Although we remain in lockdown, thieves and fraudsters clearly see the Covid-19 pandemic as a further opportunity to ply their trade. Reports suggest that Covid-19 related fraud is gaining pace.
As long as criminals acquire ill-gotten gains they will have a need to launder their proceeds of crime. All barristers need to maintain their vigilance against anyone seeking to launder criminal funds or channel monies towards terrorist activity.
Despite the current conditions, you must continue to comply with your statutory obligations where your work falls within the scope of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (as amended) (the “Regulations”). Typically, this will be where you are instructed as an independent legal professional when participating in financial or real property transactions or where, as a tax advisor, you are providing tax advice. Where the Regulations apply and where you have not already verified your client’s identity, you must undertake Customer Due Diligence (CDD). To do this successfully you need to:
- Identify your client;
- Verify their identity from reliable and independent documents, data or information; and
- Assess, and where appropriate obtain information on, the purpose and intended nature of the business relationship that you are being asked to enter into.
For most, the practicalities of identifying and verifying a new client are usually undertaken in person, often at the premises of a legal practice or practitioner. However, whilst the need for social distancing remains, that practice is unlikely to be available.
In order to assist you in carrying on accepting instructions, whilst complying with the Regulations, the Legal Sector Affinity Group, publishers of legal-sector wide anti-money laundering guidance, has issued a guidance note to practitioners on how to approach the requirements of identification and verification (ID&V). It helpfully lists a number of suggested alternative methods for carrying out ID&V. They can be used independently or in combination:
- Digital ID&V services that meet the requirements of the Regulations;
2. Gathering and analysing additional data to triangulate the evidence provided by the client, such as geolocation, IP addresses, verifiable phone numbers etc.;
3. Verifying phone numbers, e-mails and/or physical addresses by sending codes to the client’s address to validate access to accounts;
4. Using live and/or recorded digital video (many reliable and free options exist for this) of the customer showing their face and original photo identification documents so that you can compare them to a scanned copy of the same document (e.g. passport or driving license).
As responsibility for compliance with the Regulations remains with you, you should always ensure that you make use of only trustworthy digital processes.
The guidance note suggests that a pre-recorded video (see (4) above) may be sufficient for non-face-to-face identification and verification purposes. Non-face-to-face business relationships, transactions and “situations” are recognised as an example of a potentially higher-risk situation in undertaking CDD. Given the need to be satisfied of liveness, you would be well advised to require more reassurance than that provided by a pre-recorded video alone.
With the requirements of social distancing looking set to remain a part of everyday life for the foreseeable future, non-face-to-face “situations” look set to become the norm for some time to come. You will need to be able to recognise the associated new risks and address them in your procedures, risk assessments and CDD.
Keep a record of the CDD steps taken and the verification provided, so that you can evidence the processes followed, for example, of any video calls that are made.
Where personal information is captured and stored, for example passport details or digital imaging, obtain consent from the person providing the information and comply with the data protection obligations upon you as data controller.
Consider whether the steps set out above are appropriate or sufficient on their own where there is an elevated risk of money laundering or terrorist financing. The requirement to apply Enhanced Due Diligence will remain in the case of some potential clients, for example someone resident in a high-risk third country. Where Enhanced Due Diligence is needed more robust methods of identification and an increased number of reliable and independent documents, data or information are likely to be required.
It is vital for practitioners to meet their CDD obligations and maintain compliance with the Regulations. If you or your client are in doubt as to what is required you should not hesitate to obtain independent legal advice from an experienced legal practitioner.
The Bar Council’s bespoke anti-money laundering guidance can be found on the Bar Council’s Ethics Hub.
This is a shortened version of an article published by Law360.
Christopher Convey is a tenant at the Chambers of Kennedy Talbot QC, 33 Chancery Lane, London, practices in fraud, corporate crime, money laundering and asset forfeiture and is Chair of the Bar Council’s Money Laundering Working Group.