The integrity of the legal and financial services marketplace depends heavily on the perception that they function within a framework of high legal, professional and ethical standards. Law firms and insurers build their businesses around their reputation for integrity.
Law firms handle large sums of money and make attractive targets to criminals wishing to sanitise their criminal proceeds. There is evidence that the legal sector has particular vulnerabilities that criminals seek to exploit in order to launder money. There is no single default sign that money laundering is taking place, but the Financial Action Task Force has identified the key ways that criminals launder money through law firms as: misuse of the client account; property purchases; creation and management of companies and trusts; managing client affairs and making introductions; litigation. ‘Knowing your customer’ and conducting appropriate customer due diligence is set to become increasingly business critical for law firms.
Insurers too must adopt a risk based approach to their obligations and implement risk management according to the range of products on offer and the profile of the customer. The 4MLD expands on definitions of Beneficial Owners [BO] and Politically Exposed Persons [PEP]. In previous definitions of a BO, 25% plus one share was sufficient to prove ownership or control – this threshold is now seen as merely an indication and must be considered among other factors. Prior to 4MLD, enhanced customer due diligence was only required with foreign PEPs but this will extend to domestic PEPs, their close associates and family members. With the FATF increasing its scrutiny of the systems and controls law firms and financial institutions have in place to ensure compliance with 4MLD; the quality and consistency of customer due diligence to verify identity of clients, source of funds, beneficial owners and the nature of business transactions will be paramount.
Anti-money laundering tools do not have to be expensive or complex to use and integrate into business processes. CRIF’s premium identity verification service will provide users with far more than confirmation of identity. It builds a profile and framework surrounding the subject in question including an anti-money laundering check, credit bureau profiles, previous linked addresses and identities, together with previous personal lines claims history, incorporating behaviours and historic insurer relationships. This wealth of information is invaluable when conducting customer due diligence and risk assessment of individual transactions and can assist in the identification of organised fraud rings which can be linked to money laundering and serious and organised crime. From an operational perspective, the service is web accessible and simple to integrate into back office legacy systems and software house platforms. Swift and simple to use it requires no user training, and can be easily incorporated into business processes and workflow.
Changes to the identity verification landscape can be anticipated as organisations prepare for the implementation of 4MLD. There are those organisations who, to date, have seen ID verification as a tactical, box-ticking exercise, opting for the sub-standard, under-sold services available. This, in turn, means they potentially increase the risk of their businesses being exploited by criminals seeking to disguise the origins of their proceeds of crime, and going forward could face the possibility of sanctions and minimum penalties if they are found to have breached any of the key 4MLD provisions. The associated impact on their reputation and future revenues could be significant. For further information on CRIF’s premium identity verification service, please visit the ID verification section
FAQs on Anti-Money Laundering
Look at the most commonly asked questions in relation to Anti-Money Laundering to understand why and how you can strengthen your compliance processes.
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