The FCA Handbook and Money Laundering – an introduction.  Part III.

In this Part we review the research and training requirements of Firms to ensure they remain up to date with findings and relevant regulations.  Firms and their MLROs must be aware of the findings of both the Government and the Financial Action Task Force (“FATF”) in relation to the approach taken by other jurisdictions on the subject of money laundering.  Specifically, if these Firms work with those jurisdictions, they must put in place appropriate procedures in accordance with those findings.  A failure to do so could well bring that firm’s compliance with the FCA’s requirements and / or that of the Money Laundering Regulations into doubt, potentially resulting in a breach and causing serious ramifications, whether civil or criminal, as a result. 

The Government and the FATF

Established at the G-7 summit in Paris 1989, the FATF[1] is the “global money laundering and terrorist financing watchdog. The inter-governmental body sets international standards that aim to prevent these illegal activities and the harm they cause to society…”  There are over 200 countries that are committed to implementing the legislative and regulatory reforms it recommends and continuously reviews the position of financial crime globally in order to develop recommendations and standards. 

It currently has 39 members, a list of which can be found at Members and Observers – Financial Action Task Force (FATF) (fatf-gafi.org). 

It is an FCA requirement that every relevant Firm must take reasonable steps to ensure it obtains and “makes proper use of” any Government of FATF finding. 

“Proper Use” includes:

“(a) applying the information in the circumstances envisaged by… the introduction of client for one-off transaction) or… the introduction by client of a person on whose behalf he is acting;

(b) applying the information whenever first obtained to know your business information;

(c) Disseminating the information in the course of dealing with awareness and training under ML 6 (below).[2]”

What is a “finding”?

A finding is a published notice issued by either the FATF or the UK Government that contains a conclusion on the part of either body that it has analysed the framework for restricting money laundering in a country (other than the UK) and that framework is “materially deficient in comparison with one or more of the relevant, internationally accepted standards, including any recommendations published by the FATF…”[3] 

The Joint Money Laundering Steering Group (“JMLSG”)[4] is a UK based group that not only produces guidance in an effort to assist Firms with their UK AML obligations, it also publishes Government and FATF findings to create a one-stop knowledge centre for UK Firms to review and analyse for updates.  Accordingly, there really is no excuse for Firms to not be aware of changes regarding these important regulatory requirements.

Documentation and Training

Following on from the requirement that Firms be aware of Government and FATF findings, the FCA requires Firms to ensure their staff are “made aware of and given regular training about”[5] what is expected of them regarding AML procedures, as well as the consequences should they fail to abide by these requirements.

This means a Firm that has staff who handle transactions that may involve money laundering, or the managers responsible for those transactions, must have taken reasonable steps to ensure those staff are aware of:

1. Their responsibilities.  This includes obtaining sufficient evidence of identity; the ability to recognise and report knowledge or suspicion of money laundering as well as being able to utilise findings of material deficiency;
2. Who their MLRO is and what their responsibilities are;
3. The Law relating to money laundering;
4. The potential effect of any breach.

Staff must also be aware of their own liabilities under AML legislation, including potential criminal liability (more of which in Part IV).

In order to satisfy the above, each Firm must provide recorded information that:

1. Covers the issues at 1-4, above;
2. Is brought to the attention of a member of staff who starts work with the Firm and their activity is covered by the FCA handbook;
3. Remains available to each member of staff during their employment.

The handbook is very specific that contravention of a-c “may be relied on as tending to establish contravention” of the Firm’s money laundering obligations[6].

Accordingly, in an effort to encourage compliance, each Firm must take “reasonable care” to provide training that:

“(a) deals with the law on money laundering, and the responsibilities of staff under the relevant firm’s arrangements;

(b) is applicable to all staff who handle, or are managerially responsible for the handling of, transactions which may involve money laundering; and

(c) takes place with sufficient frequency to ensure that within any period of 24 months it is given to substantially all of the staff referred to in (b)…”[7].

Once again, the handbook is very specific that contravention of a-c “may be relied on as tending to establish contravention” of the Firm’s money laundering obligations, so it is vital this is adhered to.  Indeed, it is argued that the period of 24 months is far too long and much more frequent training should be provided, not only on updates but also as refreshers; at least annually or, preferably, biannually.

Conclusion

The requirements regarding the research, knowledge, documentation and training regarding AML and counter terrorist financing placed on relevant Firms are onerous.  Moreover, if a Firm fails to comply with those requirements, not only is its trading ability at stake, there is also the spectre of criminal wrongdoing. 

Get Regulated is a preeminent advisor in these requirements and provides access to the highest quality guidance and training on the appropriate regulatory infrastructure to help protect your business.  If you have any questions at all or need advice, we would be delighted to hear from you.

---

[1] FATF-GAFI.ORG – Financial Action Task Force (FATF)

[2] ML 5.1 Government and Financial Action Task Force findings – FCA Handbook

[3] Ibid.

[4] JMLSG – Joint Money Laundering Steering Group

[5] ML 6.1 Purpose – FCA Handbook

[6] ML 6.2 Awareness – FCA Handbook

[7] ML 6.3 Training – FCA Handbook