Money Laundering and the Proceeds of Crime
High Value Dealers
The Regulations place new onerous registration and procedural requirements on businesses that deal in goods and accept large cash payments. Customs and Excise has been given the responsibility for controlling High Value Dealers (HVDs), with the Regulations coming into force on 1 April 2004.
Am I affected?
A business (including dealing as an auctioneer) is defined as a HVD where it deals in goods and whenever a transaction involves accepting a total cash payment of 15,000 Euros (around £10,000) or more. Such transactions are known as High Value Payments (HVPs).
Businesses that only occasionally accept such transactions are included. Businesses that do not accept large amounts of cash or deal in services are not affected.
How will my business be affected?
If your business does deal in goods and does accept large cash payments then you will be required to:
- register with Customs and Excise and pay an annual registration fee
- implement policies and procedures to protect yourself from being used by money launderers
If you don't know whether you will sell goods for this amount and do not register, you will be obliged to refuse any qualifying transaction or insist upon payment by another means. Alternatively, you may delay a qualifying transaction and register with Customs and Excise.
The importance of the new regime
The law imposes very severe penalties on anyone involved in money laundering. The Regulations require HVDs to adopt anti-money laundering procedures to protect themselves against abuse by money launderers and the risk of prosecution. As we have mentioned previously, cash based businesses are particularly attractive to money launderers.
The registration process
Customs and Excise form MLR100 must be completed. Customs will then send a certificate showing an MLR number within 45 days. Every legal entity through which a HVD is run must be registered. An annual fee of £60 is payable for each HVD trading premises that is required to be registered.
If you fail to register you could be liable to a civil penalty if you carry out a HVD transaction.
What anti-money laundering policies and procedures are required?
These can be summarised into the acronym CATCH:
Confirm the identity of your customers
HVDs must establish the identity of any customer whenever a transaction involves accepting a total cash payment of €15,000 (around £10,000) or more. Establishing identity requires you to be satisfied that your customer is who they claim to be by obtaining evidence of their name and address.
Appoint a Money Laundering Reporting Officer (MLRO)
This is a very important role within the business and should be performed by a suitably senior person. The main roles of the MLRO should be to:
- establish the necessary procedures to implement the requirements of the Regulations
- receive and review reports of possible money laundering from others involved in the business
- decide whether to report to NCIS
Train your staff
All managers and anyone involved in your business who deals with customers must be trained to be aware of:
- the law regarding money laundering offences
- your business's policies and procedures relating to the prevention of money laundering
- identification and know your customer procedures
- recognition and handling of transactions which may be related to money laundering
- internal reporting
- record keeping
- Staff should be trained regularly and training should be repeated very two years.
Control your business by having anti-money laundering systems in place
You must put in place clear written policies and procedures relating to the prevention of money laundering and make employees aware of them. You must ensure that any suspicious activity or transactions are properly identified and reported.
Hold all records for at least five years
Only records relating to HVPs need to be kept but there are several different types of record.
- Customer ID . Legible copies of the forms of identification presented should be retained. Customer ID records should be kept for at least five years from the date that the relationship with the customer finishes.
- Business records . Records of HVPs must be kept and should include the name and address of the customer. The transaction details should also be kept but in many cases where invoices are retained, a cross-reference to this will be sufficient.
These records should be kept for five years. Records of reports and other correspondence with NCIS should also be retained for at least five years.
Failure to comply
Businesses may be liable to a civil penalty of up to £5,000 for failing to comply with a registration requirement. Failing to comply with responsibilities under the Regulations could lead to either prosecution or a civil penalty.
