Anti Money Laundering Due Diligence Investigations


Anti Money Laundering Due Diligence Investigations.

Legal professionals provide a range of services and activities that differ vastly, such as in their methods of delivery and in the depth and duration of the relationships formed with clients. Their work is fundamental to promoting adherence to the rule of law in the countries in which they practice. Lawyers hold a unique position in society by providing access to law and justice for individuals and entities, assisting members of society to understand their increasingly complex legal rights and obligations, and assisting clients to comply with the law. Lawyers have their own professional and ethical codes of conduct by which they are regulated. Breaches of the obligations imposed upon them can result in a variety of sanctions, including disciplinary and criminal penalties.

Why is a Client Due Diligence (CDD)/Know Your Client necessary?

When dealing with clients, lawyers should always undertake client anti money laundering due diligence investigations. CDD is intended to enable a legal professional to form a reasonable belief that it has appropriate awareness of the true identity of each client.

Effective anti money laundering due diligence investigations will allow legal professionals to exercise reasonable business and professional judgement with respect to clients. Such approach can provide an appropriate and effective control to manage identifiable money laundering and terrorist financing risks (AML/CFT).

Specific individuals, organisations or countries may be the subject of terrorist financing sanctions, in a particular country. In such cases a listing of individuals, organisations or countries to which such sanctions apply and the obligations on legal professionals to comply with those sanctions are decided by individual countries. Legal professionals may commit a criminal offence if they undertake business with a listed individual, organisation or country in contravention of applicable sanctions.

What are the components of a Client Due Diligence For Anti Money Laundering/Counter Terrorist Financing (AML/CFT)?

CDD comprises several components:

  • Identification and verification of the identity of clients and of beneficial owners.
  • Obtaining information on the purposes and intended nature of the business relationships.
  • Conducting ongoing due diligence.

Of these components, the identification and verification of identity of clients are requirements that must always be completed. However, in relation to all other client due diligence for anti money laundering/counter terrorist financing (AML/CFT) components, the risk level may allow for a determination of the extent and quantity of information required. Once this determination is made, there is an obligation to keep records and documents that have been obtained for due diligence purposes.

What are the activities that require lawyers to undertake a Client Due Diligence For Anti Money Laundering/Counter Terrorist Financing (AML/CFT)?

There are several activities that require lawyers to undertake a Client Due Diligence For Anti Money Laundering/Counter Terrorist Financing (AML/CFT). These include:

  • Creation, operation or management of companies
  • Opening of bank accounts
  • Buying and selling of real estate.
  • Management of bank, savings or securities accounts.
  • Managing of client money, securities or other assets.
  • Buying and selling of business entities.

When should a legal professional undertake in-depth client anti money laundering due diligence investigations?

Potential money laundering and terrorist financing risks faced by legal professionals will vary according to many factors including the activities undertaken by the legal professional, the type and identity of client, and the nature of the client relationship and its origin.

Legal professionals should determine whether a particular client poses a risk. When dealing with a client indicated in the following list, lawyers should conduct in-depth client anti money laundering due diligence investigations:

  • Clients who are PEPs (Politically Exposed Persons) are always considered as high risk clients.
  • Clients conducting their business relationship or requesting services in unusual or unconventional circumstances.
  • Clients where the structure or nature of the entity or relationship makes it difficult to identify in a timely fashion the true beneficial owner or controlling interests, such as the unexplained use of legal persons or legal arrangements, nominee shares or bearer shares.
  • Clients that are cash (and cash equivalent) intensive businesses including:
    • Money services businesses (e.g. remittance houses, currency exchange houses, casas de cambio, centros cambiarios, remisores de fondos, bureaux de change, money transfer agents and bank note traders or other businesses offering money transfer facilities).
    • Casinos, betting and other gambling related activities.
    • Businesses that while not normally cash intensive generate substantial amounts of cash.
  • Charities and other not-for-profit organisations (NPOs) that are not subject to monitoring or supervision (especially those operating on a cross-border basis) by designated competent authorities.
  • Clients using financial intermediaries, financial institutions or legal professionals that are not subject to adequate AML/CFT laws and measures and that are not adequately supervised by competent authorities.
  • Clients having convictions for proceeds generating crimes who instruct the legal professional (who has actual knowledge of such convictions) to undertake specified activities on their behalf.
  • Clients who have no address, or multiple addresses without legitimate reasons.

In-depth anti money laundering due diligence investigations is also required when legal professionals are asked to deliver the following services:

  • Services where legal professionals, acting as financial intermediaries, actually handle the receipt and transmission of funds through accounts they actually control in the act of closing a business transaction.
  • Services to conceal improperly beneficial ownership from competent authorities.
  • Services requested by the client for which the legal professional does not have expertise.
  • Transfer of real estate between parties in a time period that is unusually short for similar transactions with no apparent legal, tax, business, economic or other legitimate reason.
  • Payments received from un-associated or unknown third parties and payments for fees in cash where this would not be a typical method of payment.
  • Administrative arrangements concerning estates where the deceased was known to the legal professional as being a person who had been convicted of proceeds generating crimes.
  • Clients who offer to pay extraordinary fees for services which would not ordinarily warrant such a premium.
  • Unusually high levels of assets or unusually large transactions compared to what might reasonably be expected of clients with a similar profile may indicate that a client not otherwise seen as higher risk should be treated as such. Conversely, low levels of assets or low value transactions involving a client that would otherwise appear to be higher risk might allow for a legal professional to treat the client as lower risk.
  • Services related to shell companies, companies with ownership through nominee shareholding and control through nominee and corporate directors.
  • Situations where it is difficult to identify the beneficiaries of trusts.
  • Services that deliberately have provided or purposely depend upon more anonymity in the client identity or participants than is normal under the circumstances and experience of the legal professional.

ISOG private investigators, private detectives and lawyers are expert in anti money laundering due diligence investigations.