RapidAML Team
2024-06-18
‘Relevant Persons’ in the UK, as defined under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations, 2017 (MLR, 2017), need to follow Anti-Money Laundering (AML), Countering the Financing of Terrorism (CFT), and Countering Proliferation Financing (CPF) compliance requirements as mandated under the MLR, 2017. To simplify the AML/CFT/CPF compliance journey for Relevant Persons, RapidAML, AML software for UK, automates many components of the compliance obligations. Optimised to keep up with the evolving AML/CFT/CPF regulations, RapidAML provides a future-proof compliance strategy for the Relevant Persons.
This blog aims to discuss who the ‘Relevant Persons’ are, the AML/CFT/CPF regulatory regime applicable to them, and how RapidAML can ease their AML/CFT/CPF compliance journey through automation and provide future-proof solutions.
MLR, 2017, defines ‘Relevant Persons’ for the purpose of AML/CFT/CPF compliance. These are businesses and entities that need to comply with AML/CFT/CPF compliance requirements under MLR, 2017, and other allied laws. The list of ‘Relevant Person’ under MLR, 2017, includes the following businesses and entities:
The key laws and regulations under the UK’s AML/CFT/CPF regulatory regime applicable to the Relevant Persons are the following:
• Financial Conduct Authority (FCA): It is the supervisory authority for financial sector entities.
• Commissioners for His Majesty’s Revenue and Customs: It is the supervisory authority for high-value dealers, art market dealers, and entities such as money service businesses, trust or company service providers, accountants, etc., not supervised by any other supervisory authorities.
• 22 Professional Body Supervisors: They are the supervisory authorities for the accountancy and the legal sector.
• Gambling Commission: It is the supervisory authority for gambling businesses such as casinos.
• Financial Intelligence Unit of the UK housed within the National Crime Agency (NCA): It receives and investigates suspicious activities and transactions related to ML, TF, or PF.
After discussing the AML/CFT/CPF regulatory regime applicable to Relevant Persons in the UK, the blog now outlines the AML/CFT/CPF compliance requirements that Relevant Persons must follow, along with the AML software solutions that help automate, simplify, and future-proof their AML/CFT/CPF compliance journey.
Simplifying and Future-Proofing AML/CFT/CPF Compliance Through AML Software
| AML/CFT/CPF Compliance Requirements | Automation and Future-Proofing Through AML Software |
| AML/CFT/CPF Registration of Relevant Person and Their BOOM | ·      Pre-filling and auto-filling the required information
·      Document and data management ·      Keeping up with evolving regulatory requirements through automatic software updates |
| Business-Wide Risk Assessment (BWRA)
 |
·      Customised risk assessment parameters
·      Integration with internal systems and external database ·      Record-keeping of past BWRAs ·      Advanced algorithms and machine learning to deal with evolving ML, TF, and PF threats |
| AML/CFT/CPF Policy, Controls, and Procedures | ·      Automated policy version tracking and management
·      Easy navigation ·      Informed decision making ·      Changes with the evolving needs of the Relevant Person |
| Customer Due Diligence | ·      Digital customer identification and document collection
·      Timely review and tracking of the validity of customer’s documents ·      Inbuilt customer risk assessment ·      Systematic escalation of high-risk customers for EDD ·      Integration between BWRA and Customer Risk Assessment ·      Customer lifecycle management ·      Ongoing monitoring of customer relations |
| Employee Screening | ·      Automated background checks
·      Ongoing employee monitoring ·      Centralised and secure record-keeping ·      Real-time monitoring |
| Transaction Monitoring | ·      Real-time transaction monitoring
·      Flagging of unusual transactions ·      Integration of CDD with transaction monitoring ·      Incorporating machine learning and advanced algorithms to refine ML, TF, and PF detection |
| Sanctions Screening | ·      Real-time screening
·      Fuzzy matching techniques ·      Continual improvement in sanctions screening reports over time and adjusting to evolving sanctions regime |
| Ongoing Monitoring of Business Relationships with the Customer | ·      Case Management module for tracking compliance tasks and exceptions
·      Analysis of historical transactions ·      Ongoing risk profiling and dynamic risk scoring ·      Integrating internal and external sources to collate customer profiles |
| Record-Keeping of Specified Documents under MLR, 2017, for Five (5) Years | ·      Electronic document collection and secure storage
·      Automated retention period management ·      Seamless integration with CDD and transaction monitoring processes ·      Cloud-based storage and data security |
| Suspicious Activity Report | ·      Automatic detection of ML, TF, or PF risks
·      Auto-filled or pre-filled SAR creation and submission ·      Assistance with SAR Glossary Code Selection ·      DAML request generation and tracking its status ·      Audit trails for every SAR and DAML request for later review ·      Real-time monitoring to detect suspicious transactions |
| Staff Awareness and Training | ·      Customising training content
·      Keeping track of the roles and responsibilities of employees ·      Reminders for refresher training ·      Assessment of staff training ·      Incorporate machine learning to analyse employee performance to optimise the training process |
| Independent Audit | ·      Using data analysis
·      Generate ready-made reports ·      Keep audit trails ·      Track and monitor the corrective actions ·      Keep a ready record of past AML/CFT/CPF audits ·      Continuous monitoring of AML/CFT/CPF compliance effort |
| Data Protection obligations under MLR, 2017, and Data Protection Act, 2018 | ·      Encrypting and securely storing customer data
·      Working in alignment with the Data Protection Act, 2018, and other data protection requirements ·      Gate-keeping information ·      Automated data retention ·      Incorporating cutting-edge technologies ·      Automated handling of Data Subject Access Requests |
Under the MLR, 2017, Relevant Persons need to register themselves with the supervisory authority that regulates them for the purpose of AML/CFT/CPF compliance. Certain Relevant Persons also need to register their Beneficial Owners, Officers and Managers (BOOM)
AML Software automates and simplifies the registration process through:
Future-Proofing Benefit: As regulations evolve, AML software can adapt to new requirements through automatic software updates, alerting the Relevant person of changes in registration timelines or obligations, reducing the risk of penalties for non-compliance.
Mandated under the MLR, 2017, BWRA WRA is an essential process that helps Relevant Persons identify, assess, and manage the risks of ML, TF, or PF that may impact their business operations. BWRA enables the Relevant Person to put in place appropriate measures to manage and reduce the identified risks. Under MLR, 2017, BWRA needs to be kept up to date and in writing.
AML Software automates and simplifies the BWRA process through:
Future-Proofing Benefit: AML software is regularly updated to reflect the evolving ML, TF, and PF typologies. Integrated with advanced algorithms and machine learning, AML software continually learns and develops risk assessment mechanisms to increase the accuracy of assessing ML, TF, or PF risks. Based on the results of the BWRA, the AML software can also assist with measures that the Relevant Persons can take to manage and reduce identified risks.
Under MLR, 2017, a Relevant Person needs to establish and maintain AML/CFT/CPF policies, controls and procedures to mitigate and manage ML, TF, and PF risks. The AML/CFT/CPF policy, controls, and procedures need to be recorded along with any changes made to them over time and the steps taken to communicate these within the Relevant Person’s business. Such Policies are appliable to all subsidiaries, undertakings or branches or the Relevant Person located outside the UK as well,
As provided in the MLR, 2017, AML/CFT/CPF policy, procedures, and controls include:
AML Software automates and simplifies the AML/CFT/CPF policy, controls, and procedures through:
Future-proofing benefit: As business operations of the Relevant Person grows or expands into new geographies, the AML software ensures that internal AML/CFT/CPF policies, controls, and procedures change accordingly.
As per the MLR, 2017, CDD needs to be conducted by the Relevant Persons in the following situations:
The CDD process involves the following steps:
AML Software automates and simplifies the CDD process through:
Future proof benefit: AML software enables ongoing monitoring of customer relationships, ensuring dynamic risk scoring of the customer.
MLR, 2017, mandates that the Relevant Person screens its employees before and during appointments. AML Software automates and simplifies the employee screening process through:
Future proof benefit: Real-time monitoring of employee data to reflect any changes as well as alert the Relevant Person on the detection of any potential red flags indicating ML, TF, or PF risks.
MLR, 2017, mandates the identification and scrutiny of the following types of transactions:
AML Software automates and simplifies the transaction monitoring process through:
Future proof benefit: By incorporating machine learning and advanced algorithms, AML software continually refines its ML, TF, and PF detection mechanisms. This helps in future-proofing the system by improving its accuracy in identifying suspicious transactions, reducing false positives, and adapting to emerging ML, TF, and PF trends.
Relevant Persons need to conduct sanctions screening on their customers. Customers need to be screened against the following sanctions lists:
AML Software automates and simplifies the sanctions process through:
Future-proofing benefit: By leveraging technologies such as artificial intelligence and machine learning, AML software improves its sanctions screening reports over time and adjusts to evolving sanctions regimes.
MLR, 2017, obligates Relevant Persons to monitor the business relationship with their customer on an ongoing basis. Ongoing monitoring includes transactions monitoring to ensure that transactions are consistent with known customer profile, updating records of customer identification and verification whenever there is a change in the status of the customer, etc.
AML Software automates and simplifies the ongoing monitoring process through:
Future-proof benefit: AML software integrates internal sources and external data sources such as government databases, sanctions lists, and credit agencies to collate customer profile. This continuous data enrichment allows for real-time updates on any changes in a customer’s status.
Under MLR, 2017, a Relevant Person is required to keep the following records as part of their AML/CFT/CPF compliance:
These documents are required to be kept for a period of 5 years.
AML Software automates and simplifies the record-keeping process through:
Future-proof benefit: As businesses grow, AML software can easily scale to accommodate larger volumes of documents with solutions such as cloud-based storage and data security.
Relevant Persons need to report suspicious activity indicating ML, TF, or PF under the Proceeds of Crimes Act, 2002, and the Terrorism Act, 2000. SARs are submitted to the UK Financial Intelligence Unit through the SAR Portal. Since there may be different kinds of suspicions that prompt the filing of an SAR, each suspicion category has its own Glossary Code. The Relevant Person needs to select the Glossary Code applicable to it.
The SAR Portal can also be used to request Defence Against Money Laundering (DAML) from the National Crime Agency. DAML is requested when the Relevant Person suspects that the property they are dealing with is criminal in nature and, therefore, is at risk of committing the offence of ML under the Proceeds of Crimes Act, 2002. By obtaining the DAML, the Relevant Person does not commit any offence since they have received consent from the National Crime Agency.
AML Software automates and simplifies the SAR process through:
Future-proof benefit: AML software conducts real-time monitoring to detect suspicious transactions based on a dynamic list of red flags that evolve with the changing typologies of ML, TF, or PF.
Under MLR, 2017, Relevant Persons are obligated to train their employees and agents regarding AML/CFT/CPF laws and regulations and the detection of ML, TF, or PF risks.
AML Software automates and simplifies the staff training process through:
Future-proof benefit: AML software can incorporate machine learning to analyse employee performance to optimise the training process.
Relevant Persons are required to maintain an independent audit function under the MLR, 2017. The independent audit must:
AML Software automates and simplifies the independent auditing process by:
Future-proof benefit: AML software provides continuous monitoring of AML/CFT/CPF compliance efforts in real-time. It identifies discrepancies or failures and sends alerts to the AML/CFT/CPF compliance team, ensuring that issues are addressed promptly.
• Data Protection
Under the MLR, 2017, Relevant Persons are obligated to ensure the security of data collected from the customers throughout the AML/CFT/CPF compliance process. Such data can only be processed for the purpose of detection of ML, TF, or PF. The Relevant Person also needs to adhere to the Data Protection Act, 2018. Data Protection Act, 2018, allows individuals to request Data Subject Access Request for information on individual’s personal data that the entity is processing. However, the Relevant Person need not share this information if to do so would constitute tipping off or prejudice the prevention and detection of ML, TF, or PF.
AML Software helps protect data by:
Future-proof benefit: AML software incorporates cutting-edge technologies such as AI-based threat detection to data security and blockchain-based data integrity to ensure that customer data remains tamper-proof and can be securely audited, providing an additional layer of trust and security.
Conclusion
AML software plays an integral role in helping Relevant Persons in the UK meet their AML/CFT/CPF compliance obligations. By automating complex processes such as CDD, transaction monitoring, risk assessments, and record-keeping, RapidAML ensures efficiency and cost-savings. Further, it future-proofs the AML/CFP/CPF compliance efforts through features such as machine learning, continuous upgradation to keep up with dynamic regulations, real-time monitoring, advanced algorithms, etc.
Dipali is an Associate member of ICSI and has a Bachelor’s in Commerce and a General Law degree.
She currently assists clients by advising and helping them navigate the legal and regulatory challenges of Anti-Money Laundering Law. She also helps companies develop, implement, and maintain effective AML/CFT and sanctions programs.
She knows Anti-money laundering rules and regulations prevailing in GCC countries and specializes in Enterprise-wide risk assessment, Customer Due-diligence, and Risk assessment.
