United Kingdom – Know Your Customer (KYC) Rules

 

 

The United Kingdom (UK) plays a leading role in European and world finance and remains attractive to money launderers because of the size, sophistication, and reputation of its financial markets. Although narcotics are still a major source of illegal proceeds for money laundering, the proceeds of other offenses, such as financial fraud and the smuggling of people and goods, have become increasingly important.

The past few years have seen an increase in the movement of cash via the non-bank financial system, as banks and mainstream financial institutions have tightened their controls and increased their vigilance. The use of bureau de change, cash smugglers (into and out of the UK), and traditional gatekeepers (including solicitors and accountants) to move and launder criminal proceeds has been increasing. Also on the rise are credit/debit card fraud, use of the internet for fraud, and the purchase of high-value assets to disguise illegally obtained money.

KNOW-YOUR-CUSTOMER (KYC) RULES:

 

Enhanced due diligence procedures for PEPs:

See: What is the UK definition of a PEP?

PEP is an abbreviation for Politically Exposed Person, a term that describes a person who has been entrusted with a prominent public function, or an individual who is closely related to such a person. The terms PEP, Politically Exposed Person and Senior Foreign Political Figure are often used interchangeably

The UK definition of a PEP, can be found in the Money Laundering Regulations 2007.

    • Foreign PEP: YES
    • Domestic PEP: NO

UK – KYC covered entities

The following is a list of Know Your Customer entities covered by UK Law:

    • Banks
    • Credit unions
    • Building societies
    • emoney issuers
    • Credit institutions
    • Insurance companies
    • Securities and investment service providers and firms
    • Independent legal professionals
    • Auditors
    • Accountants
    • Tax advisors
    • Insolvency practitioners
    • Estate agents
    • Casinos
    • High value goods dealers
    • Trust or company service providers

UK – Suspicious Transaction Reporting (STR) Requirements:

Number of STRs received and time frame: 240,582 (October 1, 2009 – September 30, 2010)

The following is a list of STR covered entities covered by UK Law:

    • Banks
    • Credit unions
    • Building societies
    • emoney issuers
    • Credit institutions
    • Insurance companies
    • Securities and investment service providers and firms
    • Independent legal professionals
    • Auditors
    • Accountants
    • Tax advisors
    • Insolvency practitioners
    • Estate agents
    • Casinos
    • High value goods dealers
    • Trust or company service providers

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

 

Prosecutions: 2,439 in 2009 (Latest figures)
Convictions: 1,411 in 2009 (Latest figures)

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

The United Kingdom has a comprehensive range of anti-money laundering/countering the financing of terrorism (AML/CFT) laws. It is an active participant in multilateral efforts to meet AML/CFT threats.

The UK engages in efforts to freeze the assets of persons who commit terrorist acts, and its legislative framework relies on ―reasonable belief‖ rather than ―reasonable suspicion‖ as the burden of proof for freezing assets.

The UK continuously reviews and assesses the effectiveness and proportionality of its AML/CFT regime – including through the approval of updated and more accessible industry guidance. In order to improve the regime further, and based on the responses in a recent industry consultation, the UK plans to announce proposals to improve guidance and will publish these towards the end of the year.

The Financial Services Authority, which supervises firms for compliance with their legal and regulatory obligations, including those related to politically exposed persons (PEPs), will be merged with the Bank of England at the end of 2012. Also, the Serious Organized Crime Agency, which includes the UK financial intelligence unit, will transition to the National Crime Agency by 2013. It is important that these changes not impede the UK‘s AML/CFT efforts.