Financial Crime Awareness An Overview

Financial Crime AwarenessAn Overview

Objectives • Understand what Money Laundering is how you could commit a money laundering offence • Recognise the need to conduct Customer Due Diligence and where to find guidance on your Anti-Money Laundering Requirements on the extranet • Understand what is meant by Terrorist Financing, Financial Sanctions and how they apply to you • Understand what Corporate Facilitating Tax Evasion is and how the regulations apply to you • How to identify and report Suspicious Activity • Understand what Cyber Crime is and how to protect yourself • Understand offences of Bribery under the Bribery Act • Understand the Quilter Gifts and Entertainment policy and your obligations

Content Your obligations What is Money Laundering & the offences of Money Laundering Money Laundering Regulations 2017 & Customer Due Diligence Terrorist Financing & Financial Sanctions Corporate Facilitating Tax Evasion How to recognise Suspicious Activity & the reporting process Cyber Crime Awareness Bribery & Conflicts of Interest Gifts and Entertainment Summary and next steps

Your Obligations • Although you don’t need to memorise the AML legislation, you are expected to understand what your obligations are as a result of it • You need to know that Gill Davidson is Quilter Financial Plannings Money Laundering Reporting Officer (MLRO) • You need to understand what Money Laundering and Terrorist Financing is • Understand how the Money Laundering and Terrorist Financing offences effect you • As we are part of the regulated sector you must understand that you are legally obliged to verify the identity of a client before the start of a business relationship • You need to understand how to recognise suspicious activity and know how to make a report

In this section Your obligations What is Money Laundering & the offences of Money Laundering Money Laundering Regulations 2017 & Customer Due Diligence Terrorist Financing & Financial Sanctions Corporate Facilitating Tax Evasion How to recognise Suspicious Activity & the reporting process Cyber Crime Awareness Bribery & Conflicts of Interest Gifts and Entertainment Summary and next steps

What is Money Laundering Money laundering occurs every time a transaction takes place or arelationship is formed that involves any form of property from any crime It includes money or assets obtained criminally which are exchanged for money or assets that are ‘clean’, with no obvious link to any criminal activity This process typically involves three key stages known as:

UK Regulatory Framework The laws, rules and guidance relating to anti money laundering and terrorist financing in the UK is made of up of: Primary legislation Proceeds of Crime Act 2002 (POCA) Criminal Finances Act 2017 Secondary legislation Money Laundering Regulations 2017 (MLR) Industry and Professional Guidance Guidance notes, e.g. Joint money Laundering Steering Group (JMLSG) Regulator/Supervisory Rules and Enforcement Financial Conduct Authority Systems & Controls (SYSC) Source Book Her Majesty’s Revenue & Customs (HMRC) Law Society Office of Fair Trading (OFT) (Estate Agents) Gambling Commission (Casinos) Financial Sanctions – HM Treasury Sanctions notices and new releases Terrorism Act – Counter Terrorism Act 2008

Money Laundering Offences • Tipping off – where a person makes an unlawful disclosure which is likely to prejudice a money laundering investigation Imprisonment for a maximum of 5 years and/or an unlimited fine Assisting – being involved in concealing, disguising, converting or transferring criminal property Imprisonment for a maximum of 14 years and/or an unlimited fine Failing to report – a person knows or suspects, or has reasonable grounds for knowing or suspecting that another person is involved in ML but fails to report via a SAR Imprisonment for a maximum of 5 years and/or an unlimited fine ‘Tipping off’, ‘Assisting’ and ‘Failing to report’ are criminal offences – resulting in imprisonment and/or fines:

Tipping Off Examples You are contacted by the police for information on one of your clients as they believe that they may have committed a money laundering offence. You provide the requested information but contact your client to inform them you have done so. During the course of business you become suspicious of your client, you file a Suspicious Activity Report and are awaiting confirmation that the transaction can proceed. The client is chasing you to complete their application and you advise them that this is on hold as you are awaiting confirmation that the business can proceed.

Assisting Examples You are aware that your client is under investigation for Money Laundering; the client has investments that they have requested are withdrawn as they believe they will shortly be subject to an asset freezing order. You arrange the withdrawal and as requested by the client the funds are re-invested under a family member. You are approached by a client to arrange a mortgage, they are an employed tradesman which can be evidenced through payslips and bank statements. You notice the client will deposit cash payments in to their account from time to time and these payments have contributed to the deposit. You ask the client what these sums are for and they confirm that they will occasionally do ‘cash jobs’ to earn extra money. You ask the client if they declare the income to HMRC, the client advises that they weren’t aware they had too, you note this on your file and proceed with the application.

Failing to REPORT A self employed client provides you with SA302’s and bank statements You see that the income being declared does not match the amount of credits showing on the bank statement. You are suspicious that the client is tax evading but do not make a report. You are approached by a couple to arrange a mortgage, the clients are married and have two children. The clients also receive tax credits, you request the tax award letter to evidence the income, the award letter is received and is only addressed to applicant 1 based on their sole income, you question this and are advised that applicant 2 is still registered at their parents address as HMRC believe that they are living separately, this allows them to receive a higher rate of benefits. You advice the clients that you are unable to help them but do not make a report.

Money laundering regulations 2017 The 4th Money Laundering Directive (‘4MLD’) was introduced on 26 June 2015. It required European member states to update their respective money laundering laws and “transpose” the new requirements into local law by 26 June 2017. The Money Laundering Regulations 2017 came into force on 26 June 2017, which replaces the Money Laundering Regulations 2007. As a result of these new requirements Quilter have made changes to strengthen our systems and controls, ensuring Quilter and all it’s Advisers adhere and comply with these rules. Guidance can be found on the extranet in the following location; Working with us > Risk Regulations and Complaints > Financial Crime >Anti Money Laundering Guidance

Customer Due Diligence Money Laundering Regulations and Joint Money Laundering Steering Group guidance stipulate that firms should have appropriate systems and controls to reflect the degree of risk associated with its business and customers; firms should determine appropriate customer due diligence measures on a risk-sensitive basis. Where the risk of Money Laundering is higher appropriate due diligence checks should be put in place to mitigate the risk. Quilter have carried out a risk assessment on both the products and services we provide to our customers. Quilter’s risk assessment is based on client profile, how the advice process has been carried out and the product recommendation.

Customer Due Diligence LOW RISK BUSINESS - For business that has been deemed low risk, you are required to follow the standard customer due diligence (CDD) requirements – which may include, obtaining a obtaining a satisfactory URU pass result or certified copies name and address proof. MEDIUM RISK BUSINESS - For business that has been deemed medium risk in most circumstances the client or funds will be overseas, therefore you will be required to obtain certified copies name, address proof and source of funds and/or source of wealth evidence. There is a list of acceptable forms of ID that can be used to verify the client identity via paper copies this can be found on the extranet ; Working with us > Risk Regulations and Complaints > Financial Crime >Anti Money Laundering Guidance > Acceptable Forms of ID

Enhanced Due Diligence HIGH RISK BUSINESS - In some cases where the business is deemed higher risk, you will be required to conduct Enhanced Due Diligence (EDD) – which may include; obtaining a satisfactory URU pass result, evidence of source of funds and source of wealth. The EDD measurements and requirements will be dependent on; • product type • whether your client is politically exposed (further guidance on Politically Exposed Persons on page 16 of this document). • the clients jurisdiction or the origin of any deposits (i.e. if the client, donor or funds are from overseas or a listed high risk country)

Enhanced Due Diligence The introduction of source of funds and source of wealth reduces the risk that your business is being used to facilitate money laundering or terrorist financing by creating a full and clear audit trail of the funds origin, any movement in between and where it currently sits. Source of funds is where the money being used to fund the ‘product’ is currently held, for example this can be evidenced via bank statements or investments statements Source of wealth is the way in which the monies for the product were accumulated, evidencing where the monies derived from. These details are required to ensure a clear and full audit trail of the funds are available, in order to determine that the funds being invested have derived from legitimate sources. Should your client fall under any of the high risk categories set out above, please refer to the High Risk Clients and EDD Requirements document on the Extranet for full guidance on your obligations. Pre-approval from the financial crime team to carry out such a transaction is required This guidance can be found on the extranet in the following location; Working with us > Risk Regulations and Complaints > Financial Crime >Anti Money Laundering Guidance > Retail Client AML Requirements Our ID requirements align to the Joint Money Laundering Steering Group guidance (JMLSG) and the Money Laundering Requirements 2017, therefore they must be adhered to. Failure to do so could result in a Money Laundering breach being logged against you.

Who is a Politically exposed person? Individuals who have, or have had a high political profile, or hold or have held a position within public office, can pose a higher money laundering risk to Quilter and our Representatives. The reason for this is their position can expose them to corruption. This risk also extends to Relatives and close associates (RCA’s), i.e. immediate family members and/or known close associates, such as Financial Advisers. heads of State, heads of government, ministers and deputy or assistant ministers; members of parliaments or similar legislative bodies; members of the governing bodies of political parties; members of supreme courts, of constitutional courts or of other high-level judicial bodies whose decisions are not subject to further appeals, expect 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

IN this Section Your obligations What is Money Laundering & the offences of Money Laundering Money Laundering Regulations 2017 & Customer Due Diligence Terrorist Financing & Financial Sanctions Corporate Facilitating Tax Evasion How to recognise Suspicious Activity & the reporting process Cyber Crime Awareness Bribery & Conflicts of Interest Gifts and Entertainment Summary and next steps

What is Terrorist financing? Terrorist financing provides funds for terrorist activity. The main objective of terrorist activity is to threaten a population or coerce a government to do something by killing, seriously harming or endangering people or seriously disrupting essential services, facilities or systems. There are two main sources of terrorist financing: financial support from countries, organisations or individuals. revenue generating activities, may involve drug trafficking, human smuggling, theft, robbery and fraud to generate money, but may also come from legitimate sources such as personal donations and profits from businesses and charitable organisations, Funds raised to finance terrorism usually have to be laundered and therefore it is important for Quilter to have anti-money laundering processes and procedures in place to identify terrorist financing activities.

What are Financial sanctions Financial sanctions are imposed by the government and may apply to individuals, entities and governments, who may be resident in the UK or abroad. A key element of many financial sanctions regimes is asset freezing. Asset freezes comprise two elements: A prohibition on dealing with the funds or economic resources belonging to or owned, held or controlled by a designated person, and A prohibition on making funds or economic resources available, directly or indirectly, to, or for the benefit of, a designated person. An asset freeze prevents anyone “dealing” with funds or economic resources which belong to, or which are owned, held or controlled by, a designated person. This includes moving, transferring, altering, using or allowing access to funds or assets.

How Financial sanctions Apply to you…. HM Treasury is responsible for implementing Sanctions, through the Office of Financial Sanctions Implementation. Financial sanctions orders prohibit a firm from carrying out transactions with a person or organisation (known as the target). In some cases the order will prohibit a firm from providing any financial services to the target. Quilter’s Financial Crime Team has processes to manage the risk of conducting business with, or on behalf of individuals and subject to financial sanctions including client screening against relevant sanctions lists. The Financial Crime Team will inform you if one of your clients is subject to financial sanctions, any business with your client should cease immediately, the Financial Crime Team will inform the Office of Financial Sanctions Implementation on your behalf. The Office of Financial Sanctions Implementation may permit a licence to continue with the transaction, we will inform you if a licence has been granted.

Failure to comply with UK sanctions regime The sanctions regime requires absolute compliance and any person in breach of an obligation will be guilty of an offence, unless a defence is successfully made. It is a criminal offence not to comply with a financial sanction. Any person guilty of an offence is liable on conviction to imprisonment of 7 years and/or a maximum fine of £1,000,000. In a case where the breach or failure relates to particular funds or economic resources and it is possible to estimate the value of the funds or economic resources, the permitted maximum is the greater of - (a) £1,000,000, and (b) 50% of the estimated value of the funds or resources.

In This Section Your obligations What is Money Laundering & the offences of Money Laundering Money Laundering Regulations 2017 & Customer Due Diligence Terrorist Financing & Financial Sanctions Corporate Facilitating Tax Evasion How to recognise Suspicious Activity & the reporting process Cyber Crime Awareness Bribery & Conflicts of Interest Gifts and Entertainment Summary and next steps

Corporate facilitating tax evasion Tax evasion is the illegal non payment or underpayment of tax by individuals, corporations, and trusts. The Criminal Finances Act 2017 is an amendment to the Proceeds of Crime Act 2002 and the aim is to significantly improve the UK’s ability to tackle money laundering, corruption, tax evasion and terrorist financing. Part III of the Act makes it a criminal offence for an associated person of a relevant body to facilitate tax evasion and creates two new criminal offences: UK tax evasion facilitation offence Non UK tax evasion facilitation offence

WHAT DOES THIS ACTUALLY MEAN? The Act makes it a criminal offence for an associated person of a relevant body to facilitate tax evasion. Associated persons – the scope of the act means that anybody permitted to offer products or provide services on behalf of an entity may be captured by this term. The term applies to both individuals and corporates. This would include an adviser or administrator (employed or self employed) within an Appointed Representative of Quilter. Relevant body - meaning a body corporate or partnership (wherever incorporated or formed) this would include an Appointed Representative of Quilter. Facilitate tax evasion - an associated person will commit the facilitation offence where they knowingly and dishonestly encourage or assist the commission of a tax evasion offence.

OFFENCES OF CORPORATE FACILITATING TAX EVASION UK TAX EVASION FACILITATION OFFENCE An offence is committed where an entity anywhere in the world has failed to prevent the criminal facilitation of UK tax evasion by its associated persons. The offence applies to all entities regardless of their location NON-UKTAX EVASION FACILITATION OFFENCE Where the tax evaded is not UK tax, there will only be a liability for the corporate offence where there is a UK connection. A UK connection will be established where: 1. The financial institution is incorporated in the UK, 2. The financial institution has a place of business in the UK, or 3. Any aspect of the facilitation offence occurs in the UK.

IMPORTANCE OF PREVENTION The only defence is to have reasonable prevention procedures in place. Similar to the Bribery Act 2010, HMRC has issued guidance on how a relevant body might do this Within Quilter this means: Training and awareness Guidance and reporting procedures (published on the extranet) Dedicated Financial Crime Team to answer any questions Client Fact Find/Advice Process requirements

WHAT DOES THIS MEAN FOR YOU? Remain vigilant in the course of doing your role and where you have a concern that Quilter may be being used to further a financial crime, including being used to evade tax a suspicious activity report is raised in line with the usual reporting procedures. If you suspect that a client is evading tax you must not proceed with the advice and inform the financial crime team immediately. If advice is given it may constitute the offence of facilitating tax evasion. Contact details: Financial Crime Manager – Lindsay Palfreeman AML & CDD Specialist – Rachael Hyde Useful Information: Suspicious Activity Reporting Corporate Facilitating Tax Evasion – Awareness and Guidance – please refer to the Corporate Facilitating Tax Evasion section on the extranet

Suspicious ACTIVITY Key client behaviours Below are some examples of behaviours that may indicate Suspicious Activity; Behaviour • There is no legitimate reason for the relationship; e.g. the client is based in a different area and contacts you out of the blue • Secretive and unwilling to provide information such as fact find or advice process documentation. • A client puts great pressure on you to follow their instructions without providing you with all the answers that you need • Unexpected and last minute changes to a request which are not in keeping with the clients risk appetite or long term objectives. • There is unusual or irregular activity compared with what you know about the client Lifestyle changes • Unexplained increase in spending • Known financial/personal pressures Procedures • Being asked to do something outside of normal process and procedure • Bypassing or omitting information from standard procedures

Examples of suspicious activity?Examples of Suspicious Activity

What is suspicious activity?What is Suspicious Activity?

Suspicious activity reporting (SAR) process You can find the SAR process in the Extranet (https://extranet.Quilter.com/financial-crime/) 1. Click on RISK, REGULATIONS AND COMPLAINTS 2. Click on FINANCIAL CRIME 3. Click on the SUSPICIOUS ACTIVITY REPORTING drop down and follow the steps

Suspicious activity reporting (SAR) process The ultimate decision to report is yours and you should not be influenced by another person’s views The steps are: Either download and complete the SAR, or contact the Financial Crime Team directly Ensure the SAR has all of the relevant details, is clear and descriptive (avoid jargon) Email the completed SAR to: QFPSARS@Quilter.comandinclude the client’s name within the email’s subject line Once you’ve submitted the SAR, you must not discuss it with anyone, except as advised by the Financial Crime Team – as this would be Tipping off, which is a criminal offence. Do not indicate your suspicions on your client’s file or attach the SAR form to it

Cyber crime What is Cyber Crime? Cyber Crime is a crime in which a computer is the object of the crime (hacking, phishing, spamming) or is used as a tool to commit an offense. Hacking – to gain unauthorized access to computer, data or networks. Phishing - the fraudulent practice of sending emails with the intention to induce individuals to reveal personal information, such as passwords and credit card numbers. Malware – Malicious Software designed to damage or disrupt a computer system without the owners knowledge or permission, Malware can even be used to steal information.

Cyber crime awareness things to look out for E-mail addresses Pay attention to the senders e-mail address, is this as you would expect? Would the company/individual usually contact you in this way? URLS Are URL’s included in the e-mail genuine? They will often link to a website that copies the genuine website however the address will be incorrect. Attachments Be cautious of any emails asking you to open attachments to check your account details are correct or to verify your activity; usually these attachments are often bogus and contain malware Who is the email addressed to? Most phishing mails will often be generically addressed as they are normally sent on mass and usually start with “Dear Sir/ Madam” or “Dear customer” this is an instant sign that the mail is more than likely bogus. . However the level of detail within phishing attacks in recent times has improved and hackers can often use any details they have about you to generate a mail merge so the email will often look like it is drafted especially for you. Another clue to look out for within the content of the mail is poor grammar or spelling mistakes. Why so urgent? Why do you need to act now? Stop and think! If in any doubt give the bank/company/individual a call to verify the mail is genuine and NEVER dial any contact numbers within that mail. NEVER act on an e-mail instruction from your clients to withdraw funds, always contact them via phone or arrange a meeting to verify the instruction is genuine. A fraudster will offer excuses as to why this is not possible.

Top ten cyber TIPS Why would they hack me? Remember everyone is a potential target Turn on Automatic Updates keep software and devices up to date and patched. Antivirus & Fire Walls Keep them enabled & up to date at all times, especially when working outside of the office. Backups Keep your data regularly backed up and don’t forget to periodically test restores too. Public Wi-Fi Where possible avoid using public Wi-Fi. Where it must be used, use a VPN back into your office network.

Top ten Cyber Tips Username and password management Avoid using your work email account to sign up for sites & never write your password down or share it. Safe use of USB devices Before plugging in a USB device, confirm it has come from a trustworthy source. Keep sensitive data safe Always lock your devices before leaving them unattended and practice a clear desk policy. Mobile Device Safety Always encrypt & password protect mobile devices. Avoid using personal accounts & applications for business purposes. Social Media Take care when using Social Media, this is a great way to promote your business but think about who can see this information?

Bribery What is Bribery? ‘An offer or receipt of any item of financial or other advantage from a person such as inducementto carry out a dishonest, illegal or trust-breaching act in the conduct of business’ The Bribery Act 2010 came into force on the 1st July 2011 and created the offences of: Offering, promising or giving a bribe Requesting or agreeing to receive or accept a bribe Bribing a public official Corporations failing to prevent bribery undertaken on its behalf

Corporate offence of Bribery The corporate offence of failing to prevent bribery undertaken on behalf of corporations applies to: All companies, partnerships and individuals doing business in the UK Applies to acts or omissions worldwide Quilter prohibits the offering, giving or accepting of any dishonest payment by its employees and members intended to alter theirs or another’s conduct or decision. If you are requested to conduct an act outside of normal process in return for money or other non-monetary benefits the request must be refused and reported to the Financial Crime Team Immediately.

Conflicts of Interest A conflict of interest may arise when a person becomes involved in a business relationship that could influence their decision making or conduct when fulfilling their obligations to Quilter, for example; Encouraging a customer to purchase a less favourable product to receive a higher fee/commission Advising as a Trustee, holding a Power of Attorney, becoming an Executor or a Beneficiary for a Will in respect of your own customers The full conflicts of interest policy and guidance can be found on the extranet in the following location; Working with us > Risk Regulations and Complaints > Financial Crime > Policies Quilter requires its members to provide confirmation of compliance with the Conflicts of Interest Policy. This is achieved during Competency Assessments.

What it means to you – Bribery & conflicts of Interest You must not offer, give or accept any dishonest payment intended to alter your own or another's conduct or decision. You will be asked to complete a Conflicts of Interest Attestation during Competency Assessments. Any potential Conflicts should be disclosed to Quilter immediately regardless of when the Attestation was last completed.

Gifts & Hospitality Quilter recognises that the giving and receiving of gifts and/or entertainment is a normal activity in the course of business. Quilter supports the activity provided it is reasonable in scale and nature, it is transparent and it does not cause decisions or conduct to be influenced. They must fall within the FCA interpretation of “minor non-monetary benefits”. Appointed Representative (AR) firms and their advisers should not place themselves in a position where they may be deemed to have been influenced in making a business decision or to provide preferential treatment. The offer of gifts and corporate hospitality should have a demonstrable link to the work of Quilter Financial Planning and be designed to enhance the quality of service to the client. No donations should ever be made to Charities or other organisations with the intention of gaining a business advantage. Quilter do not permit gifts to be made to Political Parties.

Gifts & Hospitality – Your Obligations Advisers Need to report any gifts and hospitality offered/received their Practice Principal. Consent from your Principal should be obtained prior to offering or accepting any gifts or entertainment. Practice Principals need to keep a register of Gifts and Entertainment offered or received; Principals are responsible for ensuring that processes are in place to allow employees to comply with the policy and for providing evidence of compliance at their Annual Inspection Visit (AIV).

Summary Money Laundering and associated acts are a criminal offence It is imperative that you read and understand your obligations under the newly introduced legislation It is important to note where to find the latest Anti-Money Laundering Guidance on Customer Due Diligence requirements Customer Due Diligence and Enhanced Due Diligence reflects the degree of risk associated with our business and customers It is essential you read the Terrorist Financing and Financial Sanctions regime and understand your obligations It is crucial that you know how to recognise and report suspicious activity and who the MLRO is The offering or acceptance of a Bribe is a criminal offence Gifts and Entertainment offered or received should be reported to your Practice Principal who should keep a record

Financial Crime Awareness An Overview

Financial Crime Awareness An Overview

Presentation Transcript

Financial Statements: An Overview

Financial Awareness Series

Financial Aid 101: An Overview

Business Financial Crime: Issues in Fighting Financial Crime

Financial Awareness

Cyber Crime Awareness Week

Financial Aid 101: An Overview

Cyber Crime Awareness

Multinational Financial Management: An Overview

Financial Coaching: An Overview

Computer Crime An Investigative Overview

Financial Crime Reporting

Financial Awareness

Financial Statements: An Overview

Financial Crime Unit

Financial Aid: An Overview…

Introduction to Financial Crime including an Overview of Money Laundering

Business Financial Crime: Organised Crime

Financial Aid: An Overview…

Financial Management : An Overview

An Overview of Financial Management

Financial Statements An Overview