Anti Money Laundering Customer Due Diligence Procedures
Customer Due Diligence Procedures
Contents
Version Control
2. About this policy
3. Details
1. Version Control
Date Version Updates Name
January 2020 V2.0 Update for implementation of 2019 MLRs/5 MLD
September 2020 V2.0 Redated September 2020
September 2021 V2.0 Redated September 2021
September 2022 V2.0 Redated September 2022
January 2024 V2.1 Redated January 2024, MLRO changed
Annual review
Next Review Date: January 2025
Director: Abdulaziz Alnaim
Responsible Officer, MRLO: Stefan Dawidowski
1. Introduction
Mayar Capital Ltd. uses a risk-based approach with regard to its Anti-Money Laundering (“AML”) and Counter Terrorist Financing (“CTF”) strategy. The firm has established customer due diligence procedures designed to effectively mitigate and manage its risk of money laundering and terrorist financing identified in its risk assessment.
There are three distinct levels of customer identification verification processes to be implemented, depending on the money laundering risk posed by a customer, as required by the Money Laundering Regulations. These three levels are:
• Simplified Due Diligence.
• Customer Due Diligence.
• Enhanced Due Diligence.
1.1 Scope
All employees, directors, officers and associated agents are required to comply with these policies. Failure to do so may result in disciplinary action.
1.2 Objectives
The objectives of the procedure are to:
• Outline the risk factors Mayar Capital Ltd. must assess to determine the level of due diligence applicable to each customer.
• Detail the steps that Mayar Capital Ltd.’s employees should take when conducting each type of due diligence.
2. Risk-Based Approach
As required under the Money Laundering Regulations, Mayar Capital Ltd. has conducted a risk assessment to access the risks of money laundering and terrorist financing to which it is subject. This risk assessment has assisted the firm in establishing and maintaining policies, controls and procedures to mitigate and manage effectively the risks of money laundering and terrorist financing identified in the risk assessment.
For more information regarding the risk assessment please contact the firm’s MLRO
2.1 Risk Factors
The firm acknowledges that there are four key risks that must be taken into account in all areas of the business: Customer Risk, Product Risk, Delivery Channel Risk and Geographical Risk.
Customer Risk
Different customer profiles have different levels of risks attached to them. A basic Know Your Customer (KYC) check can establish the risk posed by a customer.
There are several risk factors that can be relevant when considering the risk profile of a customer or group of customers:
• Business or professional activity: e.g. Does the customer or beneficial owner have links to a sector with high corruption or Money Laundering and Terrorist Financing risks? Is the customer a credit or financial institution from a country with an effective AML/CTF regulatory regime?
• Reputation: e.g. Are there any adverse media reports or other relevant information concerning the customer? Does the firm know if the customer or beneficial owner had been subject to a suspicious activity report in the past?
• Nature and behaviour: e.g. Are there any doubts about the accuracy and veracity of the customer’s or beneficial owner’s identity? Does the customer issue bearer shares or have nominee shareholders?
Some customers will have an inherently higher risk profile than others. For example, a near-retired individual making small, regular contributions to a savings account in line with their known financial situation pose less of a risk than middle-aged individuals making ad-hoc payments of ever-changing sizes into a savings account that does not fit into the profile of the customers’ standing financial data. The intensity of due diligence conducted on the latter would be higher than that carried out on the former as the potential threat of money laundering in the second case would be perceived as being greater.
Product Risk
This is the risk posed by the product or service itself. The product risk is driven by its functionality as a money laundering tool.
The Joint Money Laundering Steering Group (JMLSG) has categorised the products with which firms typically deal into three risk bands – reduced, intermediate and increased.
Examples of reduced risk products include:
• Term life assurance
• Income protection products relating to long-term illness
• Critical illness products for a specified critical illness
• Group life protection
• Pensions
• Rebate only personal pension
• Pure protection contracts
Examples of intermediate risk products include:
• Whole of Life policies
• Life assurance savings plans
• Endowments
• Trustee Investment Plan
• Group Personal Pension
• Group Stakeholder Pension Plan
• Self-Invested Personal Pension Plan
Examples of increased risk products include:
• Single Premium Investment Bonds
• Investments in unit trusts
Delivery Channel Risk
The firm is required to ascertain the risk associated with how customers obtain the services and products we offer. The firm should consider the following factors:
• To what extent is the business relationship conducted on a non-face to face basis?
• To what extent is the firm using introducers or intermediaries and what is the nature of their relationship with the firm?
• If the customer is not physically present for identification purposes, does the firm use a reliable form of non-face to face CDD?
Relationships, where the customer makes face-to-face contact with the firm, can be perceived to carry less risk as this presents an opportunity for the firm to verify that the client’s identity documents are of true likeness to the client. Business conducted at a distance in a non-direct manner can result in an increased exposure of risk to the firm through impersonation.
Geographical Risk
The geographic location of the client or origin of the business activity has a risk associated with it. This stems from the fact that countries around the globe have different levels of risk attached to them.
Should you wish to enter into a relationship in a high-risk jurisdiction then the firm should seek prior approval and guidance from the MLRO. Failure to comply with this may result in disciplinary action being taken.
The MLRO will then determine if the relationship can proceed and, where the MLRO approves the relationship, the extent of the due diligence measures required initially and on an ongoing basis.
For more information on how Mayar Capital Ltd. has assessed jurisdictional risk, please contact the firm’s MLRO
2.2 Risks Identified
As per our most recent risk assessment, Mayar Capital Ltd. has identified the following as posing the largest Money Laundering and Terrorist Financing risks to the firm:
• Inadequate controls around the KYC and AML process for investors
• Employee Risk
• Geographical Risk
• Custody and Third/Party payments
2.3 How will The Firm Mitigate Risks?
Mayar Capital Ltd. has implemented the following procedures and controls to mitigate the Money Laundering and Terrorist Financing Risks to the firm:
• Independent KYC and AML checks of clients using a risk based approach. Annual reviews by the administrator to check and refresh documentation. For direct relationships where a
Managed Account is setup, KYC and AML check must be reviewed and signed off buy the MLRO and Compliance Officer or Mayar Capital Ltd. • Quarterly attestation taken by all employees, annual training in all financial crime areas so employees are aware of the risks and how to manage / report them. Employee segregation of duties to manage bribery risks and due signatories required for large cash transactions.
• Where clients are located in a geographical area that has been identified as posing a larger KYC / AML risk all investor checks and documentation requirements follow enhanced due diligence requirements.
• All custody payments are made by the administrator with Mayar only able to advise about payments and not have the ability to instruct or set up instructions to fund accounts. Investment manager payments over a certain threshold are reviewed and before payment.
2.4 Blacklists
Mayar Capital Ltd. will not be offering services to individuals or businesses from certain countries and industries which the firm has identified as posing a large AML/CTF risk, that the firm cannot effectively mitigate.
Government restrictions and our own internal risk assessment prohibit Mayar Capital Ltd. from accepting business from certain countries. The firm has also assessed high-risk industries and sectors and believes that some pose a larger AML/CTF risk that the firm cannot effectively mitigate.
Mayar Capital Ltd.’s jurisdiction blacklist follows the guidance of the JMLSG found on the below website:
https://www.legislation.gov.uk/uksi/2021/392/regulation/2/made
Mayar Capital Ltd.’s industry blacklist follows the above link to blacklisted countries. Should an individual or company be associated with a blacklisted country, Mayar Capital would not accept this type of client.
3. Customer Due Diligence (CDD)
‘Customer Due Diligence’ is the standard practice in place for completing customer due diligence. This is the identification and verification of a new client.
Standard Due Diligence is the process of both identifying and verifying a customer with whom the firm has established a business relationship. To identify a customer, you must request the customer provide personal data about themselves, including name, date of birth and residential address and take reasonable steps to verify this data. The information obtained must help the firm understand the intended nature and purpose of the proposed relationship.
The firm needs to be able to demonstrate that it is:
• Identifying the customer and verifying their identity.
• Identifying the beneficial owner, where relevant, and verifying their identity.
• Obtaining information on the purpose and intended nature of the business relationship.
Mayar Capital Ltd. will identify and assess the different types of customers that the firm plans to onboard, including the primary core target customer. In order to determine the level of due diligence that should be applied to a customer, Mayar Capital Ltd. will undertake a client risk assessment as part of the onboarding process. This risk assessment will incorporate identification and verification of the type of customer, relevant jurisdiction risk, average transaction details, and the clients use of Mayar Capital Ltd.’s services. This will result in the customer being allocated as high, medium or low risk, and appropriate enhanced, customer or simplified due diligence, as well as ongoing monitoring, will be applied as stated within this policy.
3.1 When to apply CDD?
The firm must apply CDD measures when it:
• Establishes a business relationship.
• Carries out an occasional transaction that amounts to a transfer of funds within the meaning of Article 3.9 of the funds transfer regulation exceeding 1,000 euros.
3.2 Know Your Customer (KYC)
The information obtained in the onboarding stage should be used to generate a holistic customer profile. This profile should form the root of an effective monitoring plan. Any transaction which does not comply with the customers profile should be flagged and reviewed accordingly.
3.3 Retail Customers
A retail customer is defined by the FCA as an individual who is “acting for purposes which are outside his trade, business or profession”.
Identification
The following information should be sought from a retail client to satisfy the identification requirements:
• Full Name.
• Residential Address.
• Date of Birth.
Verification
When verifying the identity of a customer, and where electronic methods of identification are not available [this is the preferred method of identifying customers], Mayar Capital Ltd. staff are required to obtain a government-issued document for the purposes of verification. The government-issued document must contain the customer’s: (1) Full Name (2) Photograph (3) Residential Address or Date of Birth.
Acceptable documentation can be any of the following:
• Valid passport.
• Valid photocard driving licence (full or provisional).
• National identity card (Non-UK nationals).
• Firearms certificate or shotgun licence.
• Identity card issued by the Electoral Office for Northern Ireland.
If the firm is unable to obtain a government-issued document with a photograph to verify the customer’s identity, then the firm is still required to take reasonable steps to verify the customer’s identity. The firm is required to obtain a combination of any of the following:
• A government, court or local authority document (without a photograph) – This must contain the customer’s full name.
• A second document issued by the government, judicial authority, a public-sector body or authority, a regulated utility company or another FCA-regulated firm in the UK financial services sector – this must contain the customer’s: (1) Full Name (2) Residential Address or Date of Birth.
Government-issued documents without a photograph include:
• Valid (old style) full UK driving licence (may be used as proof of address or identity but not both).
• Recent evidence of entitlement to a state or local authority-funded benefit, including housing benefit, tax credits, pension or other grants (may be used as proof of address or identity but not both).
• Letter of a court appointment.
• Current council tax demand letter or statement.
Other acceptable proof of address documents are as follows:
• Bank statements, or credit/debit card statements, issued by a regulated financial sector firm in the UK or EU (must be original copies dated within the previous three months).
• House or motor insurance certificate.
• Utility bills (not including mobile phone bills, must be original copies dated within the previous three months).
• Current council tax demand letter or statement, rent card or tenancy agreement.
• Solicitor letter confirming completion of house purchase or land registration (certified copy).
• Government control address register that is obligatory to have up to date.
Where a new residential address cannot be proved, because the address is only temporary or because verification evidence is not yet available, then the previous address should be verified. The current address should be verified as soon as practically possible afterwards. Notes should be held on file to clarify the situation.
Persons not to be accepted as Customers
1) Persons and entities subject to financial sanctions
Mayar Capital Ltd. is required to adhere to the UK’s financial sanctions regime, which is designed to deny services and financial products to individuals or entities who are deemed to be a high Money Laundering or Terrorist Financing risk. As a result, Mayar Capital Ltd. is forbidden to enter any business relationship with individuals or entities listed as targets for financial sanction.
Mayar Capital Ltd. staff will screen all new customer against the most up-to-date consolidated list of financial sanction targets issued by the Office of Financial Sanction Implementation (“OFSI”) prior to commencing any business relationships.
The firm’s MLRO is required to ensure that all staff have access to the updated sanction list and all internal systems are updated to incorporate the updated list. This is to ensure that Mayar Capital Ltd. does not conduct business with sanctioned parties.
Part of the Due Diligence of all customers is to identify if enhanced due diligence is required due to the geographical location of the customer. If it required the location is screened to see if it is on the UK’s financial sanction list.
2) Illegal immigrants
As per the Immigration Act 2014, a bank or building society must not open a current account for a person who is in the UK but does not have legal permission to enter or remain in the UK.
Verification of an individual’s immigration status should be sought through a check with a specified anti-fraud organization or a specified data matching authority.
3.4 Corporate Customers
The standard evidence that Mayar Capital Ltd. staff must obtain from all corporate customers are as follows:
• Full name.
• Registered number.
• Registered office in the country of incorporation.
• Principal business address.
• Name of ultimate beneficial owners who own or control 25% or more of the entity’s shares and voting rights.
• Name of directors and senior persons responsible for its operations.
• Written confirmation that the individual the firm is dealing with has authority to act on behalf of the company (customer).
• A copy of the company’s Certificate of Incorporation or equivalent.
Regulation 30A of the 2019 MLRs is a requirement for firms to report to Companies House discrepancies between the information the firm holds on customers compared with the information held in the Companies House Register.
Amendments to regulation 28 of the 2019 MLRs require firms to update their records relating to the beneficial ownership of corporate clients. Firms also need to understand the ownership and control structure of their corporate customers, and to record any difficulties encountered in identifying beneficial ownership.
Partnerships & Sole Traders
Sole traders and partnerships are subject to a lower level of public disclosure than private limited companies or limited liability companies, meaning the due diligence required will be proportionally higher.
Mayar Capital Ltd. is required to take a risk-based approach to verify the identity of one or more of the partners/owners as customers. Verification of the entity should be sought from a reliable source, independent of the customer. Reasonable verification requirements should be applied to partners/owners who have authority to operate an account or to give Mayar Capital Ltd. instructions concerning the use or transfer of funds or assets. Remaining partner/owners are required to be verified as beneficial owners.
Clubs and Societies
The definition of Clubs & Societies, covers: ‘a wide variety of clubs and societies, ranging from large, nationally and internationally active organisations subject to a high degree of public interest and quasi-accountability, to small, local clubs and societies funded by small, individual donations or subscriptions from local communities, serving local needs.’
When Mayar Capital Ltd. is dealing with a customer acting on behalf of a club or society, Mayar Capital Ltd. must apply a risk-based approach to the identification and verification requirements.
When dealing with a club or society, Mayar Capital Ltd. employees should obtain the following as standard evidence:
• Full name of club/society.
• Legal status of club/society.
• Purpose of the club/society.
• Name of all officers.
When conducting business for a club or society the following steps should be taken to verify its identity:
• Mayar Capital Ltd. must obtain a sight of the entity’s constitution.
• At least two of the club or society contacts should be verified as private individuals.
• If the entity is an investment club (i.e. those whose purpose is to transact in regulated investments) all members should be considered as individual clients and verified accordingly.
Charities
Charities can take several legal forms. When dealing with a charity or an individual acting on behalf of a charity, Mayar Capital Ltd. employees should obtain the following as standard evidence:
• Full name of charity.
• Registered address of charity.
• Nature of bodies activities and objects.
• Name(s) of settlors [if any].
• Names of all trustees (or equivalent).
• Name or classes of beneficiaries.
The existence of a registered charity must be verified on the relevant Charity Commission website.
The Charity Commission should be able to provide Mayar Capital Ltd. with details of the charity’s designated “correspondent”. Should the individual undertaking the transaction be the named correspondent, no further verification is required. In cases where the person undertaking the transaction is not the correspondent, you should also forward a copy of the suitability letter to the designated correspondent. A covering note should also be included to cover the details of the transaction in brief and request the designated correspondent to contact you should all not be in order
Trusts
As stated by the JMLSG: ‘there is a wide variety of trusts, ranging from large, nationally and internationally active organization’s subject to a high degree of public interest and quasi-accountability, through trusts set up under testamentary arrangements, to small, local trusts funded by small, individual donations from local communities, serving local needs.’
When dealing with a trustee acting on behalf of a trust or foundation which has no legal identity, the Mayar Capital Ltd. employee verify the trustee’s identity as a private individual. Should the trust be deemed minimal risk, the firm may, subject to MLRO sign-off, limit the trustees considered customers to those who give instructions to the firm. Other trustees will be verified as beneficial owners according to the firm’s risk-based approach.
In respect of trusts, Mayar Capital Ltd. employees should obtain the following as standard evidence:
• Full name of the trust.
• Nature, purpose, and objects of the trust (e.g., discretionary, testamentary, bare).
• Country of establishment.
• Names of all trustees.
• Names of any other beneficial owners (including settlors and beneficiaries).
• Name and address of any protector or controller.
• A certified copy of the trust deed.
• Confirmation that the individual the firm is dealing with has authority to act on behalf of the Trust.
When dealing with trust cases, the following verification checks should be carried out:
• The ‘settlor’ must be verified as a private individual (or corporation as appropriate).
• The trustees must be verified as private individuals (or corporations as appropriate).
• Any controllers who have the power to remove trustees must be verified as private individuals (or corporations as appropriate).
Source of Funds for Discretionary & Offshore Trusts
For discretionary and offshore trusts, Mayar Capital Ltd. is required to ascertain and record the nature and purpose of the trust and the original source of funding.
Where funds for an offshore trust are drawn from an account not under the control of the trustees, two authorised signatories on the account from which the funds are drawn are required to be verified as private individuals.
Powers of Attorney and Third-Party Mandate
Before acting for a client with a Power of Attorney or third-party mandate, Mayar Capital Ltd. is required to confirm the reasons for the granting of the Power of Attorney/third party mandate.
Where third-party mandates or Powers of Attorney are in place, Mayar Capital Ltd. employees must obtain the following:
• Personal verification of the holder of the Power of Attorney/third party mandate.
• Personal verification of the client themselves (i.e. the person upon whom the mandate or power of attorney is held).
• A certified copy of the Power of Attorney or third-party mandate.
• Any individual who inputs money or monies worth into the arrangement other than these parties – should also be verified as a private individual (or corporation as appropriate).
Offshore Business Verification
When conducting business offshore, Money Laundering verification requirements and the associated identification checks differ due to different legislation affecting offshore centres. If the client is situated in another territory, Mayar Capital Ltd. is required to check with the local financial services regulator whether they are deemed to be performing a regulated activity.
3.5 Ongoing Monitoring
Mayar Capital Ltd. is obliged to conduct ongoing monitoring of business relationships with their customers. Mayar Capital Ltd. employees should conduct ongoing monitoring of customers in the following ways in accordance with the firm’s risk-based approach:
• Scrutinising transactions undertaken throughout the course of the relationship. Any transactions or activities which are not consistent with the customer’s business and risk profile are flagged for further examination by compliance and the client's account will be frozen.
• Ensuring that the documents or information obtained by applying standard due diligence are kept up to date.
4. Simplified Due Diligence (SDD)
Simplified Due Diligence (“SDD”) is the lowest level of due diligence that could be completed on a customer. Mayar Capital Ltd. can only conduct SDD on customers we deem to present a low degree Money Laundering and Terrorist Financing risk.
Amendments to regulation 38 of the 2019 MLRs regarding electronic money mean that e-money firms can only forego customer due diligence measures in situations where:
• the maximum amount which can be stored electronically is €150 (previously €250)
• the payment instrument used in connection with the electronic money (the relevant payment instrument) is:
- not reloadable, or
- is subject to a maximum limit on monthly payment transactions of €150, which can only be used in the UK (previously €250)
• the relevant payment instrument is used exclusively to purchase goods or services
• anonymous electronic money cannot be used to fund the relevant payment instrument
5. Enhanced Due Diligence (EDD)
Mayar Capital Ltd. must apply Enhanced Due Diligence (“EDD”) measures on a risk-sensitive basis in any situation which by its nature can present a higher risk of Money Laundering or Terrorist Financing. For example, if a transaction is identified is complex and unusually large, or there is an unusual pattern of transactions, and the transaction or transactions have no apparent economic or legal person. The firm is required to increase the degree and nature of monitoring of the business relationship in which the transaction is made to determine whether that transaction or that relationship appears to be suspicious.
The following risk factors provide guidance on when EDD measures must be considered:
• Where there is deemed to be a high risk of Money Laundering or Terrorist Financing in accordance with the firm’s or supervisory authority’s risk assessment.
• Where the customer is from a high-risk third country.
• Where there is a correspondent relationship with another credit or financial institution.
• Where a customer has been identified to be a Politically Exposed Person (“PEP”) or family member or close associate of a PEP.
• Where the customer has provided false or stolen identification documents or other information on establishing the relationship.
• In cases where:
o A transaction is complex and unusually large.
o A transaction(s) have no apparent economic or legal purpose.
Amendments to regulation 33 of the 2019 MLRs require firms to include new additional high-risk factors when assessing the need for enhanced due diligence and seek additional information and monitoring in certain cases. These may occur where:
• there are relevant transactions between parties based in high-risk third countries,
• the customer is the beneficiary of a life insurance policy,
• the customer is a third-country national seeking residence rights or citizenship in exchange for transfers of capital, purchase of a property, governments bonds or investment in corporate entities,
• there are non-face to face business relationships or transactions without certain safeguards, for example, as set out in regulation 28 (19) concerning electronic identification processes.
• there are transactions related to oil, arms, precious metals, tobacco products, cultural artefacts, ivory or other items related to protected species, or archaeological, historical, cultural and religious significance, or of rare scientific value
EDD Measures
Below is a list of EDD measure that should be undertaken by Mayar Capital Ltd.:
• Obtaining additional information on the intended nature and purpose of the business relationship.
• Obtaining information of the source of funds or source of wealth of a customer.
• Obtaining information on the intended purpose of a transaction.
• Obtaining, and where appropriate verifying, additional information on the customer and beneficial owner.
• Obtaining, where possible, negative information about the customer and his business activities through adverse media searches.
• Increasing the frequency of reviews on a customer.
• Conducting enhanced monitoring of the business relationship, by increasing the number and timing of controls applied, and selecting patterns of transactions that need further examination.
5.1 Politically Exposed Persons (PEP)
A Politically Exposed Person (PEP) is defined by the FCA as ‘Individuals entrusted with prominent public functions’. The definition of a ‘prominent public function’ will vary according to the nature of the function held by a person. Mayar Capital Ltd. is required to understand the nature of each position held and whether the function gives rise to the risk of large-scale abuse of position.
The FCA’s guidance helps provide clarity on the definition of a prominent public function:
• Heads of state, heads of government, ministers, and deputy or assistant ministers.
• Members of parliament or of similar legislative bodies.
• Members of supreme courts, of constitutional courts or of any judicial body the decisions of which are not subject to further appeal except in exceptional circumstances.
• Members of courts of auditors or of the boards of central banks.
• Ambassadors, charges d’affaires and high-ranking officers in the armed forces.
• Members of the administrative, management or supervisory bodies of State-owned enterprises.
• Directors, deputy directors and members of the board or equivalent function of an international organisation.
A ‘known close associate’ of a PEP is defined as including:
• An individual known to have joint beneficial ownership of a legal entity or a legal arrangement or any other close business relationship with a politically exposed person.
• An individual who has sole beneficial ownership of a legal entity or a legal arrangement that is known to have been set up for the benefit of a PEP.
A known close associate of a PEP is not a PEP themselves purely through being associated with a PEP.
A family member of a PEP is defined as including:
• Spouse, or civil partner.
• Children and their spouses or civil partner.
• Parents.
Mayar Capital Ltd. employees are required to take a proportionate and risk-based approach to the treatment of family members who do not fall into this definition.
PEP Risk Factors
PEPs may pose various levels of Money Laundering and Terrorist Financing risk dependent on strength of certain risk factors. Mayar Capital Ltd. employees should diligently assess these risk factors for each identified PEP or known close associate or family member of a PEP. After doing so, they must determine if the PEP represents a high risk or a low risk, and this must be recorded in the clients file.
1) Indicators that PEP might pose lower risk
• Products
o The PEP is seeking access to a product the firm has assessed to pose a lower risk.
• Geographical
o The PEP has been entrusted with a prominent public function in the UK (unless other risk factors raise the inherent risk of the customer).
o The PEP has been entrusted with a prominent public function in a country with, but not limited to, the following characteristics: low levels of corruption, political stability, credible AML defenses and an independent judiciary.
• Personal or Professional
o The PEP is subject to rigorous disclosure requirements.
o The PEP does not have executive decision-making responsibilities (i.e. is an opposition MP or an MP with no mistrial responsibilities).
2) Indicators that PEP might pose higher risk
• Products
o The PEP is seeking access to a product the firm has assessed to pose a higher risk.
• Geographical
o The PEP has been entrusted with a prominent public function in a country with a higher risk of corruption and, based on information available, has with following characteristics: political instability, weak AML defenses, a non-democratic form of government and a criminal justice system vulnerable to influence.
• Personal or Professional
o PEP’s personal wealth is inconsistent with a known legitimate source of income.
o Credible allegations of financial misconduct.
o Responsibility for, or able to influence, large public procurement exercises.
o Responsibility for, or able to influence, scarce government licenses.
3) Indicators that PEP family or close known associate pose lower risk
• A family member or close known associate of PEP may pose a lower risk if the PEP themselves pose a lower risk.
4) Indicators that PEP family or close known associate pose higher risk
• Wealth derived from the granting of government licenses.
• Wealth derived from preferential access to the privatization of former state assets.
• Wealth derived from commerce in industry sectors associated with high-barriers to entry or a lack of competition.
• Wealth inconsistent with a known legitimate source of income or wealth.
• Credible allegations of financial misconduct.
• Appoint to a public office that appears to be inconsistent with personal merit.
Identification of PEP
Mayar Capital Ltd. employees are required to undertake certain measures when they identify and verify a proposed customer PEP, or family member or known close associate of a PEP’s status.
Upon verification of the PEP, or family member or known close associate of a PEP’s status. The following measures should be applied:
• Obtain sign-off, as a minimum, from its MLRO before proceeding with the relationship. The sign-off requirements will vary according to the risk assessed.
• Take “adequate measures” to establish the customer’s source of wealth and source of funds relevant to the proposed business relationship or transaction. The adequate measures required will vary according to the risk assessed.
• Conducted enhanced ongoing monitoring of the business relationship. The nature and extent of this monitoring will depend on the individual risk assessment for the customer.
PEP due diligence measures
If Mayar Capital Ltd. determines that a PEP represents an elevated risk of Money Laundering and Terrorist Financing, the firm should conduct EDD measures on them. EDD measure that Mayar Capital Ltd. employees may apply to high-risk PEPs include:
• Intrusive steps to establish the source of wealth and funds.
• Oversight and approval of the relationship from senior management.
• Undertake frequent and thorough monitoring of the relationship to ascertain whether or not it should be maintained.
6. Suspicious Activity
A suspicious transaction will often be a transaction which is inconsistent with the customer's known legitimate business or personal activities or with the normal business for that type of customer. Therefore, the first key to recognition is knowing enough about the customer's business to recognise that a transaction, or series of transactions, is unusual.
To determine whether an established customer’s transaction might be suspicious you need to consider:
• Is the size of the transaction consistent with the normal activities of the customer?
• Is the transaction rational in the context of the customer’s business or personal activities?
• Has the pattern of transactions conducted by the customer changed?
• Where the transaction is international in nature, does the customer have any obvious reason for conducting business with the other country involved?
6.1 Recognizing Suspicious Activity
When an employee has reasonable grounds to suspect or has actual knowledge that an individual or client is engaged in Money Laundering or Terrorist Financing he is legally required to report this to the firm’s MLRO. Failure to report your knowledge or suspicions to the MLRO may result in action being taken, both internally and externally by the appropriate legal authorities as this would be a breach of S.330 of POCA 2002
Mayar Capital Ltd. employees should always be fully alert to recognize suspicious activity surrounding a customer or a transaction. Scenarios which should lead you to have cause for suspicion would include:
• Clients who are reluctant to provide proof of identity.
• Clients who place undue reliance on an introducer (they may be hiding behind the introducer to avoid giving you a true picture of their identity or business).
• Requests for cash related business. For example, questions about whether investments can be made in cash or suggestions that funds might be available in cash for investment.
• Linked transactions which might be being used to disguise or divert money. For example, unnecessary switching, encashment, and reinvestment of the same funds, possibly in the name of a partner, business or family member.
• Where the source of funds for investment is unclear.
• Where the magnitude of the available funds appears inconsistent with the client’s other circumstances (i.e. the source of wealth is unclear). Examples might be students or young people with large amounts to invest.
• When a transaction does not appear to make sense given the client’s circumstances, particularly if the client insists on following such a route against your advice. (Care should be taken not to automatically include all insistent clients within this idea. A weight of suspicious evidence leading to a genuine suspicion is what you should be looking for).
• Where the transaction doesn’t appear rational in the context of the customer’s business or personal activities. Particular care should be taken in this area if the client changes their method of dealing with you without reasonable explanation (e.g. from advisory to execution only).
• Where the pattern of transactions changes.
• Where a client who is undertaking transactions that are international in nature does not appear to have any good reason to be conducting business with the countries involved (e.g. why do they hold monies in the particular country that the funds are going to or from? Do their circumstances suggest that it would be reasonable for them to hold funds in such countries?).
• Where lump sum investments are used by the investor as security for loans.
• Clients who are unwilling to make face-to-face contact, or to provide you with normal personal or financial information, for no apparent or rational reason. (Care should be taken not to include all distance relationships as suspicious because most will be for genuine reasons. Suspicions will ordinarily be based upon cumulative as opposed to stand alone issues)
Remember that a money launderer is likely to provide persuasive arguments about the reasons for their transactions. You need to look behind these, at the client’s actual circumstances, to decide whether a transaction is suspicious.
Any suspicions must be reported promptly to the MLRO. This will protect staff from any future recourse including prosecution.
6.2 Reporting Suspicious Activity
When a Mayar Capital Ltd. employee suspects that a client, or anybody for whom they are acting, may be undertaking (or attempting to undertake) a transaction involving the proceeds of any crime you must report your suspicion to the MLRO as soon as practicably possible and in writing.
Internal reports to MLRO must be made regardless of whether the business has taken place. In some instances, it may be necessary for the MLRO to obtain consent from the National Crime Agency (NCA) prior to being able to continue with the transaction.
An internal suspicions report must be made as soon as reasonably possible to the MLRO and the following process should be followed:
• An internal suspicious reporting form should be completed and submitted to the MLRO. The report should provide full details of the client and a full statement of the circumstances giving rise to the suspicion, as a minimum:
o Details of all parties to the transaction
o The owner of the monies in question
o How the identity of the client was verified
o A full description of the transaction
o Reasons for suspicion and supporting evidence
• This should be forwarded, together with any supporting documentation to the MLRO immediately.
• Your suspicion report will be acknowledged, and a response will be provided by the MLRO (along with a reminder of the obligation to do nothing that might prejudice enquiries - i.e. tipping off).
• If for any reason you do not receive an acknowledgment you should contact the MLRO.
Once you have reported your suspicion to the MLRO you will have satisfied your statutory obligation. It is unlikely that the MLRO will be able to provide you with any details in relation to the outcome of your report and you should not ask them to do so. If further suspicion arises after a report has been made to the MLRO, a further report should be made.
Where required the MLRO will forward the report and concerns to the National Crime Agency (NCA) for consent to proceed. In such circumstances, it is an offence to consent to a transaction or activity going ahead within the seven-working day notice period from the working day following the date of disclosure, unless the NCA gives consent. Where urgent consent is required, requests should be transmitted electronically over a previously agreed secure link, or by fax as specified on the NCA website at http://www.nationalcrimeagency.gov.uk/
When an activity or transaction (or a related transaction) which gives rise to concern is already within an automated clearing or settlement system, where a delay would lead to a breach of a contractual obligation, or where it would breach market settlement or clearing rules, the nominated officer may need to let the transaction proceed and report it later. Where the nominated officer intends to make a report, but delays doing so for such reasons, POCA provides a defense from making a report where there is a reasonable excuse for not doing so. However, it should be noted that this defence is untested by case law, and would need to be considered on a case-by-case basis.
7. Record Keeping
In line with UK AML regulations, Mayar Capital Ltd. will retain customer information for five years following the termination of a business relationship or occasional transfer, except for situations where legal obligations placed upon Mayar Capital Ltd. require otherwise.
Where information is held about customers, it must, as far as reasonably possible, be kept up to date. Once the identity of a customer has been verified there is no obligation to re-verify it, unless suspicions dictate otherwise. However, it is necessary to ensure customer information such as personal and financial circumstances and change of address or employment is kept up to date under the Money Laundering Regulations.