HMRC cracks down on money laundering

After the recent HMRC largest fine up to date to a London financial service company was imposed, the HMRC itself has advised the organisations in the scope of the AML policies and procedures to improve their quality and requirements. For the purpose a special guidance was issued by David Redfern, tax preparation specialist and Managing Director of DSR Tax Claims Ltd.

HMRC recently announced that it was issuing a £7.8 million fine against a foreign exchange and money transmitting business based in London due to the breaches of the anti-money laundering regulations. The failures in adhering to AML regulations occurred between July 2017 and September 2018.

When handing down the fine, HMRC highlighted four areas in which AML regulations were not up to the standard required, these being customer due diligence, staff training, company procedures and risk assessments with associated record-keeping. Redfern said, “Client due diligence is of the utmost importance for all businesses where money laundering could be an issue, not just for money service businesses but all businesses within the financial services, legal and property sales sectors. Companies must ensure that customers can prove they are who they claim to be, with the appropriate identity documentation, and firms must check that customers don’t have any additional risk factors which could make their involvement in money laundering more likely, such as being a politically exposed person (PEP) who might be susceptible to blackmail or bribery. It is vital that staff are trained in AML procedures including due diligence so that they are aware of the responsibilities on them to ensure all customers are suitably assessed and any concerns are flagged to the person designated as money laundering reporting officer. Training needs to be a continuous process, not just a one-off activity”.

In addition, HMRC highlighted failings with risk assessment, record keeping and AML policies and procedures. Redfern said, “HMRC’s actions in this instance demonstrate the importance for any business within those key money-laundering areas to develop a strong AML policy, which includes a thorough risk assessment of all its activities and the potential areas and gaps in which individuals could use the business to launder the proceeds of criminal activity or fund terrorism. This includes having a reporting procedure for staff members who have raised suspicions and keeping thorough records on client due diligence and suspicious activity reporting. HMRC makes it quite clear that ignorance of the law is no defence against the law”.

In a statement, the Director of HMRC’s Fraud Investigation Service, Simon York stated, “A word to the wise for those firms who, either by ignorance or design, continue to flaunt the rules – this record fine shows we mean business, so get your house in order before we come knocking”. Redfern added “There is a wealth of guidance for affected businesses to ensure that they are compliant with AML regulations and this most recent crackdown, with such a significant fine levied, shows the importance of understanding and following those regulations”.