Whether you are just starting out or running a successful business already, you have probably heard of anti-money laundering regulations. It is important to get familiar with the anti-money laundering rules. Therefore, understanding how they can affect your business is even more important.
Even if it’s unintentional, failure to comply with these rules can come with severe penalties. Should something go wrong, the business owner is held responsible.
Don’t be ignorant to anti-money laundering legislation. Find out what businesses need to register with HMRC and how to protect your business from this crime. Learn what is considered money laundering. How anti-money regulations can affect your business and how to deal with it.
What is money laundering?
First things first, you need to understand what is considered money laundering. It will prepare you and help you stay alert should there be any suspicious activities in your company.
Essentially, money laundering is the illegal process of making large amounts of money and concealing the source and destination of that money.
Transactions are made to look legitimate by transferring and altering illegally acquired money into the company’s financial system. In other cases, money laundering means using money, funds or goods to purchase other goods or services.
But money laundering doesn’t involve illegally obtained money only from theft and drug trafficking. It also refers to corruption, tax evasion, bribery and fraud.
Types of businesses that need to register with HM Revenue & Customs
Whether you are a small firm or a large one, The Money Laundering Regulations (MLR) pose a challenge to all. Some businesses should implement anti-money laundering procedures and are subject to MLR. This means a supervisory authority will monitor them.
Businesses that operate in the financial sector usually have to register with HMRC for anti-money laundering and comply with the regulations.
Here is the list of the main types of businesses that have strict responsibilities:
- Financial sector businesses
- Estate agents
- Registered auditors
- Accountants
- Tax Advisors
- High-value dealers – this refers to companies making £10k plus transactions
- Solicitors and notaries
- Trust or company service providers
- Bill payment service providers
- Art market participants
If your business carries out any activities related to these types of organisations, you need to register with HMRC. Therefore, failure to trade while not registered is a criminal offence. This may result in a penalty or prosecution.
Registering premises
Once you set up and register for money laundering supervision, you must tell HMRC about your premises. As a result, premises to register and for which you will have to pay can include any of the following:
- offices;
- shops and auction houses;
- call centres;
- cruise ships (in UK territorial waters);
- home address or contact address (if you do not have a business address); and
- virtual offices and agent premises.
Premises you do not need to register
In some cases, you do not need to register your premises. This goes for premises that are outside the UK or for premises whose purpose is solely for:
- storing your business records;
- training employees; and
- generally managing your employees.
Accordingly, if transactions occur in those premises, including even completing paperwork, it’s best to register those premises.
Compliance with anti-money laundering (AML) regulations
If you are a business that has to comply with anti-money laundering regulations, the first step in preventing money laundering crimes is having an anti-money laundering policy. Having this policy in place will help all staff understand the obligations placed upon the company. At K&K Legal Consulting we have drafted a robust due diligence & anti-money laundering policy which you can download from our website here.
What must a company do to comply with the regulations? To this end the list is long, but here are some of the main responsibilities:
- carry out checks on their customers’ identities (customer due diligence);
- identify the risk of money laundering posed by a customer;
- monitor and analyse transactions;
- carry out risk assessments on customers to identify money laundering activities; and
- report suspicious activity to the Serious Organised Crime Agency (SOCA).
Carrying out a risk assessment should be the first step in protecting your business from money launderers. Activities that you will want to look into include:
- Rise in cash transactions;
- High employee turnover;
- Working with valuable goods;
- Direct transfers to your bank; and
- Inaccurate or poor record-keeping by your staff.
Consequently, the moment you suspect any strange activity, you need to address it as soon as possible.
Final thoughts
If you are unsure whether or not you will need a policy on anti-money laundering. Or if you have any other anti-money laundering related questions, don’t hesitate to contact us. At K&K Legal Consulting, we help businesses of all types and sizes to comply with anti-money laundering regulations.