Introduction, definition and scope
We are committed to:
- preventing ourselves and our employees being exposed to money laundering
- identifying the risks where it may occur
- complying with legal and regulatory requirements
We have a legal obligation to ensure procedures are in place to prevent services being used for money laundering or terrorist financing.
Money laundering is linked to terrorist financing. This is the process by which terrorists fund operations to perform terrorist acts. Terrorists need financial support to carry out their activities and achieve their goals.
Any business in any sector can be subject to money laundering risks. Local government is no exception.
Definition
Money laundering is the process by which the proceeds of crime are converted into assets which appear to have a legitimate origin. They can then be retained permanently or recycled into further criminal enterprises.
Money laundering often involves three steps:
- placement – 'dirty' cash is introduced into the financial system
- layering – the proceeds are moved through a series of transactions. The purpose of this is to conceal the illegal source
- integration – a legitimate explanation for the source of funds is created. Financial wealth can be retained and potentially invested or assets acquired
Money laundering may range from a single act to complex and sophisticated schemes involving multiple parties.
Scope
All employees should be vigilant for signs of money laundering.
This policy applies to all our employees. It sets out procedures to follow when there are suspicions of money laundering activity. Not all staff will need a detailed knowledge of the criminal offences covered by the legislation. However some employees will require additional guidance to ensure awareness of money laundering.
The policy is consistent with our other policies, including the counter fraud and whistleblowing policies.
Failure by a Council employee to comply with the procedures in this policy may lead to disciplinary action being taken against them.
Objectives
The policy outlines our arrangements around:
- the money laundering reporting officer (MLRO) role
- receiving and managing concerns of staff about money laundering. Making reports to the National Crime Agency (NCA) where required
- ensuring those staff most likely to be exposed to money laundering situations are aware of the requirements placed on the organisation and them as individuals by the relevant legislation
- procedures designed to prevent money laundering
- provision of training to those most likely to encounter money laundering
Money laundering reporting officer (MLRO)
We are required to appoint a money laundering reporting officer (MLRO) to receive disclosures from employees of money laundering activity.
Our nominated officer is the head of internal audit and risk management.
The main functions of the MLRO are:
- produce written risk assessment for the business
- point of contact between the business and NCA
- receive notifications of potential terrorist money laundering or terrorist financing
- analyse notifications - to decide whether to file a SAR
- consider staff training needs
- responsibility for policies and controls
- guardian of records relating to SARs
Reporting concerns to the money laundering reporting officer (MLRO)
Staff that know or suspect they may have encountered criminal activity and may be at risk of contravening the legislation in place should notify the MLRO. The disclosure should be made at the earliest opportunity. Confidentiality does not apply if money laundering is at issue.
The employee must follow any subsequent instructions made by the MLRO. No further enquiries into the matter may be taken without authorisation from the MLRO.
All disclosure reports made to the MLRO (and the reports submitted to the NCA) must be retained by the MLRO for a minimum of five years. The MLRO will keep a record of all referrals received and any action taken to maintain an audit trail. The money laundering disclosure form should be used to record any action taken.
Reporting to the National Crime Agency
The MLRO will note the disclosure. They will evaluate the information provided to identify if there are reasonable grounds for suspicion of money laundering. The MLRO may commence an investigation to enable a decision on whether to report the matter to the NCA.
If a decision is made to report the matter to the NCA, the MLO should do this promptly via the forms provided by the NCA to submit a Suspicious Activity Report (SAR).
If the MLRO or deputy MLRO know or suspect that a person is engaged in money laundering and they do not disclose this to the NCA, they are committing a criminal offence. Care should be taken that the client suspected of money laundering is not alerted that a report has been made to the NCA. Tipping off is a specific offence under the Proceeds of Crime Act 2002.
If no report is made, the MLRO must record the reasons for this.
Money laundering offences
There are three principal money laundering offences under Proceeds of Crime Act 2002. An offence is committed if a person knows or suspect property has been purchased with the proceeds from a criminal act and:
- conceals, disguises, converts or transfers or removes the property from the UK - Section 327
- enters into arrangement which he or she knows or suspects will facilitate another person to acquire, retain, use or control that property – Section 328
- acquires, uses or possesses the property – Section 329
Property can include:
- money
- real or moveable property, including inherited assets
- intangible property (for example mortgages, leases, rights etc)
The money laundering offences are aimed at criminals and their associates. However any person can be caught by the offences if they suspect money laundering and either become involved or do nothing about it. It is not necessary to have benefitted in any way to be guilty of the offences.
The key requirement for our employees and partners is to promptly report (Section 337 disclosure) any suspected money laundering activity to our MLRO. While the risk to us of contravening the legislation is low, it is important that all employees are familiar with their responsibilities as serious criminal sanctions can be imposed for breaches of legislation.
Section 337 of the Proceeds of Crime Act 2002 provides protection to employees when they report suspected money laundering. There are conditions to this:
- the information must come to the employee's notice in the course of their trade, profession, business or employment and
- causes the employee to know or suspect (or give reasonable ground to know or suspect) that another person is engaged in money laundering and
- the disclosure is made to a constable, customs officer or the nominated MLRO
It is also important to note that when a proposed act or transaction is a suspected money laundering offence, anyone knowing or suspecting money laundering who is then involved in the act or transaction is guilty of the same offence, unless they have made a Section 337 Disclosure and appropriate consent has been given.
A Section 337 money laundering disclosure is strictly confidential. There must be no disclosure or other indication to the person suspected of money laundering. Section 342 of the Proceeds of Crime Act states that a person may be guilty of this offence if they:
- make a disclosure likely to prejudice the investigation
- falsify, conceal, destroy or dispose of documents relevant to the investigation
Failure to comply with these requirements could amount to the criminal offence of Prejudicing an Investigation.
General procedures
Cash payments
We will not accept cash payments that exceed £1,000. Cash is defined as notes, coins or any currency.
Identification of new clients
It is important to 'know your customer'. Employees should be wary of situations where funds flow through the Council from sources they are not familiar with. Where we are forming a new business relationship and, or considering a significant one-off transaction with a new client, we should obtain evidence of the identity of the prospective client before proceeding.
It is good practice to have either:
- one government document that verifies the name, address and date of birth or
- a government document that verifies their full name and another supporting document which verifies name and either their date of birth or address
Where it is not possible to obtain such documents, it is necessary to consider the risks associated with the client and seek advice from the MLRO or deputy MLRO.
Possible signs of money laundering
The following signs may be possible indicators of money laundering taking place and employees should be vigilant:
- concerns about honesty, integrity or location of the client
- secretive behaviour for example refusal to provide information
- attempted payment of a substantial sum of cash
- transactions which appear uneconomic, inefficient or irrational
- illogical third party transactions – unnecessary routing of funds from third parties
- illogical involvement of an unconnected third party
- funds received from an unexpected source
- instructions for payment to an unexpected source
- significant overpayments (and subsequent request for refund)
- refunds following reversal or cancellation of an earlier transaction
- no obvious legitimate source of funds
- unusual request for client account details
- poor business records or internal controls
Staff training and awareness
Staff can undertake a general fraud awareness e-learning course. This includes money laundering. Some areas of our activities may be more vulnerable to attempts to launder money. The counter fraud team will assess the risks and provide enhanced awareness training where applicable.
Further information
Further information can be obtained from the MLRO and the following sources: