The Importance of Anti-Money Laundering Schemes

If you run a business within the financial sector in the UK, you will likely need to register with an anti-money laundering scheme. There are additional rules for business sectors such as financial and credit, independent legal professionals, accountants, and more to register with an anti-money laundering supervisory authority.

To understand the importance of anti-money laundering schemes, you must understand the reason behind them and their impact on UK businesses.

What is Money Laundering?

Money laundering, according to the Cambridge Dictionary, is “the crime of moving money that has been obtained illegally through banks and other businesses to make it seem as if the money has been obtained legally.”

What Is the Impact of Money Laundering?

Money laundering threatens “the UK’s national security, national prosperity and international reputation” (National Crime Agency, 2021).

Committing the crime of money laundering can have huge, negative impacts on your business, the economy, and society. It is estimated that 5% of annual global GDP (gross domestic product) is attributed to money laundering. This encourages fraud, corporate embezzling, drug crimes, and loss of morals/ethics for businesses as it shows that successful money laundering can “pay off”.

Money laundering has local and global economic implications due to false demand created by inflated “dirty cash,” lack of regulations in developing countries impacted by “modern money laundering”, and local effects on “taxation and small-business competition” (Curran, 2020).

What Is Anti-Money Laundering?

Anti-money laundering (AML) refers to the local and global policies, laws, and regulations to deter and prevent money laundering.

What Is an AML Scheme?

There are certain kinds of business sectors in which it is a requirement to register with a supervisory authority to follow AML regulations. You may need to register directly with HMRC if your business does not fall under one of the existing sector supervisory authorities.

Why Are AML Schemes Important?

In summary, AML schemes are important for:

·      Protecting the UK’s national security and prosperity, and international reputation,

·      Protecting your business from illegitimate or fraudulent business dealings,

·      Maintaining your business’ reputation and credibility,

·      Investing in customer relationships and loyalty.

AML schemes help to create societies and economies where crime is less prevalent and is not “rewarded” with profit such as in cases of money laundering. Registering with an AML scheme and following AML guidelines and requirements raises the credibility and legal compliance of your business, protects your business and your clients, and helps to maintain the UK’s security and prosperity.

Rules relating to AML can protect your business’ integrity and finances from clients with illegal business dealing or business malpractices by implementing a “Customer Due Diligence” policy. By the UK Government’s standards, “customer due diligence means taking steps to identify your customers and checking they are who they say they are” (GOV.UK, 2017).

Solicitors involved in transactions pertaining to property are at particular risk of dealing with illegitimate sources and fraudulent activity. In many cases, legitimacy reports go hand-in-hand with AML regulations and compliance by reducing the uncertainty in identifying the legitimacy of parties involved in business transactions. Recently, HM Land Registry officially launched the “Digital Identity Standard” which aims to protect conveyancers from fraudulent activity.

To find out more about how we can assist with your due diligence requirements when it comes to AML contact your local Index office. Details of which can be found here - https://indexpi.co.uk/where-we-are.html

References

·      Anti-money laundering registration. (2014, 4 December). GOV.UK. https://www.gov.uk/anti-money-laundering-registration

·      Cambridge Dictionary. (2021, 17 March). MONEY LAUNDERING | Meaning in the Cambridge Dictionary. https://dictionary.cambridge.org/dictionary/english/money-laundering

·      Curran, J. L. O. (2020, 27 July). How Money Laundering Works. HowStuffWorks. https://money.howstuffworks.com/money-laundering.htm#pt5

·      GOV.UK. (2017, 26 June). Your responsibilities under money laundering supervision. https://www.gov.uk/guidance/money-laundering-regulations-your-responsibilities

·      National Crime Agency. (2021, 10 March). Money laundering and illicit finance. https://www.nationalcrimeagency.gov.uk/what-we-do/crime-threats/money-laundering-and-illicit-finance

·      Who needs to register for money laundering supervision? (2020, 21 May). GOV.UK. https://www.gov.uk/guidance/money-laundering-regulations-who-needs-to-register