Financial Crime Compliance
Financial Crime Compliance UK
Our team of analysts and associates provide clients with counter-terror financing screening, crypto due diligence, beneficial ownership analysis, PEP and Sanctions checks and anti-corruption investigations for clients. Whether your organisation is looking to invest in crypto currency, operate in high risk jurisdictions, reviewing UBO structures or looking to improve your sanctions position, contact TenIntelligence for further assistance.
Good financial crime compliance and anti-money laundering directives all require organisations to introduce a risk-based approach to customer and enhanced due diligence.
Counter Terror Financing
When assessing the risks of money laundering and terrorist financing, organisations should check whether any high-risk factors apply.
When dealing with individuals or companies established in high-risk jurisdictions, or are exposed to other cases of high risk, we help organisations identify the areas of risk and apply enhanced due diligence measures to manage and mitigate those risks appropriately.
Specifically, we help identify:
- whether any business relationships are conducted in unusual circumstances
- customers that operate in geographical areas of higher risk, including areas of non AML/CTF legislation, significant levels of corruption, countries subject to UN sanctions and/or countries harbouring designated terrorist organisations
- whether any individuals are using personal asset-holding vehicles
- customers who only have nominee shareholders or shares
- if any customers are cash-intensive
- ownership structures of customers who appear unusual or excessively complex given the nature of their business
- whether any business relationships are based on anonymity
- if your organisation has received funds from unknown parties
Corruption takes many forms, including bribery, kickbacks, illegal gratuities, economic extortion and collusion. It is an illegal practice and places law-abiding companies at a competitive disadvantage. Anti-corruption investigations, audits and awareness will identify such practices and improve your organisation’s culture.
Legislation issued in the UK Bribery Act 2010 and the US Foreign Corrupt Practices Act FCPA provide organisations with a clear warning against corrupt business activities.
In particular, the UK Bribery Act 2010 introduced a new “strict liability” offence for corporate entities that fail to prevent bribery by their employees, agents or subsidiaries (both domestic and foreign). The only defence available in the UK is that the corporate entity had in place “adequate procedures” to prevent bribery; anti-corruption investigations, audits and reviews will improve an organisation’s defence. This corporate liability is wide and far-reaching and has grave consequences for corporate entities and their executives, including unlimited fines.
Whilst in the USA, the FCPA requests that companies implement anti-corruption investigations and maintain an effective compliance and ethics program to prevent, detect, remediate and report misconduct, including FCPA violations.
Despite various legislative measures, corruption is still a significant problem for organisations, particularly due to growing financial pressures and opportunities in unregulated markets.
How we can help with anti-corruption investigations:
- Our anti-corruption investigations will examine whether corruption schemes exist within your organisation, procurement functions and supply chains
- We help implement robust anti-bribery and corruption provisions and policies, as well as guiding you through any subsequent investigations
- Review existing contractual terms with employees, agents and other parties in supply chains to ensure compliance
- Provide Enhanced Due Diligence and ongoing monitoring into an organisations’ supply chain and third parties
- Conduct internal investigations and gather the evidence required for private prosecution or disciplinary procedures
- Implement an effective FCPA compliance programme tailed to your organisation to help prevent, detect and report corruption
Ultimate Beneficial Owners & Politically Exposed Persons
Ultimate Beneficial Owners (UBOs)
The need for accurate, audited and up-to-date information on beneficial owners is a powerful tool in deterring financial crime activity, and to help identify those who might hide their identity behind corporate structures.
A beneficial owner means any natural person or persons, who ultimately owns or controls the customer. Most Anti-Money Laundering directives state that a shareholding of 25% or more, whether it be a natural person or corporate entity, shall be an indication of direct ownership. Depending on an organisation’s risk-based approach, a lower percentage can be set depending on their criteria.
In exceptional cases, organisations having exhausted all other means of identification and provided there are no grounds for suspicion, may consider the senior managing officials to be the beneficial owners.
How we can help:
As part of the risk-based approach, we help organisations reduce the likelihood of financial crime, assisting with customer and enhanced due diligence;
- identify the customer and verify the customer’s identity on the basis of documents, data or information obtained from a reliable and independent source
- take reasonable measures to verify the beneficial owner’s identity
- take reasonable measures to understand the ownership and control structure of the customer
- verify the control structure and ultimate beneficial owner
- conduct ongoing monitoring of the business relationship including scrutiny of transactions undertaken throughout the course of that relationship to ensure compliance
- verify that any person purporting to act on behalf of the customer is authorised and identify and verify the identity of that person
Politically Exposed Persons (PEPs)
With respect to transactions or business relationships with Politically Exposed Persons, organisations must implement appropriate risk-based procedures, to determine whether the customer or the beneficial owner of the customer, is a Politically Exposed Person (PEP). Approval from senior management to establish or continue business relationships with PEPs is required.
We help organisations satisfy PEP compliance on their behalf, by:
- checking and verifying sanction lists and registers to identify PEPs, close associates and subjects of interest
- establishing the source of wealth or funds that are involved in business relationships or transactions with PEPs
- conducting enhanced, ongoing monitoring of business relationships with PEPs
If a PEP is no longer entrusted with a prominent public role, organisations are still obliged, for a period of at least 12 months, to continue enhanced due diligence with respect to the PEP until such a time that the PEP is deemed to pose no further risk.
Note also, that EU Directive measures are of a preventative and not criminal nature and should not be interpreted as categorising a PEP as being involved in criminal activity. Although PEPs are considered a risk due to their public life making them vulnerable to corruption, organisations should not simply refuse a business relationship on the basis that he or she is a PEP, as this is contrary to the ethos of the Directive.
EU Directive measures also apply to family members or persons known to be close associates to the PEP.
Crypto Due Diligence
The biggest risk currently facing investors and crypto currency platforms is the anonymity and ambiguity of customers as well as some of the individuals and developers that are behind the companies offering crypto currency services themselves. Crypto due diligence will enable organisations to mitigate these risks.
Although, Crypto currencies are not currently measured by Financial Action Task Force (“FATF”) as a high risk, they do recognise that compliance processes are required in relation to Initial Coin Offerings (“ICOs”), Virtual Assets (“VA”) and Virtual Asset Service Providers (“VASPs”), in particular with regard to:
- fraud prevention measures, crypto due diligence, suspicious activity and transaction reporting
- supervision or monitoring of VA, ICOs and their VASPs for anti-money laundering and counter finance terrorism purposes
- licensing or registration of VA, ICOs and VASPs
- enforcement and sanction measures for offenders
Customer Due Diligence – a risk based approach
Let’s start with customer due diligence. When dealing with individuals or investors established in high-risk jurisdictions, or are exposed to other cases of high risk, it is imperative that crypto companies identify the areas of risk and apply enhanced due diligence measures to manage and mitigate those risks appropriately. Specifically, to question:
- whether their customers are operating in geographical areas of higher risk, including areas of non AML/CTF legislation, significant levels of corruption, countries subject to UN sanctions and/or countries harbouring designated terrorist organisations
- are ownership structures of larger investors appear unusual or excessively complex given the nature of their business
- whether your organisation has received funds from unknown parties
- what information you collect from your customers? Can you demonstrate sound “KYC – know your customer” compliance? How do you verify the information gathered?
- whether any business relationships are conducted in unusual circumstances
ICOs, are they who they say they are?
Large and small investors will want to know who they are investing their assets with and the assurance that the ICOs are appropriate. Although there is no required template for the ICO organisation to complete, investors can still perform background checks on the management and developers who are behind the ICO platform – ICO due diligence is key to good compliance.
The fundamentals of background checks remain the same regardless of the industry, it is just applied differently. In the ICO example, our team would determine the ICO’s integrity, ability, reputation by performing open source intelligence and background checks on the senior management, board directors, relevant executives and shareholders of the ICO.
We would specifically be looking for adverse information and risk, including undisclosed red flags, conflicting findings, false or exaggerated statements and report these findings to the investor.
Background checks will include but not limited to verifying their qualifications and employment history, analysing their financial status, examining their record as a board director, identify whether there are any litigation, insolvency or court cases filed, as well as digging deeper via archived media and press articles, as well as possible exposure to sanctions lists and politically exposed persons.
Enhanced Due Diligence
If the required, an additional level of enhanced due diligence can be applied by providing investors with an independent analysis and assessment of the appropriateness of directors and developers’ professional background by speaking with former colleagues, clients and senior management that had previously worked with the individual.
All of these crypto due diligence measures, enhanced due diligence, industry insight interviews and regulatory references, allows investors to invest with more assurance, confidence and compliance.
Find out how we can help you
We understand that due diligence, corporate investigations and protection services can be sensitive and complex matters, and we take steps to ensure that all of our clients’ information is kept strictly confidential.
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