Anti-Money Laundering Goes "BOOM" Are you one?

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AML goes BOOM!

Are you subject to a relevant criminal conviction? Richard Simms explains why this will be a problem for your business

You may be wondering why your latest personal practising certificate or firm registration application has become more onerous and why there was a sudden rush to get everything done by 26 June this year. Hopefully, you’ve been asked to declare in some way that you and, if applicable, others within your firm are not subject to a relevant criminal conviction.

The idea here is to prevent those subject to relevant criminal convictions from owning and operating certain businesses that are regulated for anti-money laundering. The 2017 Money Laundering Regulations (MLR17) introduced this area of law to the UK. MLR 2017 came into effect on 26 June 2017 and set a deadline of 26 June 2018. The June 2018 deadline required that approval has been granted or that it has been applied for and not yet determined.

What is the requirement?

No person should be a beneficial owner, officer or manager of a firm or sole practice within the Accountancy Service Providers (ASPs) sector unless they have been approved by their Anti-Money Laundering (AML) supervisor. ‘BOOM’ is the term adopted within our sector for a Beneficial Owner, Officer or Manager.

Such approval can only come following an application to their AML supervisor within which confirmation is given that a BOOM is not subject to any relevant criminal convictions.

Who does this apply to?

MLR17 details the following sectors as subject to this requirement (r.26):

(a) auditors, insolvency practitioners, external accountants and tax advisors;

(b) independent legal professionals;

(c) estate agents;

(d) high value dealers.

What are relevant convictions?

There are 35 relevant offices listed in Schedule 3 of MLR17. I’ve stopped short of listing them out in full.

Two offences worth noting are what could be seen as compliance issues. A criminal offence under the Data Protection Act 1998 (assumedly now GDPR) and an offence under money laundering regulations could both prevent in individual from being a BOOM. This could feel like a soft offence, but it certainly helps to focus the mind on these areas of compliance.

What might have been?

Whether you follow AML avidly or just what you need to do, you should understand that the MLR 2017 regulations are based on a requirement to implement the 4th EU Anti-Money Laundering Directive (4MLD) into the UK by 26 June 2017.

4MLD was based in the Financial Action Task Force’s (FATF) 2012 version of the FATF AML recommendations (FATF recommendations). It’s worth tracing this requirement through, but first we get up with the lingo. Designated Non-Financial Businesses and Professions (DNFBP) are where our sector falls within the FAFT terminology.

FAFT recommendation 28 introduces the goal of: “…to prevent criminals or their associates from being professionally accredited, or holding or being the beneficial owner of a significant or controlling interest or holding a management function.”

This is broader than MLR 2017 in that it refers to the prevention of criminals from being professionally accredited. Should this come in then it would, I would interpret, ensure that no one can be professionally qualified if that has a relevant criminal conviction. Certainly a broader interpretation, would this have been a good thing? This would have expanded the criminality checks to accountants in industry; regulation of accountants in industry for AML is already preferred by some senior figures.

FATF also talks about criminals and their associates, not just the criminals themselves.

4MLD doesn’t pick up on all of FAFT’s recommendations it includes the associates point but scraps the professionally accredited requirement.

MLR 2017 thins things down a little further by dropping the associates point. This point would bring its own challenges but would in my view feel more complete. The associate definition could have been borrowed from the Politically Exposed Person (PEP) guidance.

What if you get it wrong?

Any approval by an AML supervisor is not valid for an individual that is subject to a relevant criminal conviction even if granted by the supervisor and is not valid if an individual becomes subject to a relevant criminal conviction.

If an individual becomes subject to a relevant criminal conviction, then they and must inform their AML supervisor within 30 days of the conviction. They must also inform their firm within 30 days of when they became aware of the conviction.

If the beneficial owner of a firm (or sole trader) become subject to a relevant conviction then the High Court upon application of the beneficial owner’s AML supervisor can make an order to sell the beneficial owners interest in the firm.

The maximum prison sentence for acting as a BOOM when subject to a relevant criminal conviction is two years.

Though MLR 2017 is silent on the question of spent convictions, interpretation appears to be that spent convictions are not considered to be relevant criminal convictions. If you’re unsure I’d suggest checking with your AML supervisor.

Different interpretations

From talking to people who are AML supervised by a wide variety of supervisors it is clear that satisfaction of the criminal conviction confirmation has taken different shapes and sizes. There seems to be range from ticking a box to submitting ID documents for Disclosure Barring Service (DBS) checks to take place and be sent directly to the AML supervisor.

I do find this frustrating as supervisors where working with HM Treasury on this question, that different interpretations of the requirements came out and many at the last minute doesn’t reflect well on the AML sector as a whole.

In reality, as we have seen above, the offence is that of the individual subject to the relevant criminal conviction and not the supervisor. Perhaps forcing individuals to undertake DBS checks was necessary if people would have not have disclosed a relevant offence. My concern is the outcome has not produced a level playing field; with some perhaps getting away with it where a lighter touch has been taken? The expectation is that although declarations will remain, DBS checks will not be required annually, at least by the supervisors.

A last thought

Criminal conviction following a breach of data protection or AML law would mean that you would no longer be able to be BOOM in accountancy. Please don’t ignore your compliance requirements.

As ever, please don’t forget that if you hold a practising certificate from the ICPA you are entitled to use AMLCC included with your practising certificate.

Richard Simms is Managing Director of the AMLCC

This blog is taken from the ICPA website. Dedicated to supporting and promoting the needs of the general practitioner. You can find us at www.icpa.org.uk or email [email protected] or by phone on 0800-074-2896.