Mar 04 2008 Helen O'Gorman
Regulated firms in the UK are struggling with the requirements of the EU's Payer Information Regulation 2006, industry sources have told Complinet. Financial institutions carrying out payment services often received instructions with incomplete originator information, which did not meet the requirements of the regulations, and were unsure about how to proceed. HM Treasury, speaking at the Anti-Money Laundering Professionals Forum's fourth annual seminar in London, sought advice from its lawyers and offered the regulated sector some clear advice on how to proceed with this problem.
Legal advice on wire transfers
HM Treasury addressed the case of a bank that regularly receives wire transfers worth millions of euros, yet the originator information is always missing. The receiving firm does not want to lose out on high-value business, yet the regulations are not explicit on how it should proceed.
The department's lawyers indicated that the firm must be clear about whether the EC regulations apply to the transactions in question. They said it was possible that the transfers would be covered by the exceptions under Articles 3 and 17 of the regulations. Most payment service providers are bound by Article 9.1, however, and must reject the transaction and ask for complete information. Under Part 7 of the Proceeds of Crime Act 2002 and Part 3 of the Terrorism Act 2000, money laundering reporting officers should lodge suspicious transaction reports with the financial intelligence unit and, where relevant, freeze the accounts.
If the originator information is missing regularly, the bank should issue a warning, set the sender deadlines by which to comply and then decide whether to terminate the contract. The payee payment service provider should also tell the regulator if the PSP regularly fails to supply the necessary information. Finally, the UK implementing regulations 2007 impose criminal and civil penalties for the failure to comply offence. The Joint Money Laundering Steering Group is doing some work on wire transfers and should offer some industry guidance on the area soon.
Party of three
The Treasury also promised that work would be done later this year on third-party reliance, another bone of contention for money laundering reporting officers. It said that the government would publish a consultation paper on the subject in due course.
There is no clear advice on this area of AML regulation and many reasons why it could go awry. Reliance on a third party such as a large-scale reorganisation of a retail deposit taking bank could be risky if, for example, huge numbers of customers need to find a new bank; this would force banks to do CDD in haste when they would need to rely on third-party information. In the event of a crisis at the relied upon bank and its records going into storage, it is not clear whether the regulator would be satisfied without seeing the records in question.
