ML Money Laundering

ML 1

Application
and Purpose

ML 1.1

Application

01/12/2004

ML 1.1.1

(1) This sourcebook applies to every relevant firm (see ML 1.1.2 R) with respect to its relevant regulated activities (see ML 1.1.4 R), but there are special provisions in ML 8.1for sole traders with no employees and authorised professional firms.

(2) Some provisions also relate to the money laundering reporting officer of a relevant firm in his capacity as an approved person (see ML 7.1).

01/04/2005

Who?

ML 1.1.2

(1) In this sourcebook, "relevant firm" means every firm, except:

(a) a firm whose only regulated activities are those specified in ML 1.1.4 R (1);

(b) a UCITS qualifier.

(2) An incoming firm is a relevant firm, but only to the extent that it is conducting activities from an establishment in the United Kingdom.

01/12/2001

ML 1.1.3

The scope of this sourcebook is very wide. It includes all firms except:

(1) those within the limited exception for firms concerned only with certain insurance activities and UCITS qualifiers (see ML 1.1.2 R); in this respect, the chapter follows article 1 of the Money Laundering Directive (No.91/308/EEC as amended by No 2001/97/EEC);

(2) those within the exception for firms carrying on any insurance mediation activity in relation to a general insurance contract or pure protection contract (see ML 1.1.4 R (1A)) or any mortgage mediation activity (see ML 1.1.4 R (5)); in this respect, the chapter follows articles 2(3)(h) and 2(3)(i) of the Money Laundering Regulations 2003 (SI 2003/3075).

The scope extends to incoming firms (such as branches of institutions established elsewhere in the EEA), except those providing only cross border services in the United Kingdom. This is because the Directive is designed to apply on a "Host State" basis. ML does not apply with respect to the unregulated activities of a firm, for example money service business.

01/04/2005

What?

ML 1.1.4

In this sourcebook, "relevant regulated activities" means any regulated activity apart from:

(1) general insurance business;

(1A) insurance mediation activity in relation to a general insurance contract or pure protection contract;

(2) long-term insurance business which is outside the First Life Directive (and is not otherwise a relevant regulated activity);

(3) business relating to contracts which are within the Regulated Activities Order only because they fall within paragraph (e) of the definition of " contract of insurance " in article 3 of that Order (see the Glossary );

(4)

(a) arranging, by the Society of Lloyd's, of deals in general insurance contracts written at Lloyd's; and

(b) managing the underwriting capacity of a Lloyd's syndicate as a managing agent at Lloyd's; and

(5) mortgage mediation activity .

14/01/2005

Where?

ML 1.1.5

This sourcebook applies only in relation to activities carried on from an establishment maintained by the firm (or its appointed representative) in the United Kingdom.

01/12/2001

ML 1.2

Purpose

01/12/2004

ML 1.2.1

The purpose of this sourcebook is to require relevant firms to have effective anti-money laundering systems and controls, in order to reduce the opportunities for money laundering in relation to relevant firms. It is also to require relevant firms to ensure that approved persons exercise appropriate responsibilities in relation to these anti-money laundering systems and controls.

01/12/2001

ML 1.2.2

Section 2 of the Act (The Authority's general duties) sets out the regulatory objectives of promoting market confidence and public awareness, protecting consumers and reducing financial crime. The reduction of financial crime objective is the most important to this sourcebook. One aspect of the reduction of financial crime objective is the risk of the businesses of relevant firms being used in connection with offences which involve handling the proceeds of crime. It follows that an effective and proportionate regulatory regime is important in reducing the extent to which it is possible for the businesses carried on by relevant firms to be used for money laundering. These rules and compliance with them will also help the FSA to meet the objective of maintaining market confidence, by reducing the risks posed to the financial community by money laundering. As to the public awareness objective, this sourcebook is designed to assist relevant firms and, through them, the public at large, to be better informed about the safeguards for the financial system provided by effective anti-money laundering systems and controls. Consumers are better protected if relevant firms are able to protect themselves against criminal activity and to record the steps they have taken for that purpose.

01/12/2001

ML 1.2.3

This sourcebook provides support, in relation to money laundering, for certain other parts of the Handbook, mainly:

(1) the Principles (PRIN), especially PRIN 3;

(2) the Statements of Principles and Code of Practice for Approved Persons (APER), in particular Statements of Principle 2 and 7;

(3) Senior Management Arrangements, Systems and Controls (SYSC), in particular SYSC 3; and

(4) the Training and Competence sourcebook (TC).

01/12/2001

ML 1.2.4

This sourcebook relates to regulatory requirements, as opposed to requirements imposed by the criminal law. It is, therefore, not relevant guidance for the purposes of regulation 3(3) of the Money Laundering Regulations or section 330(8) of the Proceeds of Crime Act 2002.

01/03/2004

ML 1.2.5

In assessing a relevant firm's compliance with the requirements of this sourcebook, the FSA will have regard to the relevant provisions of the Joint Money Laundering Steering Group's Guidance Notes for the Financial Sector.

01/03/2004

ML 2

General money laundering duties

ML 2.1

Duty to have arrangements and to appoint a money laundering reporting officer

01/12/2004

ML 2.1.1

A relevant firm must set up and operate arrangements, including the appointment of a money laundering reporting officer (MLRO) in accordance with the duty in ML 7, which are designed to ensure that it, and any appointed representatives that act on its behalf, are able to comply, and do comply, with the rules in this sourcebook.

01/12/2001

ML 2.1.2

The duties of the MLRO are set out in full in ML 7. The MLRO is responsible for the oversight of the relevant firm's anti-money laundering activities and is the key person in the relevant firm's implementation of anti-money laundering strategies and policies.

01/12/2001

ML 2.1.3

If a relevant firm permits or requires an appointed representative to carry on particular relevant regulated activities on its behalf, the relevant firm's duty to comply with this sourcebook and the MLRO's duties set out in ML 7 also apply to the activities of those appointed representatives.

01/12/2001

ML 3

Identification
of the client

ML 3.1

The duty

01/12/2004

Purpose and meaning of "client"

ML 3.1.1

The purpose of this chapter is to ensure that relevant firms carry out the identification of clients. The chapter also makes clear that relevant firms must not, in general, carry out relevant regulated activities, or agree to do so, for a client or potential client unless the relevant firm has taken reasonable steps to check that client's identity. In this sourcebook "client" is defined differently from elsewhere in the Handbook and relevant firms should take care to ensure that they use the correct definition. There are special provisions in this chapter for cases where the person with whom the relevant firm has contact is acting for another. Broadly, the relevant firm has to enquire into the identity of both persons, unless a relevant exemption enables it to focus solely on the person it is actually in contact with.

01/12/2001

Meaning of "transaction"

ML 3.1.2

"Transaction" in this sourcebook includes the giving of advice, and thus has a wide meaning throughout this sourcebook. Certain sorts of transaction are exempted from these requirements. These include cases where the transaction is of relatively small value or the person has been vouched for by another person who can be relied on to have carried out these checks himself. But the various exemptions from the requirement are all subject to the overriding condition that there is nothing in place to put the relevant firm on enquiry ("knowledge or suspicion") in the money laundering context.

01/12/2001

Identification of the client: the duty

ML 3.1.3

(1) A relevant firm must take reasonable steps to find out who its client is by obtaining sufficient evidence of the identity of any client who comes into contact with the relevant firm to be able to show that the client is who he claims to be.

(2) If the client with whom a relevant firm has contact is, or appears to be, acting on behalf of another, the obligation in (1) is to obtain sufficient evidence of both their identities.

(2A) If the client, or the person on whose behalf he is acting, engages in money service business and is registered with the Commissioners for HM Revenue and Customs, sufficient evidence of identity must include the registered number, within the meaning given by regulation 9(2) of the Money Laundering Regulations, of the client or the person on whose behalf he is acting.

(3) This rule is subject to the exceptions in ML 3.2.

21/04/2005

Financial exclusion

ML 3.1.5

The guidance in ML 3.1.5 G to ML 3.1.7 G aims to help relevant firms ensure that, where people cannot reasonably be expected to produce detailed evidence of identity, they are not denied access to financial services. Although a relevant firm must always take reasonable steps to check who its client is, relevant firms will sometimes be approached by clients who are at a disadvantage, or who otherwise cannot reasonably be expected to produce detailed evidence that helps to confirm identity. An example could be where a person does not have a passport or driving licence, and whose name does not appear on utility bills.

01/12/2001

ML 3.1.6

If a relevant firm has reasonable grounds to conclude that an individual client is not able to produce detailed evidence of his identity and cannot reasonably be expected to do so, the relevant firm may accept as identification evidence a letter or statement from a person in a position of responsibility who knows the client that tends to show that the client is who he says he is, and to confirm his permanent address if he has one.

01/12/2001

ML 3.1.7

Examples of persons in a position of responsibility include solicitors, doctors, ministers of religion, teachers, hostel managers and social workers.

01/12/2001

Identification of the client: timing

ML 3.1.8

(1) A relevant firm must comply with the obligation in ML 3.1.3 R (1) as soon as reasonably practicable after it has contact with a client with a view to:

(a) agreeing with the client to carry out an initial transaction; or

(b) reaching an understanding (whether binding or not) with the client that it may carry out future transactions.

(2) If the client does not supply evidence of identity within the time scale in (1), the relevant firm must:

(a) discontinue any regulated activity it is conducting for him; and

(b) bring to an end any understanding it has reached with him;

unless in either case the relevant firm has informed the National Criminal Intelligence Service (NCIS).

01/12/2001

ML 3.1.9

Nothing in ML 3.1.8 R (2) requires a relevant firm to continue with a transaction which conflicts with its obligations, if any, in relation to rights of a third party.

01/12/2001

ML 3.2

The exceptions

01/12/2004

ML 3.2.1

(1) This section sets out circumstances in which:

(a) the duty in ML 3.1.3 R (1) (Identification of the client: the duty) need not be complied with; or

(b) the relevant firm is required to take reasonable steps to establish the identity of a person for whom the client is acting.

(1A) None of the rules in this section applies if the relevant firm:

(a) knows or suspects; or

(b) has reasonable grounds to know or suspect;

in accordance with (2) that the client or the person on whose behalf he is or appears to be acting is engaged in money laundering.

(2) The relevant firm will be taken to know or suspect or to have reasonable grounds to know or suspect as set out in (1A) if any member of the staff handling the transaction or potential transaction or managerially responsible for it knows or suspects or has reasonable grounds to know or suspect.

01/12/2002

When the duty to identify does not apply

ML 3.2.2

The duty in ML 3.1.3 R (1) (Identification of the client: the duty) does not apply if:

(1) the client is also:

(a) a credit institution or financial institution covered by the Money Laundering Directive; or

(b) an authorised professional firm; or

(c) is regulated by an overseas regulatory authority (see ML 3.2.7 R) and is based or incorporated in a country (other than an EEA State) whose law contains comparable provisions to those contained in the Money Laundering Directive; or

(2) the transaction is:

(a) a one-off transaction with a value of less than euro 15,000; or

(b) is one of a number of transactions which are related and, when taken together, have a value of less than euro 15,000; or

(3) with a view to carrying out a one-off transaction, the client (other than a money service operator) is introduced to the relevant firm by a person who has given the relevant firm a written assurance that in all such cases he obtains and records identification evidence, and:

(a) the person who has given the written assurance is a credit institution or financial institution covered by the Money Laundering Directive, or an authorised professional firm, or an entity undertaking comparable activities in an EEA State; or

(b) the person is regulated by an overseas regulatory authority (see ML 3.2.7 R) and is based or incorporated in a country (other than an EEA State) whose law contains comparable provisions to those contained in the Money Laundering Directive; or

(4) the proceeds of a one-off transaction;

(a) are to be payable to the client but are then to be invested on his behalf;

(b) are to be the subject of a record; and

(c) can thereafter only be reinvested on his behalf or paid directly to him; or

(5) when the transaction concerns a long-term insurance contract:

(a) taken out in connection with a pension scheme relating to the client's employment or occupation, if the policy contains no surrender clause and cannot be used as security for a loan; or

(b) where the premium is a single payment of no more than euro 2,500; or

(c) where the premium payments do not exceed euro 1,000 in any calendar year.

01/03/2004

ML 3.2.3

A relevant firm is expected to take reasonable steps to determine whether or not the client falls within the exceptions in ML 3.2.2 R (1) and ML 3.2.2 R (3)(b).

01/12/2001

Where the client is acting for another person

ML 3.2.5

Where the client acts, or appears to act, other than in the circumstances covered by ML 3.2.2 R (1) and ML 3.2.2 R (3) for another person, the relevant firm must take reasonable steps for the purpose of establishing the identity of that person.

01/03/2004

Relevant overseas regulatory authorities

ML 3.2.7

An overseas regulatory authority is relevant for the purposes of ML 3.2.2 R (3)(b) and ML 3.2.5 R if it falls within section 82 of the Companies Act 1989 (Request for assistance by overseas regulatory authority), in so far as it exercises the kind of regulatory functions described in that section.

01/12/2001

ML 4

Reporting

ML 4.1

Internal reporting

01/12/2004

ML 4.1.1

This section deals with the reporting to the firm's MLRO or a person authorised by the Director General of NCIS of knowledge or suspicions within the relevant firm about money laundering.

01/03/2004

ML 4.1.2

(1) A relevant firm must take reasonable steps to ensure that any member of staff who handles, or is managerially responsible for handling, transactions which may involve money laundering makes a report promptly to the MLRO or a person authorised by the Director General of NCIS , within the same firm or group, if he:

(a) knows or suspects; or

(b) has reasonable grounds to know or suspect;

that a person is engaged in money laundering.

(2) The steps to be taken under (1) include establishing and maintaining arrangements for disciplining any member of staff who fails, without reasonable excuse, to make a report of the kind envisaged in this section.

01/03/2004

ML 4.1.3

A relevant firm may wish to set up internal systems that allow its staff to consult with their line manager before sending a report to the MLRO. If a relevant firm sets up such systems, it should ensure that they are not used to prevent reports reaching the MLRO whenever staff have stated that they have knowledge or suspicion that a transaction may involve money laundering.

01/12/2001

ML 4.1.4

(1) The duty in ML 4.1.2 R (Internal reporting) does not apply where the relevant firm is a professional legal adviser and the knowledge or suspicion or the reasonable grounds for knowing or suspecting are based on information or other matter which came to it in privileged circumstances.

(2) Information or other matter comes to a professional legal adviser in privileged circumstances if it is communicated or given to the adviser:

(a) by (or by a representative of) its client in connection with the giving by the adviser of legal advice to the client; or

(b) by (or by a representative of) a person seeking legal advice from the adviser; or

(c) by a person in connection with legal proceedings or contemplated legal proceedings.

(3) The privileged circumstances in (2) do not apply to information or other matter which is communicated or given with a view to furthering a criminal purpose or in contravention of a provision of the regulatory system.

(4) "Professional legal adviser" includes any person in whose hands information or other matter may come in privileged circumstances.

01/03/2004

ML 4.2

MLRO access to know your business information

01/12/2004

ML 4.2.1

(1) A relevant firm must take reasonable steps to give its MLRO, or any person to whom the MLRO's duties have been delegated, access to any know your business information it has.

(2) Know your business information in (1) is information about:

(a) the financial circumstances of a client or any person on whose behalf the client has been acting or is acting; and

(b) the features of the transactions which the relevant firm has entered into with or for the client (or that person).

01/12/2001

ML 4.2.2

In order to do his job properly, the MLRO has to decide whether to make a report to NCIS. In most cases, before taking the decision to make a report, the MLRO is likely to need access to a relevant firm's know your business information.

01/12/2001

ML 4.2.3

A relevant firm is not required to increase the amount of information it gathers and keeps about its clients in the normal course of its business. Rather, a relevant firm should use its existing client information effectively by making such information readily available to its MLRO.

01/12/2001

ML 4.3

External reporting

01/12/2004

ML 4.3.1

The purpose of this section is to ensure that reports made to the MLRO are considered and that, where appropriate, a report is made available to NCIS. The duty to make external reports is one of the functions that some groups or larger relevant firms may decide can be delegated by their MLRO to suitably qualified staff, as described in ML 7.1.3 G.

01/12/2001

ML 4.3.2

(1) A relevant firm must take reasonable steps to ensure that any report required by ML 4.1.2 R (1) (Internal reporting), other than a report made to a person authorised by the Director General of NCIS, is considered by the MLRO, or his duly authorised delegate, and that if, having considered the report and any relevant know your business information to which he has sought access, the MLRO or his duly authorised delegate:

(a) knows or suspects; or

(b) has reasonable grounds to know or suspect;

that a person has been engaged in money laundering, he reports promptly to NCIS.

(2) In reporting to NCIS, an MLRO, or his duly authorised delegate, must have regard to any order under section 339 of the Proceeds of Crime Act 2002 prescribing the form and manner in which a disclosure must be made to NCIS and to any guidance issued by NCIS on the form and manner of reporting.

01/03/2004

ML 4.3.3

(1) To take reasonable steps as required by ML 4.3.2 R, the relevant firm should:

(a) require the MLRO to consider a report under ML 4.1.2 R (1) in the light of all relevant information accessible to or reasonably obtainable by the MLRO;

(b) permit the MLRO to have access to any information, including know your business information, in the relevant firm's possession which could be relevant; and

(c) ensure that where the MLRO, or his duly authorised delegate knows or suspects, or has reasonable grounds to know or suspect, that a person has been engaged in money laundering, he makes a report which is not subject to the consent or approval of any other person.

(2) Contravention of (1) may be relied on as tending to establish contravention of ML 4.3.2 R.

(3) Compliance with (1) may be relied on as tending to establish compliance with ML 4.3.2 R.

01/12/2002

ML 4.3.4

A sole trader with no employees who knows or suspects, or has reasonable grounds to know or suspect, that a client of his, or the person on whose behalf the client is acting, is or has been engaged in money laundering must make a report promptly to NCIS.

01/12/2002

ML 5

Using
national and international findings on material deficiencies

ML 5.1

Government and Financial Action Task Force findings

01/12/2004

ML 5.1.1

The purpose of this chapter is to enable government and Financial Action Task Force findings of inadequacy, concerning the approach to money laundering of individual countries or jurisdictions, to be brought to bear on relevant firms' decisions and arrangements.

01/12/2001

ML 5.1.2

(1) A relevant firm must take reasonable steps whenever this rule applies to ensure that it:

(a) obtains; and

(b) makes proper use of;

any government or Financial Action Task Force findings of the kind referred to in ML 5.1.3 R.

(2) "Proper use" in (1) includes:

(a) applying the information in the circumstances envisaged by ML 3.2.2 R (3)(b) (introduction of client for one-off transaction) or ML 3.2.5 (2) (introduction by client of a person on whose behalf he is acting);

(b) applying the information whenever first obtained to know your business information;

(c) Disseminating the information in the course of dealing with awareness and training under ML 6.

01/12/2001

ML 5.1.3

The findings in ML 5.1.2 R (1) are any published notices:

(1) which are issued:

(a) by the government of the United Kingdom, or any government department in the United Kingdom; or

(b) by the Financial Action Task Force; and

(2) which contain a finding or other conclusion on the part of the government or a government department or the Financial Action Task Force:

(a) that it has examined the arrangements for restraining money laundering in a particular State or jurisdiction other than the United Kingdom; and

(b) that it has found those arrangements to be materially deficient in comparison with one or more of the relevant, internationally accepted, standards, including any recommendations published by the Financial Action Task Force, required of or recommended to States and jurisdictions.

01/12/2001

ML 5.1.4

In order to assist relevant firms, the Joint Money Laundering Steering Group (JMLSG) publishes government, government department, or Financial Action Task Force findings of the kind referred to in ML 5.1.3 R. This information can be found on the JMLSG's website (www.jmlsg.org.uk) or accessed indirectly via the FSA's website (www.fsa.gov.uk) or, in the case of Financial Action Task Force findings only, via the Financial Action Task Force's website (www.fatf-gafi.org). All relevant firms should check this information regularly to ensure that they keep up to date with current findings.

01/03/2004

ML 6

Awareness
of and training for staff

ML 6.1

Purpose

01/12/2004

ML 6.1.1

The purpose of this chapter is to ensure that staff in relevant firms are:

(1) made aware of; and

(2) given regular training about;

what is expected of them in relation to prevention of money laundering, and what the consequences are for the relevant firm and for them if they fall short of that expectation.

01/12/2001

ML 6.2

Awareness

01/12/2004

ML 6.2.1

A relevant firm must take reasonable steps to ensure that staff who handle, or are managerially responsible for the handling of, transactions which may involve money laundering are aware of:

(1) their responsibilities under the relevant firm's arrangements made under this sourcebook, including those for obtaining sufficient evidence of identity, recognising and reporting knowledge or suspicion of money laundering and use of findings of material deficiencies;

(2) the identity and responsibilities of the MLRO or a person authorised by the Director General of NCIS;

(3) the law relating to money laundering, including the Money Laundering Regulations and this sourcebook; and

(4) the potential effect, on the relevant firm, its employees and its clients, of any breach of that law.

01/03/2004

ML 6.2.2

(1) A relevant firm should provide information, whether recorded in writing or otherwise, which:

(a) covers the matters in ML 6.2.1 R;

(b) is brought to the attention of any member of staff who starts to work in any capacity within a relevant firm which is covered by this sourcebook; and

(c) remains available to that person so long as he works for that relevant firm in that capacity.

(2) Contravention of (1) may be relied on as tending to establish contravention of ML 6.2.1 R.

(3) Compliance with (1) may be relied on as tending to establish compliance with ML 6.2.1 R.

01/12/2001

ML 6.2.3

Staff need to have an awareness of anti-money laundering legislation in the United Kingdom, including a clear understanding of their own potential criminal liability.

01/12/2001

ML 6.2.4

Staff are likely to need information about the ways in which their clients' involvement in money laundering may affect bank and other accounts and other assets, in particular if a relevant firm decides it is unable to process transactions, because of the risk of committing a money laundering offence. They are also likely to need information about the ways in which the relevant firm may itself be at risk if (without the consent of NCIS) it processes transactions which involve the proceeds of crime.

01/12/2001

ML 6.3

Training

01/12/2004

ML 6.3.1

A relevant firm must take reasonable care to provide appropriate anti-money laundering training for its staff who handle, or are managerially responsible for the handling of, transactions which may involve money laundering.

01/12/2001

ML 6.3.2

(1) In taking reasonable care for the purposes of ML 6.3.1 R, the relevant firm should provide training which:

(a) deals with the law on money laundering, and the responsibilities of staff under the relevant firm's arrangements;

(b) is applicable to all staff who handle, or are managerially responsible for the handling of, transactions which may involve money laundering (see ML 6.2.1 R); and

(c) takes place with sufficient frequency to ensure that within any period of 24 months it is given to substantially all of the staff referred to in (b).

(2) Contravention of (1) may be relied on as tending to establish contravention with ML 6.3.1 R.

(3) Compliance with (1) may be relied on as tending to establish compliance of ML 6.3.1 R.

01/12/2001

ML 6.3.3

These requirements do not preclude a rolling programme of training, under which training on different subjects takes place on different dates.

01/12/2001

ML 7

The money
laundering reporting officer and other arrangements

ML 7.1

The money laundering reporting officer

01/12/2004

MLRO: approval by the FSA and role

ML 7.1.1

A relevant firm has to appoint an individual as its MLRO (see ML 7.1.5 R). Under section 59 of the Act, the function of acting in the capacity of the MLRO has been specified as a controlled function (see SUP 10.1.13 R). As a consequence, any individual invited to perform that function must be individually approved by the FSA, on the application of the relevant firm, before performing the function. The job of the MLRO is to act as the focal point within the relevant firm for the oversight of all activity relating to anti-money laundering. He needs to be senior, to be free to act on his own authority and to be informed of any relevant knowledge or suspicion in the relevant firm. In turn he has to pass on issues to NCIS as he thinks appropriate. He can be expected to liaise with NCIS on any question whether to proceed with a transaction in the circumstances.

01/12/2001

Firms within a group

ML 7.1.2

If a relevant firm is part of a group, it may choose to appoint as its MLRO an individual who performs that function for another relevant firm within the group.

01/12/2001

Delegation by the MLRO to others

ML 7.1.3

If a relevant firm that is a member of a group chooses the approach in ML 7.1.2 G, it may wish to permit the MLRO to delegate anti-money laundering duties to other suitably qualified individuals within the relevant firm . Similarly some relevant firms, particularly those with a number of branches or offices in different locations, may wish to permit the MLRO to delegate such duties within the relevant firm. Where anti-money laundering tasks are delegated by a relevant firm's MLRO, the FSA will expect the MLRO to take ultimate managerial responsibility for ensuring that the duties imposed on the MLRO by this sourcebook are complied with. The responsibilities to be discharged by the MLRO are set out in ML 7.1.11 R.

01/12/2001

MLRO as "nominated officer" under Money Laundering Regulations

ML 7.1.4

If convenient, a relevant firm may decide that the same person can carry out the responsibilities of the MLRO and of the "nominated officer" under the Money Laundering Regulations. "Nominated officer", under those Regulations, has the meaning given by Regulation 7.

01/03/2004

Duty to appoint MLRO

ML 7.1.5

A relevant firm must appoint an individual as its MLRO and operate arrangements that are designed to ensure that it and the MLRO comply with the relevant obligations of this chapter.

01/12/2001

ML 7.1.6

When a relevant firm appoints an individual to be its MLRO, it must choose someone who is employed within the relevant firm, or within another relevant firm in the same group, whether as part of its governing body, management or staff.

01/12/2001

Qualifications and resources of MLRO

ML 7.1.7

So that he can carry out his controlled function effectively, a relevant firm must ensure that its MLRO:

(1) has a sufficient level of seniority within the relevant firm; and

(2) has sufficient resources, including sufficient time and (if necessary) support staff.

01/12/2001

ML 7.1.8

"Sufficient resources" should include arrangements to apply in any temporary absence of the MLRO, who should take reasonable steps to ensure the adequacy of such arrangements. An individual who performs the role of MLRO for a period of less than 12 weeks in a consecutive 12 month period does not need approval by the FSA (see SUP 10.5.5 R (periods of less than 12 weeks)).

01/12/2001

ML 7.1.9

A relevant firm must ensure that its MLRO is able to:

(1) monitor the day-to-day operation of its anti-money laundering policies; and

(2) respond promptly to any reasonable request for information made by the FSA.

01/12/2001

ML 7.1.10

(1) A relevant firm should ensure that its MLRO is based in the United Kingdom.

(2) Contravention of (1) may be relied on as tending to establish contravention of ML 7.1.9 R.

01/12/2001

Responsibilities of the MLRO

ML 7.1.11

A relevant firm must make its MLRO responsible for:

(1) receiving internal reports under ML 4.1;

(2) taking reasonable steps to access any relevant know your business information;

(3) making external reports to NCIS under ML 4.3 (External reporting);

(4) obtaining and using national and international findings under ML 5;

(5) taking reasonable steps to establish and maintain adequate arrangements for awareness and training (whether by himself or someone else) under ML 6; and

(6) making annual reports to the relevant firm's senior management under ML 7.2.

01/03/2004

ML 7.1.12

APER 4.7.2 E and APER 4.7.9 E make provisions about the conduct of the MLRO, to help determine whether the MLRO's conduct complies with Statement of Principle 7 concerning the conduct expected of the MLRO as an approved person.

01/12/2001

Duty to appoint MLRO when position vacant

ML 7.1.13

If the position of MLRO falls vacant, the relevant firm must appoint another individual as its MLRO.

01/12/2001

ML 7.1.14

The obligation on a relevant firm to appoint an MLRO is in ML 2.1.1 R. That provision is limited to relevant firms and does not apply:

(1) if the relevant firm is a sole trader with no employees; or

(2) if the relevant firm is an incoming firm which is only providing cross border services (as opposed to operating through an established branch) in the United Kingdom.

01/12/2001

ML 7.2

Compliance monitoring

01/12/2004

ML 7.2.1

SYSC 3.2.6 R (Compliance) requires a relevant firm to take reasonable care to establish and maintain appropriate systems and controls for compliance with its regulatory obligations and to counter the risk that it might be used to further financial crime. This section amplifies particular aspects of the rule in SYSC. It does not, however, limit the application of the rule, the effect of which is that, where financial crime is concerned, firms must also comply with other Handbook requirements (in particular, ML) and their legal obligations under the Money Laundering Regulations and the Proceeds of Crime Act 2002.

01/03/2004

ML 7.2.2

(1) A relevant firm should establish and maintain arrangements under SYSC 3.2.6 R which include requirements that:

(a) at least once in each calendar year, the relevant firm commission a report from its MLRO which:

(i) assesses the relevant firm's compliance with this sourcebook;

(ii) indicates, in particular, the way in which new findings under ML 5 (Using national and international findings) have been used during the year; and

(iii) gives the number of reports made in accordance with ML 4.1 (Internal reporting) by staff of the relevant firm, dealing separately, if appropriate, with different parts of the relevant firm's business;

(b) the relevant firm's senior management consider the report; and

(c) they take any necessary action to remedy deficiencies identified by the report.

(2) Contravention of (1) may be relied on as tending to establish contravention of SYSC 3.2.6 R.

01/12/2001

ML 7.2.3

Figures for internal reports should be broken down, if appropriate, in the MLRO's report. The purpose of the report is to enable a relevant firm's senior management to assess whether internal reports are being made whenever required by ML 4.1.2 R, and that an overall figure which seems satisfactory does not conceal inadequate reporting in a particular part of the relevant firm's business. Relevant firms will need to use their judgement how the MLRO should be required to break down the figures in order to achieve this aim.

01/12/2001

ML 7.3

Record keeping arrangements

01/12/2004

ML 7.3.1

SYSC 3.2.20 R (Records) requires a relevant firm to take reasonable care to make and retain adequate records (including accounting records). This section amplifies this requirement.

01/12/2001

ML 7.3.2

(1) A relevant firm must make and retain, for the periods specified in (2), the following records:

(a) in relation to evidence of identity:

(i) a copy of the evidence of identity obtained under ML 3; or

(ii) a record of where a copy of the evidence of identity can be obtained; or

(iii) when it is not reasonably practicable to comply with (i) or (ii), a record of how the details of the evidence of identity can be obtained; and when it has concluded it should treat a client as financially excluded ML 3.1.5 G to ML 3.1.7 G (Financial exclusion), a record of the reasons for doing so;

(b) a record containing details of every transaction carried out by the relevant firm with or for the client in the course of regulated activity;

(c) [deleted]

(d) records of action taken under ML 4.1 (Internal reporting) and ML 4.3 (External reporting); and

(e) when an MLRO has considered information or other matter concerning knowledge or suspicion that another person has engaged in money laundering, but has not made a report to NCIS under ML 4.3, a record of that information or other matter.

(2) The specified periods are:

(a) in relation to evidence of identity, five years from the end of the relevant firm's relationship with the client;

(b) in relation to transactions within (1)(b), five years from the date when the transaction was completed; and

(c) [deleted]

(d) in any other case, five years from the obtaining of the information or the creation of the record.

(3) "Transaction" in (2) does not include advice given to a client unless such advice is followed by a transaction with monetary value.

01/03/2004

ML 7.3.3

Records kept under SYSC 3.2.20 R should include the dates when anti-money laundering training was given, the nature of the training, and the names of the staff who received training; and (in relation to anti-money laundering monitoring) reports by the MLRO made in accordance with ML 4.3, and records of consideration of those reports and of any action taken as a consequence.

01/12/2001

ML 8

Sole traders and authorised professional firms

ML 8.1

Application of this sourcebook

01/12/2004

Sole traders

ML 8.1.1

The only provisions of this sourcebook which apply to a sole trader with no employees are those specified in ML 8.1.2 R.

01/12/2001

ML 8.1.2

Application to certain sole traders (see ML 8.1.1 R)

Chapter

Subject matter

Parts applicable to a sole trader with no employees

ML 1

Application and purpose

The whole chapter

ML 2

The general money laundering duties

The whole chapter

ML 3

Identification of the client

The whole chapter

ML 4

Reporting

Only ML 4.3.4 R applies

ML 5

Findings of deficiencies

The whole chapter

ML 6

Awareness and training

The whole chapter except ML 6.2.1 R (2)

ML 7

The MLRO and other arrangements

Only

ML 7.2

ML 7.3

Except ML 7.2.2 E (1)(a) and ML 7.2.2 E (1)(b) and ML 7.2.2 E (2)

Except ML 7.3.2 R (1)(d) and ML 7.3.2 R (1)(e)

ML 8

Sole traders and authorised professional firms

The whole chapter

01/12/2001

Authorised professional firms

ML 8.1.3

This sourcebook does not apply to authorised professional firms when carrying on non-mainstream regulated activities.

01/12/2001

Transitional Provisions and Schedules

ML TP 1

Schedule

ML TP 1.1

Transitional Provisions

(1)

(2)

(3)

(4)

(5)

(6)

Material to which the transitional provision applies

Transitional provision

Transitional provision: dates in force

Handbook provision: coming into force

1

ML 2.1.1 R
ML 7.1.5 R

R

(1) Paragraph (2) applies where, immediately before the commencement , there is in a relevant firm an individual who was appointed by the relevant firm before that date to act for it in connection with its responsibilities in relation to money laundering.
(2) If, on commencement , the individual in (1) is approved to perform the money laundering function , nothing in ML 2.1.1 R or ML 7.1.5 R requires the relevant firm to reappoint that individual as its MLRO .

From commencement

Commencement

2

ML 3

R

Where, immediately before commencement , a relevant firm already has an established client relationship with any person, nothing in ML 3 requires the relevant firm to establish the identity of that client .

From commencement

Commencement

3

ML

G

Expired

01/04/2005

ML Sch 1

Record keeping requirements

01/12/2004

ML Sch 1.1

The aim of the guidance in the following table is to give the reader a quick over-all view of the relevant record keeping requirements.

01/12/2004

ML Sch 1.2

It is not a complete statement of those requirements and should not be relied on as if it were.

01/12/2004

ML Sch 1.3

Handbook reference

Subject of record

Contents of record

When record must be made

Retention period

ML 7.3.2 R (1)(a)

Customer identification

Full details of evidence of identity

As soon as reasonably practicable after first contact

5 years from end of relationship with client

ML 7.3.2 R (1)(b)

Transactions

Full details

On effecting the transaction

5 years from the date when the transaction was completed

ML 7.3.2 R (1)(d)

Internal and external reporting

Full details of actions taken

Once actions have been taken

5 years from the creation of the record

ML 7.3.2 R (1)(e)

Information not acted upon

Full details of information considered by the MLRO but not made an external report

Once decision not to report has been made

5 years from the obtaining of the information

01/12/2004

ML Sch 2

Notification requirements

01/12/2004

ML Sch 2.1

There are no requirements to notify or report to the FSA in ML.

01/12/2004

ML Sch 3

Fees and other required payments

01/12/2004

ML Sch 3.1

There are no requirements for fees or other payments in ML.

01/12/2004

ML Sch 4

Powers exercised

01/12/2004

ML Sch 4.1

The following powers and related provisions in the Act have been exercised by the FSA to make the rules in ML:

(a)

Section 138 (General rule making power)

(b)

Section 146 (Money laundering rules)

(c)

Section 149 (Evidential provisions)

(d)

Section 156 (General supplementary powers)

01/12/2004

ML Sch 4.2

The following power in the Act has been exercised by the FSA to give the guidance in ML:

(a)

Section 157(1) (Guidance)

01/12/2004

ML Sch 5

Rights of action for damages

01/12/2004

ML Sch 5.1

The table below sets out the rulesin MLcontravention of which by an authorised person may be actionable under section 150 of the Act (Actions for damages) by a person who suffers loss as a result of the contravention.

01/12/2004

ML Sch 5.2

If a "Yes" appears in the column headed "For private person?", the rulemay be actionable by a "private person" under section 150 (or, in certain circumstances, his fiduciary or representative; see article 6(2) and (3)(c) of the Financial Services and Markets Act 2000 (rights of Action) Regulations 2001 (SI 2001 No 2256)). A "Yes" in the column headed "Removed" indicates that the FSA has removed the right action under section 150(2) of the Act. If so, a reference to the rulein which it is removed is also given.

01/12/2004

ML Sch 5.3

The Column headed "For other person?" indicates whether the rulemay be actionable by apersonother than a private person (or his fiduciary or representative) under article 6(2) and (3) of those Regulations. If so, an indication of the type of person by whom the rulemay be actionable is given.

01/12/2004

ML Sch 5.4

Table: Actions for damages: Money Laundering Sourcebook

Right of action under section 150

Chapter/Appendix

Section/Annex

Paragraph

For private person?

Removed?

For other person?

Rules in ML with the status letter "R"

Yes

No

Rules in ML with the status letter "E"

No

01/12/2004

ML Sch 6

Rules that can be waived

01/12/2004

ML Sch 6.1

The rules in ML can be waived by the FSA under section 148 of the Act (Modifications or waiver of rules).

01/12/2004