Anti-Money Laundering Training

Anti-Money Laundering Training
JULY 2014
Over the past years those involved in hiding the proceeds of crime have resorted to
increasingly sophisticated ways of disguising the source of their funds. As a result,
new legislation aimed at catching those involved has become necessary. The UK’s
Money Laundering Regulations of 2007 and other legislation now place a heavy
onus on businesses and staff.
It is the responsibility of the London Metal Exchange senior management to provide
a procedure for the monitoring and reporting of suspicious activity, and to ensure
that all employees are aware of this Anti-Money Laundering (AML) process.
Accordingly, as part of the LME drive to comply with the UK’s money laundering
rules, you must confirm by declaration, that you are familiar with the following:
 Your responsibilities under the LME’s ‘Anti-Money Laundering’ (AML)
procedures;
 The identity of your Money Laundering Reporting Officer (MLRO);
 The potential effect on the LME of you breaching any of the money
laundering regulations.
Please read and digest the information that follows and complete & return the
Declaration (detailed at the end of this document) to the General Counsel’s
office as soon as possible
The following information should be read carefully, as it will help you to
understand the AML process at the LME. This information should take around
twenty minutes to read, and includes the following sections:
 What is money laundering?
 The money laundering process;
 The UK's Anti-Money Laundering laws;
 The LME’s obligations;
 Your Money Laundering Reporting Officer;
 Know Your Client;
 Monitoring, recording & reporting;
 Your role in preventing money laundering;
 Money Laundering red flags; and,
 How to report suspicions of money laundering.
What is Money Laundering?
Money laundering involves the possession of, and any dealings with, the proceeds
of criminal conduct.
In particular, this may include the procedure to mask the origins of criminal proceeds
so that the proceeds appear to have come from genuine, legitimate sources, which
is known world-wide as 'MONEY LAUNDERING'. It is a diverse and often complex
process and those involved are:
 Hiding the true ownership and origin of criminal proceeds;
 Maintaining control of the proceeds;
 Changing the form of their ill-gotten gains; and
 Obscuring the movement of the proceeds.
 The Money Laundering Process
In order to change the form of criminal proceeds, money laundering has traditionally
been thought of as involving three independent steps that may occur
simultaneously:
1. Placement: Physically placing bulk cash proceeds.
2. Layering: Separating the proceeds from criminal activity from their origins
through layers of complex financial transactions.
3. Integration: Providing an apparently legitimate explanation for the illicit
proceeds.
For money laundering to be successful there must be no 'paper trail' to
connect these three steps. Thus, the money laundering regulations now
established set out to ensure that a 'paper-trail' does exist.
As noted above, however, even being in possession of criminal property would
constitute a money laundering offence.
The UK's Money Laundering Laws
The UK has long recognised the problem of money laundering. Consequently, antimoney laundering legislation has been in place for many years. In response to
international initiatives and European Union directives the UK legislation has
evolved over recent years and is now contained in a number of statutes and
regulations.
Underpinned by the UK's 'Proceeds of Crime Act 2002' (Part 7), the 'Money
Laundering Regulations of 2007', came into force on 15 December 2009 and
imposed new legal obligations on most companies and organisations, (known under
the regulations as the ‘regulated sector.’). The Money Laundering Regulations
created a number of anti-money laundering (AML) compliance requirements which
the regulated sector must undertake. The Proceeds of Crime Act also creates
obligations to report suspicions of money laundering by regulated sector firms.
Importantly, a failure to comply can result in criminal prosecution.
Essentially, the obligations are:
 To identify customers;
 To inform the criminal prosecution authorities if money laundering is
suspected; and,
 To take internal measures to prevent money laundering.
These regulations represent an important development in the UK's strategy to tackle
both money-laundering and terrorist-financing, as the proceeds of money-laundering
allow criminals to profit from their crimes and are used to fund organised crime and
terrorist activity. Thus, the integrity of the UK financial system is dependent on there
being vigorous measures in place.
In light of the above, the Financial Conduct Authority (FCA) has indicated that it
expects the LME, as with other institutions, to take reasonable steps to ensure that
the firm's employees understand:
 The UK's current AML regime, and,
 His/her individual AML responsibilities with respect to the firm.
The LME does not generally handle client money and very few LME employees
handle money received by the LME from third parties – mainly members and data
vendors. Nevertheless, the FCA has said it would like all employees to receive a
basic understanding of the AML regime.
 LME’s obligations
There are five key anti-money laundering requirements that are specific to the LME,
and these are extremely important to consider when looking at how to manage
money laundering risk.
 Appointment of a Money Laundering Reporting Officer ('MLRO') who will
determine internal controls and procedures;
 Monitoring;
 Record keeping;
 Reporting of suspicious transactions;
 Staff Training and awareness.
Your Money Laundering Reporting Officer ('MLRO')
The MLRO is the focal point within every company for overseeing all anti-money
laundering matters. Your MLRO will work independently of the business functions
and be responsible for all issues pertaining to AML compliance and reporting.
At the LME, your MLRO is the Finance Director. If you have any queries or
suspicions relating to money laundering, please speak to your MLRO. If the MLRO
is absent, or you work within the Compliance department, you should speak to the
Deputy Chief Executive or the General Counsel & Head of Enforcement in the
first instance.
Later on, you will learn more about the important role your MLRO maintains within
the LME.
Know your Client ('KYC')
The single most important rule for preventing and detecting money laundering is the
process termed ‘Know your Client’ (KYC).
Whenever an institution or an individual applies to become a member of the LME, it
is important not only to understand who the member is, but also to understand why
they want to do business on the LME. The FCA’s anti-money laundering rules
require all institutions to perform checks that confirm the identification of clients.
Because trading on the LME, including trading through LME Select, constitutes the
carrying on of a regulated activity in the United Kingdom, category 1, category 2 and
category 4 members of the LME are required to be authorised under the Financial
Services and Markets Act 2000. On an application for membership, the LME
checks with the applicant to ensure that it has in place anti-money laundering
procedures which comply with the FCA requirements. This is an important part of
the KYC process.
 The Know Your Client ('KYC') Process
The 'KYC' process is at the heart of any AML programme. So, in order to guard
against money laundering, the LME needs you to:
 Ensure that the identity of each new member is verified;
 Ensure that suspicious member applications or transactions are
recognised as such and reported;
 Ensure that if a member comes under investigation in the future, the LME
can provide its part of the audit trail.
The same principles apply in relation to any third party who is proposing to enter
into a commercial arrangement with the LME, which will involve the payment of
money to the LME. It is important to ensure that any suspicious counterparty
and/counterparties or transaction is recognised as such and reported.
This process is known by the expression, ‘KNOW-YOUR-CLIENT’. It is a
phrase that should be uppermost in your mind when dealing with new
commercial arrangements.
Monitoring, Recording & Reporting
There may be occasions where you can acquire a good deal of information about
members or commercial counterparties in the course of your work. You could,
therefore, come upon situations where a suspicion of money laundering ought to be
raised.
You must not assume that a member will always spot suspicious behaviour and
subsequently report it. Recognising suspicious behaviour and subsequently
reporting it is a legal obligation that applies to everyone. So even if a member has
reported suspicious activity, you will be liable if you were also aware of that activity
and did not report it. The reporting obligation also applies if a reasonable person in
your position would have been suspicious based on the information available to you
– i.e. this is a negligence test.
If you have knowledge or suspicion of money laundering, or there are
reasonable grounds to have such knowledge or suspicion, you must report it
yourself directly to your MLRO, who will arrange for the matter to be
investigated.
Should you possess knowledge or suspicion of money laundering you must, in the
first instance, report the circumstances orally to your MLRO; thus ensuring that the
MLRO, (or the deputy if the MLRO is unavailable,) is made aware of the situation
straight away. Without delay following your oral report, you should document the
facts and forward them to your MLRO, thus confirming in writing your knowledge or
suspicion of money laundering.
Once you have done this you have effectively DISCHARGED YOUR
RESPONSIBILITY.
It is now the responsibility of your MLRO to act.
 Retention of records
Verification of identity and relationship opening records, including an indication of
the nature of the evidence obtained and a copy of the evidence (or, where this is not
reasonably practicable, such information to enable a copy to be obtained) must be
retained. Regulated organizations are required to maintain these records for at least
FIVE YEARS from the date when the relationship with the client has ended. The
general rule is that it must be possible to recover all information regarding a specific
transaction.
These records may be retained in the form of the original documents, or copies may
be stored on microfiche or in computerised or electronic form.
Records which relate to current investigations or activities which have been
disclosed to the authorities should in all cases be retained pending agreement by
the authorities that records can be destroyed.
The law requires that the LME keeps complete records of any client
verification document and the activity/transactions that you and LME handle.
 Your Role in Preventing Money Laundering
To protect you and the LME, and to avoid being implicated in money laundering:
 You must not assist any person to obtain, conceal, retain or invest any
assets if it is (or should be) known or suspected that they are the
proceeds of any criminal conduct;
 You must report any suspicion or knowledge of money laundering to your
company's MLRO;
 You must not ‘tip-off’ any person that a potential case of money
laundering has been reported or is being investigated, (whether they are
the subject of a suspicion, or anybody else.)
If you fail to comply with these requirements you are committing a criminal offence,
which may lead on conviction to a fine or prison sentence, as outlined below:
 Providing assistance to a money launderer could result in up to 14 years
in prison, or a fine, or both;
 Failing to report your suspicion that money laundering may be taking
place, could lead to up to 5-years in prison or a fine, or both;
 'Tipping-off' a money launderer that he or she are being investigated,
could mean up to 2-years in prison, or a fine, or both.
 Money Laundering Red Flags
The following are examples of 'red flags' for money laundering. This list is not allinclusive, but may help you to recognise possible money laundering schemes. You
should be focused primarily on reporting suspicious transactions, not on determining
that the activities are linked to money laundering.
 Beware the member/counterparty that enters into transactions which
make little or no commercial sense or which go against normal market
practice;
 Beware the member/counterparty that is happy to enter into a bad deal;
 Beware the member/counterparty that is unwilling to explain the purpose
of a transaction with no obvious motive;
 Beware the member/counterparty that suddenly changes their pattern of
trading;
 Beware the member/counterparty that enters into deals beyond their
apparent financial means;
 Beware the member/counterparty that makes payments in cash;
 Beware the member/counterparty that wishes to deal in bearer securities;
 Beware the member/counterparty that transfers positions to apparently
unrelated third parties; and
 Beware the member/counterparty that takes part in transactions across a
number of different jurisdictions, as they could be transferring funds from
one country to another.
General Rule: Any actual or proposed activity/transaction which is out of the
ordinary should raise questions.
 How to report suspicions of money laundering
The law imposes a personal obligation on YOU to report to your MLRO actual or
suspected money laundering activities connected with any criminal conduct.
To avoid conviction (and the possibility of a fine and/or imprisonment) you must
either:
 Ensure that your knowledge or suspicions are reported; or
 Demonstrate that you did not know or suspect that the funds were the
proceeds of criminal conduct and that there were no reasonable grounds
for you to have such knowledge or suspicion.
If you have any suspicions at all about a transaction, a firm or an individual, you
should report them to the MLRO, currently the Finance Director. If the MLRO is
absent, or if you work within the Compliance Department, you should report your
suspicions to the Deputy Chief Executive or the General Counsel & Head of
Enforcement in the first instance. As soon as you have done so, you have fulfilled
all of your legal obligations. The MLRO will take responsibility and, if appropriate,
pass on the information to the relevant authorities.
If you are suspicious about a transfer of funds, transfer of positions, or other
transaction, which you are aware is planned but which has not yet taken place, you
must not become involved in the transaction or allow it to proceed without the
MLRO's express consent
After you have reported the suspicious activity to your MLRO, he will consider how
serious the situation is and subsequently decide whether a report should or should
not be made to the National Crime Agency (NCA).
At no time do you have to make this decision. The responsibility is entirely
your MLRO's.
The MLRO is the focal point within your company for overseeing all anti-money
laundering matters. Therefore, you must ensure that your MLRO has reasonable
access to all the information that could help him when considering disclosures
received from you.
You must not ‘tip off’ any person that a potential case of money laundering has
been reported or is being investigated, (whether they are the subject of a suspicion
or anybody else). You should not speak to the person about whom you are
suspicious, as doing so might alert him/her to the fact that he/she is being
investigated. This could prejudice a proper investigation and might constitute the
offence of "tipping-off".
Once you have reported your suspicions to the MLRO you have effectively
DISCHARGED YOUR RESPONSIBILITY and as a result, placed all future liability
concerning your suspicions firmly with your MLRO.
If you have any queries about this training information or your responsibilities please
contact the Finance Director, the Deputy Chief Executive or the General Counsel &
Head of Enforcement.
NOW, PLEASE COMPLETE THE DECLARATION BELOW.
I confirm that I have read the above information and am familiar with :

My responsibility under LME’s ‘Anti-Money Laundering’ (AML)
procedures;

The identity of my Money Laundering Reporting Officer (MLRO);

The potential effect of any breach of the money laundering regulations on
LME.
Name :
Signature:
Department :

Download Report