Money Laundering Regulations 2017 Change: an Independent Audit and staff screening
- AuthorSarah Canning
Are you compliant?
For the first time, estate agents as a regulated business have to consider establishing an independent audit function to ensure that their compliance is adequate and effective.
So, does this apply to you?
Regulation 21 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR) states that:-
“Where appropriate with regard to the size and nature of its business, a relevant person must –
Establish an independent audit function with the responsibility –
- To examine and evaluate the adequacy and effectiveness of the policies, controls and procedures adopted by the relevant person to comply with the requirements of these Regulations;
- To make recommendations in relation to those policies, controls and procedures; and
- To monitor the relevant person’s compliance with those recommendations.”
The relevant person refers to the estate agency itself and more specifically the decision and assessment must be taken by an individual appointed by the Board to be responsible for the compliance with the MLR. Traditionally, the individual has been known as the Money Laundering Reporting Officer (MLRO) and we have therefore retained that terminology for the purposes of this update.
A risk based approach
With the move now to requiring a risk based approach to assessing a business, whether or not an independent audit is required will depend upon the MLRO’s assessment of the business and interpretation of its size and nature.
A risk based approach balances the costs to your business and customers with a realistic assessment of the risk of the business being exploited for the purposes of money laundering a terrorist financing. Estate Agents have been at the front of queue in terms of property purchases by criminals seeking to launder funds. The risk therefore is well established and widely recognised.
Who is your MLRO? Should they act as your ‘Compliance Officer’?
Having in place controls to address the risk will differ between a business with a number of different branches and managers to a sole practitioner who deals directly with the customer. Location, type of client and typical method of financing a transaction could all add to the risk assessment.
Based upon the assessment, the relevant person will determine and demonstrate in writing whether or not an independent person separate from the MLRO should act as a “Compliance Officer” and whether it is feasible to have an appointment independent of the MLRO internally to cover the task or external support is required to secure independence.
Further, the MLRO must now carry out screening of “relevant employees” that are engaged by the agency both before their appointment and during the course of their employment. Do you have processes in place to demonstrate this and have your policies been updated to include this requirement?
The time to comply is now!
If you have no yet complied with the MLR, now is the time to bring your processes up to date before the Regulators begin their enquiries as to how you are managing your compliance and how you risk assess your business.
For further information regarding Money Laundering Regulations compliance, please contact Sarah Canning on (01604) 828282 or email firstname.lastname@example.org