DISCLAIMER:

THIS TRAINING POWERPOINT EXAMPLE IN ITS

CURRENT FORMAT WOULD NOT BE SUFFICIENT
TRAINING FOR THE MLRO OR TO GIVE TO YOUR
EMPLOYEES. THIS IS AN EXAMPLE WITH HINTS AND
TIPS ONLY. IT MUST BE ADAPTED AND EXPANDED
UPON TO ENSURE IT IS RELEVANT TO YOUR FIRM, ITS
EMPLOYEES, CURRENT LEGISLATION, REGULATORY
GUIDANCE AND CURRENT TRENDS, THEMES AND
RISKS.
AML training
What is money laundering?
Money Laundering Explained….
Money Laundering Explained….

Is the following statement true or false? Money laundering is the concealment of

the origins of illegally obtained money. Terrorist financing is providing funds to
sponsor or facilitate terrorist activity. Terrorist income often combines ‘clean’ and
‘dirty’ money.

True

Is the following statement true or false: Money laundering only ever occurs
when physical cash derived from criminal activity is given to someone else.
True

5
Accountancy sector ML risks
National Risk Assessment of MLTF 2020, accountancy sector was highlighted
as a crucial gateway for criminals looking to disguise the origin of their
funds.
Accountants fail to
Accountants involved in money laundering cases tend to be
recognise the threat of
negligent or unwittingly involved.
money laundering.

The sector is assessed as

Create corporate structures
high risk as the services they Gain legitimacy
which disguise activity
provide can be used to:

Facilitate transactions
Evade tax
through client accounts
Think like a criminal…

A client has approached you to use your services to launder

£250k. The funds are currently in cash. What advice and
assistance would you give to make these funds appear
legitimate?
Professional Enablers…
Predicate Crimes
What possible crimes could occur prior to the act of money laundering?

• Modern slavery • Cyber crime

• Human trafficking • Fraud
• Firearms offences • Bribery corruption
• Child sexual abuse • Sanctions evasion
• Organised immigration • Tax evasion
• Terrorism • Drug trafficking
Modern Slavery and Human Trafficking Indicators
Some of the businesses known to be linked to exploitation are agriculture, high cash-
generative personal service businesses, cleaning companies, construction and
maintenance businesses, and transport and freight.

Cash-based business potentially used to exploit victims Business output not

proportionate with Client holds a
and pass unexplained funds through size and staffing levels diverse portfolio of
businesses in high-
risk industries e.g.
construction,
takeaways, care
Unusual, complex Unclear source of Payments/income
agencies
Evasive behaviour received at unusual
structures in place funds/wealth Extended family
times of the day
involvement in
business or
Card statements showing transactions e.g.
payments processed
between hours that do bulk of funds paid to
Irregular hours or family members
Suspicious lack of not correlate with the Unclear beneficial
pay, yet all staff are Round sum salaries
staff costs type of business it is ownership
paid the same
Drug Trafficking
The law and regulations
Tipping Off Explained
What is Tipping Off?
The offence is committed by a person who discloses information that is likely to prejudice an actual or a
proposed investigation before an SAR has been made, or who discloses information that is likely to prejudice
an investigation which might be conducted after an SAR has been made to law enforcement, in circumstances
where he or she knows or suspects that there is either an investigation or a proposed investigation, or that a
disclosure has been made to law enforcement.

Misinterpretation of the law

The offence is widely misunderstood. It is often mistakenly assumed that enquiries should not be made of
customers during the evaluation process for fear that such enquiries might expose an employee to the risk of
tipping off the customer. This is not the case. While employee enquiries must be handled with care, to be in
danger of committing a tipping-off offence an employee must either know or suspect that an SAR has been, or
is to be, made or must know or suspect that an investigation is underway or is planned. This will rarely be the
case at the initial suspicion evaluation stage.
Tipping Off – Scenario

An accountant has been contacted by law enforcement and has

been issued with a Production Order on one of his clients –
which means all relevant documentation must be provided. The
accountant has not filed an SAR and is not aware of what law
enforcement are investigating. The accountant is concerned
about GDPR, so notifies the client.

Is this tipping off?

Role of the MLRO
Conducting customer due diligence
(CDD)
Customer Due Diligence (CDD)
What is CDD? Customer due diligence is the process of identifying your clients and checking they are who
they say they are.

Why it is important? Criminals often seek to mask their true identity – for example, by using complex
ownership structures. The purpose of CDD is to know and understand a client’s identity and business activities
so that any ML risks can be properly managed.

Risk assessment: a risk assessment on each client to identify the money laundering risk that they pose must
be conducted. The following factors need to be considered during this risk assessment:
• Customer risk
• Product, service, transaction and delivery channel risk
• Geographical risk

Risk categorisation: the client should be categorised as low, medium or high risk. It is this risk categorisation
which determines which level of due diligence should be completed.
Customer Due Diligence (CDD)
Identifying client risk
• Consider these client profiles. Would you classify them as high, medium or
low risk?
Sunflower Massage Spa
• Based in Soho.
• Operating hours are 12pm to 3am Monday to Saturday.
• Spa has no official website or social media presence.
• It is listed on Google and has several reviews.
• You have found a news article from 2016: “Chinatown and Soho: 18
arrested in prostitution and slavery raids as police storm six ‘massage
parlours’”. However, Sunflower Massage Spa was not specifically named.

High Risk
Identifying client risk
Web Development & Design Company
• Their website describes them as a web design agency based in
Manchester.
• They have been trading for 11 years.
• Profits are steady year on year and is in line with industry statistics.
• Mr. Alan Example is the sole director and UBO.
• Payments are made electronically, and they can provide invoices.
• No adverse media information was found.

Medium/Normal Risk
Identifying client risk
• Consider these client profiles. Would you classify them as high, medium or
low risk?
Mr. S Hoss
• Mr. S Hoss is based in Iran.
• He wants to use accountancy services as he is buying several properties in
London under the company Ardabil and Co.
• According to Companies House, Ardabil and Co. formed in June 2021 and
he is one of several directors.
• The firm has registered addresses in London, Tehran and Dubai.
• The ultimate beneficial owner is the firm ‘Persian Enterprises’ who are
owned by ‘Gulf Limited’.
High Risk
Identifying client risk
Pension Protection Fund (PPF)
• They describe themselves as “a statutory public corporation led
by our board and accountable to Parliament through the
Secretary of State for the Department for Work and Pensions.”
• It is intended to protect members if their defined
benefit pension fund becomes insolvent.
• It was created under the Pensions Act 2004.

Low Risk
AML red flags
Think like a criminal…

You are an accountant. A client has approached you to use

your services to launder £250K. The funds are currently in
cash. What advice and assistance would you give to make
these funds appear legitimate?
Identifying client risk – Ring Ring Mobiles

• Employs 4 full-time members of staff.

• Specialises in mobile phone repairs.
• Sells and buys second-hand mobile phones.
• Shop also trades on eBay.
• 2019 Figures show turnover was £36k and overall profit was £2k.
• Takings for the last 3 months were £3,000, £2,800 & £3,000 respectively.
• High proportion of customers using credit cards.
• Owner has recently bought a £400k property.
Identifying Client Risk - Neat Nail Bar (NNB)

• Neat Nail Bar is based in a residential street in Croydon, London.

• NNB does not accept card payments – owner states he will only take cash payments
due to the costs of card transactions.
• NNB has been open since 2010. For the first seven years the average profit per
annum was £60k. Since new owners have taken over in 2018, profits have increased
to £200k per annum. Annual records show staff costs were £44k in 2018.
• Its operating hours are 9am until 9pm Monday to Saturday, 10am to 4pm Sunday. It
has three full-time employees.
• NNB is registered to the Central London address of Sanders Associates, an
accountancy firm. Another 81 companies are registered there.
Identifying Client Risk– FM
• FM is a company service provider based in Nevis.
• Its main source of business is the incorporating and operating of companies in
jurisdictions on their clients’ behalf.
• It was founded in 1990 and acts for 100k companies with 20 full-time
employees.
• It has offices in Cayman Islands, Bermuda and British Virgin Islands.
• Clients include the former Sudan president, the prime minister of Andorra and
the brother-in-law of the ex-Prime Minister of Malaysia.
• The client list also includes several shell corporations.
 Identifying Client Risk– Ioannis Investment Securities
• Ioannis Investment Securities offer investment opportunities. Rather than offer high returns to all
comers, Ioannis Investment Securities offers fairly modest but steady returns to an exclusive
clientele. In the last 10 years of trading, returns have always been between 7%-9% per annum.
Ioannis Konstantinou generally refuses to meet directly with investors. Some investors who have
already invested are wary of removing their money from the fund, in case they could not get back
in later.

• Recently, a proposal pack was published aiming to raise £250m into a new investment fund.
Funds will be used to invest in a diverse portfolio of emerging industries to spread risk – such as
5G, peer-to-peer lending and cryptocurrencies. In 10 years of trading there were seven losing
months during this time, and those losses were statistically insignificant.

• The accountancy firm handles the credits using the client account and will transfer to one of
Ioannis Investment Securities accounts held around the world. The accountant is a sole practice
and a close family friend so is trusted by Ioannis Konstantinou.
Reporting suspicious activity
Money laundering: How trusted professionals can help law
enforcement
 Your obligation to submit an Internal SAR

• You must complete an internal SAR should you have knowledge or

suspicion of money laundering activity.

• You may commit an offence if you have ‘knowledge’ or ‘suspicion’ of

money laundering activity or criminal property, do something to assist
another in dealing with it, and fail to make a SAR. This also includes
tipping off.

• Submitting a SAR protects you, your firm and UK financial institutions

from the risk of laundering the proceeds of crime.
Submitting good-quality internal SARs

Why you are suspicious or have knowledge?

When did the

What is the value of the criminality suspected? Who is involved?
circumstances arise?

Where has the How did the

What is the criminality
How are they involved? suspected criminality circumstances arise?
suspected?
taken place?
 What is a Suspicious Activity Report (SAR)?

• Suspicious Activity Reports (SARs) alert law enforcement to potential instances

of money laundering or terrorist financing.
• SARs are made by financial institutions and other professionals such as solicitors,
accountants and estate agents, and are a vital source of intelligence not only on
economic crime but on a wide range of criminal activity.
• They provide information and intelligence from the private sector that would
otherwise not be visible to law enforcement.
• SARs can also be submitted by private individuals where they have suspicion or
knowledge of money laundering or terrorist financing.
NCA: UK Financial Intelligence Unit
Record-keeping
Further reading
Relevant legislation/guidance and publications

• AML Guidance For The Accountancy Sector

• ML Regs 2017
• FATF Guidance on the Risk-Based Approach for Accountants
• FATF UK Mutual Evaluation Report
• HM Treasury national risk assessment
• FATF RBA Guidance for Accountants
• Transparency International Report: At your service
• Review NCA website and relevant material
Why it matters…
 Why it matters…
• One whistle-blower said, “We would work anything from 80-90 hours per week and pay would be from £3-£4 per hour. The payslip
would show 37.5 hours worked per week and the rate would be the minimum wage rate, but that's not what we got. It was all for
show”. 
• They explained that everyone was always paid in cash and not into a bank account.  If anyone didn’t like the rate they could go
elsewhere, but all the factories would have similar rates so there really was no choice, especially if anyone was an illegal
immigrant.

• The driver has been charged with the manslaughter of the 39 victims as well as people trafficking, immigration and money
laundering offences.
• Two brothers, Ronan and Eamon Hughes, one of which has admitted manslaughter whilst the latter is on the run, owned
the haulage firm. It’s likely that these men used the services of an accountant.
• Ronan Hughes estimated his haulage business had a turnover of between €500,000 (£484,000) and €600,000 (£538,000)
but said his business was not very profitable. Mr. Hughes has access to numerous vehicles and more than €200,000
(£173,000) in 33 bank accounts.
• The judge said he found unconvincing Mr. Hughes' claim of a lack of awareness of his financial affairs.