It is common knowledge that HM Revenue and Customs (HMRC) is responsible for regulating taxes, wages, and many other aspects of the financial sector in the United Kingdom. But not so many people are aware of the important role that this government department plays in anti-money laundering efforts. HMRC has produced critical legislation regarding the fight against financial crime and has created regulations that specifically target money laundering. Many financial institutions are required to follow the regulations that HMRC has set forth, and they face legal repercussions if they fail to do so properly.
HMRC places several requirements on financial institutions in order to combat money laundering. Among these measures are verifying the identities and backgrounds of clients, keeping track of the details of all transactions, and appointing a dedicated official to be responsible for complying with financial crime regulations. Additionally, in the UK, financial institutions are now legally required to file a report of any suspicious transactions they discover.
One of HMRC’s major goals is to curtail the threat of money laundering, and they have gone to great lengths to do so successfully. For instance, in addition to acquiring details about their clients, financial institutions are also required to obtain details about any companies that they have partnerships with or are closely related to. Similarly, financial institutions must also calculate how at risk their company is of falling victim to financial crime and what they should do in order to prevent it from occurring within their institution. This is one of the most critical parts of the anti-money laundering legislation created by HMRC, as it requires financial institutions to strengthen their companies through a thorough risk analysis of every aspect of their business plans.
The HMRC also requires that financial institutions keep detailed documentation of all transactions and clients. If the authorities ever wish to see paperwork regarding a specific account, they should be able to do so instantly. Similarly, if an audit is ever completed for the institution, there should be copies of everything for examiners to view. Some data is allowed to be deleted after a certain number of years, but having all the information regarding transactions and clients is key to tracking financial crime patterns and discovering criminals’ identities.
A unique position created by HMRC to help fight financial crime is the “nominated officer”, also known as a “money laundering reporting officer”. Every financial institution must have a nominated officer; this person receives reports from other employees about suspicious activity (by clients or fellow employees), potential money laundering or terrorist financing, and then consider these reports and evaluates whether there seems to be sufficient evidence. If necessary, the nominated officer can then report to the National Crime Agency (NCA) by completing a Suspicious Activity Report. The nominated officer must then ask the NCA for consent to continue with any transactions that have been reported and ensure that no transactions are continued illegally.