper of a document.

Plenty of commercial law firms will assess or write policies and procedures. I won’t link to any of them lest they get upset and sue me. I make it a rule not to get into legal battles with lawyers.

Likewise, there are compliance consultants who can help. Lime is one of them.

What about a DIY approach? We wouldn’t recommend starting from a blank piece of paper. Although it’s doable, it is a lot of work. Start from standard templates. Don’t tell anyone, but that’s what Lime does (under licence).

Whichever approach you take, do something. Make sure that you have reviewed the paperwork and documented that review.

Minimum Requirements

Regulation 18. You must identify and assess the risks of money laundering and terrorist financing to your business. You need to consider information from the supervisor and risk factors, including customers, geography, products and services, transactions and delivery channels.

Your assessment needs to be in writing and regularly updated. If your supervisor requests it and you don’t have one, they will warn you, fine you or close you.

Regulation 19. You must establish and maintain policies, controls and procedures to mitigate and manage effectively the risks of money laundering and terrorist financing. They must include risk management practices, internal controls, customer due diligence, reliance and record keeping, the monitoring and management of compliance with, and the internal communication of such policies, controls and procedures.

Your policies, controls and procedures must be in writing and regularly updated. If your supervisor requests them and you don’t have them, they will warn you, fine you or close you.

Please understand that even where there is no suspicion of money laundering, both FCA and HMRC may sanction or close your business down if you do not maintain the required documentation.

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Lime is led by Stuart Lennon, and I take pride in no-nonsense, straight-talking. Send me a question by e-mail, or set up a free no-obligation call. If I can help, I will.  

Anti-Money Laundering legislation and regulation is here to stay and supervision is becoming closer and more hands-on.