Money Laundering and Terrorist Financing

Money laundering involves hiding the origins of money obtained from illegal sources so that it appears to come from legitimate activities. Money laundering typically takes place in three stages:

  1. the introduction of the cash into the system
  2. carrying out a number of complex transactions to disguise the source of the funds, and
  3. receipt of the proceeds from the funds in a legitimate form

Money laundering allows criminals to keep hold of the proceeds of their criminal activities and is fundamental in enabling terrorism and other forms of organised crime.

The UK anti-money laundering requirements are set out in the following legislation:

The Proceeds of Crime Act 2002 (POCA)

Establishes the primary offences that constitute money laundering and provides law enforcement with extensive powers to recover assets.

The Terrorism Act 2000 (as amended)

Imposes counter financing of terrorism obligations on banks and financial institutions.

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

These are the basis of the UK’s AML requirements. They implement the EU’s 4th Money Laundering Directive and are in line with FATF’s standards and recommendations.

Money Laundering, Terrorist Financing Regulations 2019

These implement the EU’s 5th Money Laundering Directive extending the scope of the regulated sector and making some changes to customer due diligence and enhanced due diligence requirements.

JMLSG Guidance

In the UK, the Joint Money Laundering Steering Group (JMLSG) publishes industry guidance to help firms interpret UK Money Laundering Regulations. PIMFA is a member of the JMLSG.

National Risk Assessment 2020

This is a comprehensive assessment of the money laundering and terrorist financing risk in the UK. The wealth management sector continues to be a high risk for money laundering due to its exposure to the proceeds of political corruption and tax evasion

Penalties for non-compliance can be severe, ranging from fines to criminal charges depending on the nature and severity of the offence. Anti-Money Laundering breaches may also result in significant reputational damage.

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