Client identity and identification and compliance with the Money Laundering Regulations 2007 is a major requirement of all regulatory bodies in the legal and financial fields.
Did you know:
- under AML 2007 Regulation 9(2) and subject to very limited exceptions (paragraphs 3-5 of Regulation 9 and Regulation 10), a relevant person must verify the identity of the customer (and any beneficial owner) before the establishment of a business relationship or the carrying out of an occasional transaction
- when establishing a business relationship but not an occasional transaction, verification can be carried out at the first possible opportunity if you comply with Regulation 9(3)
- under AML 2007 Regulation 8(2)(b), in relation to a business relationship, you have an ongoing obligation to monitor that relationship and you must keep the documents, data or information obtained for the purpose of applying customer due diligence measures up-to-date
- if you cannot apply customer due diligence in accordance with AML 2007, you must not carry out a transaction with or for the client through a bank account, establish or continue the relationship or carry out an occasional transaction and must consider whether you need to make a disclosure
- a relevant person who proposes to have a business relationship or carry out an occasional transaction with a politically exposed person must (Regulation 14(4))—
- have approval from senior management, i.e. the partners, for establishing the business relationship with that person
- take adequate measures to establish the source of wealth and source of funds which are involved in the proposed business relationship or occasional transaction and
- where the business relationship is entered into, conduct enhanced ongoing monitoring of the relationship
- there are substantial penalties for failing to comply and a breach of Regulation 9(2) carries criminal sanctions including fines and imprisonment (Regulation 45)
Electronic verification provides a detailed and extended client identity check with an appropriate audit trail which will satisfy AML 2007 and the relevant regulatory authorities and extends to searches of politically exposed persons. However the Council of Mortgage Lenders has further requirements directed to mortgage fraud namely:
- you must follow the guidance in the Law Society’s mortgage fraud practice note
- if you are not familiar with the seller’s solicitors or licensed conveyancers, you must verify who they are
- you are required to ask the client to produce certain documents from Lists A&B set out in Paragraph 3.1.6 of the CML Handbook to enable you to verify signatures
- unlike AML 2007, there is no obligation to satisfy these requirements before commencing the transaction
In cases involving the administration of estates, you should consider identity checks for the beneficiaries even though they may not be your clients. Payment to the wrong person will always lead to costly investigation and potential damages.
Intelliworks ID Check done at the outset of any transaction ensures that you meet the requirements of regulation 9(2) of AML 2007 and therefore comply with the relevant provisions of the SRA Handbook and AML element of the Handbook for the Council of Licensed Conveyancers.