We get many calls from firms who have unusual compliance queries. They are my favourite calls!
Today’s tale is a common one, and the issue it raises is a common misconception. In fact, we had 2 calls about this on the same day, with similar issues.
“We’re ready to complete, there is a third-party funder, we’ve asked for source of funds information, but it’s not forthcoming. Can I get consent?”
The answer to that question will depend on the facts of each case, and whether there is a suspicion of money laundering.
Quite often in these situations I ask the firm what they are suspicious about, they will say, the fact the clients are refusing to provide the information is making me suspicious. And that is true.
However, consent, or a defence against money laundering will only be given if there is a suspicion of money laundering; for there to be money laundering, you need to know or suspect there is criminal property.
So, the next question I ask is what is the suspected criminal conduct, and very often the answer is, “I have no idea” or “I don’t think there is any”.
If the firm can not detail on the Suspicious Activity Report what they think the criminal property is, and the suspected criminal conduct from which it is thought to have come from, the NCA are unlikely to accept it as a valid SAR.
Having no idea won’t get you there, you won’t have the relevant suspicion.
If you can’t get consent for missing CDD information, what can you do?
Regulation 31 stipulates that you must not establish a business relationship with someone for whom you can’t complete your due diligence enquiries. So, if you’re in a position that you can’t complete your CDD enquiries because of an uncooperative client or third party, you may need to withdraw.
Many people who contact us about this are concerned about how to explain to their client without telling them they are suspicious. If you don’t already, you should consider setting out your source of funds and wealth policy at the very beginning, explaining to the client the depth you are likely to go to and then if they do not provide the information, you can point to the policy and withdraw from acting.
If you are already in receipt of funds, the situation will be a lot more difficult, you may need to press the client further for the information, and keep returning to the question, do you suspect any criminal conduct.
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