Anti Money-Laundering Policy
PART 1: INTRODUCTION
Capiteus and its appointed representatives (all collectively “Capiteus”) are committed to maintaining effective prevention and detection measures to assist the law enforcement authorities in combating financial crime. This handbook sets out the policies and procedures which have been adopted to meet Capiteus’s legal obligations under anti-money laundering and counter terrorist legislation.
These policies and procedures must be adhered to at all times.
Capiteus seeks to ensure at all times that:
Clients’ identities are satisfactorily verified in accordance with the firm’s risk-based approach
before Capiteus does business with them, Capiteus knows its clients and understands their reasons for doing business with us both at the client acceptance stage and throughout the business relationship
Our representatives are trained and made aware of both their personal legal obligations and the legal obligations of Capiteus.
Our representatives are trained to be vigilant for activities where there are reasonable grounds for suspicion that money laundering could be taking place and to make the reports to the MLRO.
Sufficient records are kept for the required period.
We establish, maintain and implement appropriate procedures to achieve these objectives.
Money laundering, fraud and market abuse threats are dynamic and criminals constantly devise new techniques and exploit the easiest targets in the financial services sector. To reduce the likelihood of being used as a vehicle for financial crime Capiteus will systematically assess, mitigate and monitor these risks. It will seek to identify fraud, money laundering and market abuse at an early stage of the client acceptance process, and if necessary escalate this to senior management and take appropriate action.
A risk-based approach adopted by Capiteus is the driver of our overall strategy of fighting financial crime. Through this approach we identify the areas of greatest vulnerability and focus our resources on those areas. Ultimate responsibility for this approach lies with the senior management but all representatives carry a responsibility to maintain the effectiveness of systems and controls.
Given the nature of risks involved it is not possible to cover every possible eventuality in this handbook. Should an issue arise that is not specifically covered in this handbook, representatives/members should refer to the Money Laundering Reporting Officer (“MLRO”) for further guidance.
Financial Crime Risk
Money laundering is the process by which criminals attempt to hide and disguise the true origin and ownership of the proceeds of their criminal activities, thereby avoiding prosecution, conviction and confiscation of criminal funds.
Money laundering and terrorist financing risks are closely related to the risks of fraud and insider dealing. While these are separate offences, money laundering involves handling the proceeds of any crime, including the proceeds of these activities.
The ability to launder the proceeds of crime through the financial system is vital to the success of criminal operations. London, as one of the world’s major financial centres, has a major role to play in combating money laundering. Firms that become involved in money laundering risk prosecution and damage to their reputation.
In recognition of this the procedures that Capiteus has adopted to reduce the incidence of financial crime, focus on knowing our clients, understanding their businesses, carrying out proportionate verification checks and identifying and reporting suspicious activity.
Law, Regulation and Industry Practice
Capiteus is guided by the provisions of the UK Money Laundering Regulations 2007. The Joint Money Laundering Steering Group guidance 2007 (“JMLSG”) provides practical interpretation of legal and regulatory requirements and indicates good industry practice. Capiteus has taken account of the JMLSG when devising a risk-based approach to the prevention of money laundering risk.
In order to comply with the relevant laws, regulations and guidance, Capiteus adopts the following principles:
Anti-Money Laundering Policies
Capiteus has implemented policies, procedures and controls aimed at deterring criminals from using Capiteus for the laundering of proceeds of crime. These policies and procedures are tailored to the risk posed by individual clients, in accordance with the JMLSG.
Money Laundering Reporting Officer
Capiteus has appointed Intercontinental Trust (Seychelles) Limited as its Money Laundering Reporting Officer (“MLRO”). The MLRO acts as the central point of contact both with the law enforcement agencies and internally, in relation to all matters relating to money laundering. The MLRO monitors Capiteus’s compliance with anti-money laundering procedures and submits reports to senior management at least on an annual basis.
Customer Due Diligence (‘CDD’)
Capiteus has established Customer Due Diligence procedures to identify the users of its services and, in relation to higher-risk clients, the principal beneficial owners and origins of funds. These procedures include knowing the nature of our clients’ businesses and being alert to abnormal transactions.
Unexplained or abnormal transactions or activities that are suspected of being linked to criminal activity should be reported to the MLRO in writing without delay. The MLRO will determine whether to report the suspicions to the relevant authority. If the MLRO is absent, reports should be made to the Deputy MLRO who is the General Manager or Managing Director. An acknowledgment of receipt should be obtained from the MLRO for every such report.
All personnel must be informed of their individual and collective responsibilities and Capiteus’s antimony laundering policies. Personnel are provided with training to enable them to understand the vulnerabilities of Capiteus’s business and to recognise and report suspicious activities.
Capiteus retains all records verifying the identity of our clients for at least 5 years following the end of the business relationship. We also retain the records of any internal reports of suspicion submitted to the MLRO and any disclosures made to NCA or other relevant authority.
PART 2: OFFENCES
AML legislation varies from country to country, but broadly follows the same principles. For example, there are a number of pieces of legislation that make up the UK’s anti-money laundering/counter-terrorist financing legal framework. A brief summary of the main pieces of UK legislation is provided below. Broadly similar legislation exists in all jurisdictions in which Capiteus is active. All representatives of Capiteus should be aware that it is not only the firm that is subject to the legislation but also the representatives of the firm. Failure to comply with certain aspects of the legislation can result in an individual being subject to prosecution with the threat of a custodial sentence or fine.
Proceeds of Crime Act 2002
The Proceeds of Crime Act 2002 (“POCA”) is the main piece of legislation dealing with individual criminal liability in relation to money laundering. Offences under POCA occur in relation to “criminal conduct” and/or “criminal property”, which are defined below.
Criminal conduct is a conduct which constitutes an offence in any part of the United Kingdom (or would constitute an offence in any part of the United Kingdom if it occurred there).
Property is criminal property if it constitutes a person's benefit from criminal conduct or it represents such a benefit (in whole or part and whether directly or indirectly), and the alleged offender knows or suspects that it constitutes or represents such a benefit. It is immaterial:
a) who carried out the conduct
b) who benefited from it
c) whether the conduct occurred before or after the passing of POCA 2002
A person benefits from conduct if he obtains property, advantage or benefit as a result of or in connection with the conduct or any other conduct. Where the property is land, this includes a servitude, right or interest in relation to that piece of land.
Property is all property wherever situated and includes:
b) all forms of property, real or personal, heritable or moveable
c) things in action and other intangible or incorporeal property
Concealing, Making Arrangements and Acquiring
It is a criminal offence under sections 327-329 POCA for any person, subject to certain exceptions, to conceal, make arrangements, acquire, use or possess criminal property including funds. This offence covers being part of an arrangement to facilitate the acquisition, retention, use or control of criminal assets by another person.
This offence is punishable in the UK by a maximum penalty of 14 years’ imprisonment and an unlimited fine.
Concealing and Related
A person commits an offence in the UK if he:
a) conceals criminal property
b) disguises criminal property
c) converts criminal property
d) transfers criminal property
e) removes criminal property from England, Wales, Scotland or Northern Ireland
This offence is punishable by a maximum penalty of 14 years’ imprisonment and an unlimited fine.
A person commits an offence in the UK if he enters into or becomes concerned in an arrangement which he knows or suspects or facilitates (by whatever means) the acquisition, retention, use or control of criminal property by or on behalf of another person.
This offence is punishable by a maximum penalty of 14 years’ imprisonment and an unlimited fine.
Acquisition, Use and Possession
A person commits this offence if he:
a) acquires criminal property
b) uses criminal property
c) has possession of criminal property
This offence covers any conduct wherever it takes place, if it would constitute a criminal offence if committed in the UK. This excludes minor offences committed overseas where the conduct is lawful in the jurisdiction where the offence in question is committed (for example, bull fighting in Spain). This offence, however, includes but is not restricted to, drug trafficking, terrorist activity, corruption, theft, fraud, tax evasion, robbery, forgery, product piracy, illegal deposit taking, blackmail and extortion.
It is a defence to show that a person reported their suspicion to the MLRO (in the case of the MLRO, to a law enforcement agency).
This offence is punishable by a maximum penalty of 14 years’ imprisonment and an unlimited fine.
It is a criminal offence under section 333 POCA to take action likely to prejudice an investigation by informing (tipping off) the subject of a suspicion report, or anyone else, that a disclosure has been made to either NCA (or other relevant authority) or the MLRO or that the police or customs authorities are carrying out or intending to carry out a money laundering investigation.
It is a defence to show that a person had either lawful authority or reasonable excuse to make the disclosure. It is also a defence that a person neither knew nor suspected that the disclosure would prejudice an investigation.
Tipping off is punishable by a maximum penalty of 5 years’ imprisonment and an unlimited fine.
Failure to Disclose
It is a criminal offence under sections 330 and 331 POCA for persons working in the regulated sector not to disclose if they have reasonable grounds to know or suspect, in the course of their day to day business activities, that another person is engaged in money laundering, as soon as reasonably practicable after the information comes to their attention. This offence also covers a failure of the MLRO to report a suspicion to NCA or other relevant authority without a reasonable excuse.
Reporting to the MLRO in accordance with Capiteus’s procedures will satisfy the obligation to report. Legislation protects those reporting suspicions of money laundering from claims in respect of any alleged breach of client confidentiality.
Failure to disclose is punishable by a maximum of 5 years’ imprisonment and an unlimited fine.
NOTE: There is a separate offence of a failure to report reasonable knowledge or suspicion of terrorist fund raising, use and possession of terrorist funds and arrangements facilitating the retention and control of terrorist property.
Destruction of Documents
It is an offence under section 341 POCA to destroy or dispose of documents that may be relevant to a money laundering investigation.
Money Laundering Regulations 2007
The Money Laundering Regulations 2007 (“the Regulations”) implement the 3rd EU Money Laundering Directive. The purpose of the Regulations is to specify arrangements which must take place within firms to forestall and prevent operations relating to money laundering and terrorist financing.
Capiteus’s business activities fall within the scope of the Regulations and Capiteus must therefore have in place appropriate policies and procedures covering:
Customer due diligence
Risk assessment and management
Compliance management; and
The relevant authorities may institute proceedings for offences under the regulations relating to money laundering. Whether a breach of the regulations has occurred is not dependent on whether money laundering has taken place. Firms can be sanctioned for not having adequate procedures in place. In the UK, failure to comply with the Regulations constitutes an offence punishable by a maximum of 2 years imprisonment, or a fine, or both. Similar penalties exist in other jurisdictions.
Terrorism Act 2000 & the Anti-terrorism, Crime and Security Act 2001
The Terrorism Act 2000 (as amended by the Anti-terrorism, Crime and Security Act 2001) establishes offences related to involvement in facilitating, raising, possessing or using funds for terrorism purposes, failing to report, tipping off or prejudicing an investigation. The Act:
Makes it a criminal offence for any person not to report the existence of terrorist property where there are reasonable grounds for knowing or suspecting the existence of terrorist property
Makes it a criminal offence for anyone to take any action likely to prejudice an investigation by informing (i.e. tipping off) the person who is the subject of a suspicion report, or anybody else, that a disclosure has been made to a MLRO or to NCA (or other relevant authority), or that the police or customs authorities are carrying out or intending to carry out a terrorist financing investigation
Grants a power to the law enforcement agencies to make an account monitoring order, similar in scope to that introduced under POCA
Failure to report is punishable in the UK by a maximum penalty of 5 years’ imprisonment and a fine. The offence of actual money laundering is punishable in the UK by 14 years’ imprisonment and a fine. The Anti-Terrorism, Crime and Security Act 2001 gives the authorities power to direct firms in the regulated sector to provide the authorities with specified information on clients and their terrorism-related activities.
US Legal Obligations
The US criminal money laundering laws, in particular the USA Patriot Act 2001, have extra-territorial effect. Where Capiteus has any established activities in, or linked to the USA, whether through a branch, subsidiary, associated company or correspondent banking relationship there is a risk that US regulations and sanctions may apply. This includes dealing with clients that are US citizens.
PART 3: INTERNAL COMMUNICATIONS
Money Laundering Reporting Officer
The General Manager or Managing Director is Capiteus’s Money Laundering Reporting Officer (“MLRO”). The MLRO has overall responsibility for the establishment and maintenance of effective anti-money laundering systems and controls.
The MLRO’s responsibilities include the following:
Monitoring of the effectiveness of Capiteus’s anti-money laundering controls
Overseeing the firm’s compliance with the relevant rules on anti-money laundering systems and controls
Having overall responsibility for the day-to-day operation of such policies, even where these have been delegated
Ensuring that procedures for onboarding a new client are compliant with Capiteus’s policy and the JMLSG
Receiving and reviewing internal disclosures and submitting external reports to NCA or other relevant authority
Responding promptly to any reasonable request for information made by the relevant authorities or law enforcement in any jurisdiction in which Capiteus is active
Liaising with the relevant authorities and other external agencies
Ensuring that anti-money laundering training is provided, its standards and scope are appropriate and that records are kept
Reporting to the senior management on at least an annual basis (via a MLRO Report) and keeping the management updated on money laundering issues
Obtaining and using national and international findings, for example the findings of the FATF, IMF and World Bank
Appointing of a Deputy MLRO to cover the MLRO’s periods of absence
Ensuring that client and transaction monitoring is being undertaken
Assessing the risks of Capiteus’s client base and business activities in relation to money laundering on an on-going basis
Ensuring the firm’s policies and procedures are being communicated effectively to all relevant members/representatives.
While the MLRO may delegate their duties to another appropriate person, such delegation needs to be documented. In such cases the MLRO will take ultimate managerial responsibility.
Contact with Third Parties
Capiteus’s personnel must not discuss any issues relating to the firm’s anti-money laundering policies and procedures with any third parties without prior consent of the MLRO. All requests from the relevant authorities or other investigating and enforcement agencies must be referred to the MLRO without delay.
The following are examples of orders which may be served on Capiteus as part of an on-going investigation. Other orders may be issued by competent authorities in other jurisdictions. Should you receive any such order, please give it to the MLRO without delay:
a production order
a disclosure order
a customer information order
an account monitoring order
a search and seizure warrant
an order for financial information under the UK Terrorism Act 2000 or equivalent in a different jurisdiction
PART 4: THE RISK-BASED APPROACH
Capiteus is required to operate a risk-based policy in order to identify, manage and mitigate the risks associated with the firm being used for money laundering or terrorist financing. This approach will identify the most cost-effective and proportionate way to manage and mitigate the risks posed to the firm. It is accepted that a risk-based regime cannot be a zero failure regime but that it should strike a balance between cost and the realistic threat of being used for money laundering or terrorist financing.
The aim is to focus the efforts where they are most needed and will have the most impact.
A risk-based approach requires Capiteus to undertake the following steps:
Assess the risks applicable to the firm. In the case of Capiteus these risks will predominately relate to our customers and the products and or services we provide to them.
Design and implement controls to manage and mitigate these risks
Monitor and improve the effective operation of the firm’s controls
Record what has been done and why.
Assessing the risk to Capiteus
Capiteus adopts a risk-based approach to business that enables it to utilise its resources in the most efficient and cost-effective manner. While we will, as far as reasonably practicable, ensure consistent application of our risk-based approach, we recognise that this approach cannot anticipate every eventuality. Therefore in any given case the Compliance Officer or MLRO may exercise their judgment in deciding whether or not to deviate from the written policies. This judgment will be clearly reasoned and documented.
Geographical location of the client and their business
When and if Capiteus deals with clients located in countries without adequate anti-money laundering standards it will either obtain additional Customer Due Diligence information or perform more intensive monitoring of the client’s account. Countries presenting a high geographical risk are those where:
Cash is the normal medium of exchange
There is a politically unstable regime with high levels of public or private sector corruption
They are known to be drug producing or drug transit countries
They have been classified as countries with inadequacies in their anti-money laundering strategies
A useful source of information on geographical risk is Transparency International at www.transparency.org
Client Risk Assessment
Capiteus’s client base is divided into three risk categories: Low, Medium and High. The Compliance Officer or MLRO determines to which category a client belongs. They will record the basis of assessment for each client. Given the nature of business undertaken by Capiteus it is expected that the majority of our clients will be assessed as either Low Risk or Medium Risk.
The following should be used as guidance when applying a risk-based approach to the assessment of money laundering risk posed by each client. Consideration of the overall information held may alter the risk profile of the client.
Individuals in all jurisdictions (except for those in the Non-Cooperative Countries and Territories [“NCCTs”]) who present satisfactory valid government-issued ID and proof of both their residential status and the source of their funds
Companies and/or Trusts in all jurisdictions (except for those in the NCCTs) which present satisfactory government-issued ID and proof of residential address for all key officers together with detailed information on all company/Trust structures to enable Capiteus to identify the ultimate beneficial owner(s) of such structures provided that such companies and/or Trusts are not engaged in high-risk business activities
Government offices and agencies in all jurisdictions except for those in the NCCTs
Companies or their subsidiaries (50% or more) whose shares are traded on EU regulated market or equivalent exchange,
Reputable, well-known organisations, with long histories in their industries or large market capitalisation and with substantial public information about them and their principals and/or controllers.
Clients represented by those whose appointment is subject to court approval or ratifications (e.g. executors)
Relationships where a Politically Exposed Person (“PEP”) or their connected person, have been identified as having a significant involvement. This definition of PEP would include heads of state or of government, senior politicians, senior government, judicial or military officials, senior executives of publicly owned enterprises and important political party officials. Please consult the MLRO if you think that you may be dealing with PEP or their connected person. (See Part 6 of this handbook)
Complex business ownership structures, such as offshore special purpose vehicles, that make it easier to conceal underlying beneficial owners, especially where there is no legitimate commercial rationale. Relationships involving clients that reside in or nationals of Non-Cooperative Countries and Territories (“NCCTs”).
Accounts that involve regular payments to or from unrelated third parties.
Names that have been previously linked with financial crime.
Clients based in or conducting business in or through high-risk jurisdictions with known level of corruption and organised crime, or drug production and distribution.
Clients engaged in higher-risk business activities, for example where large amounts of cash are involved.
Companies issuing bearer shares, especially if incorporated in higher-risk jurisdictions.
Clients that have been subject to a Suspicious Transaction Report.
Clients that have not been physically present for identification purposes. This does not apply to clients to whom SDD applies.
All other clients that do not fall within either a low-risk category or a high-risk category including (but not restricted to):
Subsidiaries of or entities associated with low-risk clients
Private companies from the UK, EEA or comparable jurisdiction provided they are not undertaking high-risk business.
Capiteus will take the following additional considerations into account when determining the risk posed by a particular client. While these considerations will not determine the risk on their own, they will be considered alongside other factors in judging the overall money laundering risk posed by a particular client.
Whether Capiteus is engaged in a one-off transaction or business relationship
In relation to introduced business, the effectiveness of the due diligence carried out by the introducer
The nature and length of any existing or previous relationship between either Capiteus or our representatives/members and the client
The way in which information is obtained (e.g. from a government department, regulated firm or other source)
The nature and extent of any assurances given by regulated firms that may be relied upon.
Any associations the client may have with other entities or jurisdictions, such as headquarters, operating facilities, branches or subsidiaries and the individuals who may influence its operations.
Other relevant considerations; such as whether the client has a regulated investment manager or adviser, a prime broker (who have performed due diligence on the client) and other considerations that the Compliance Officer or MLRO may reasonably consider relevant to the client’s risk assessment.
The type of products or services that Capiteus is providing to the client.
MLRO’s On-going Risk Assessment
Risk management is a continuous process. The MLRO is responsible for ensuring the firm’s risk assessment is up to date and appropriate. This is done by means of an on-going risk assessment. On an on-going basis the MLRO will review Capiteus’s business activities, including:
Appropriate procedures to identify changes in client characteristics, which come to light in the normal course of business
Ways in which different products and services may be used for money laundering or terrorist financing, and how these may change
Adequacy of representatives training and awareness
Monitoring compliance arrangements (such as internal audit/quality assurance, processes or external review)
The balance between technology-based and people-based systems
Capturing appropriate management information
Upward reporting and accountability
Effectiveness of the liaison with regulatory and law enforcement agencies
The MLRO will identify any changes to Capiteus’s services that may expose the firm to a higher risk of money laundering. This may also highlight the need for a formal assessment of risks posed by either of our client categories or individual clients. The results of this on-going assessment will be detailed in the annual MLRO’s Report to senior management.
PART 5: CUSTOMER DUE DILIGENCE PROCEDURE
Capiteus follows the requirements of the UK Money Laundering Regulations 2007 which set out a firm’s obligations to conduct Client Due Diligence (“CDD”) in a more detailed form than under the previous regulations. The regulations specify the CDD measures that are required to be carried out, the timing, as well as actions required if CDD measures are not carried out. The concept of Simplified Due Diligence (SDD) and Enhanced Due Diligence (EDD) are also introduced by the new regulations. The purpose of this Part is to provide guidance on the following:
The meaning of CDD measures
Timing of, and non-compliance with CDD measures
Application of CDD measures
Simplified Due Diligence
Enhanced Due Diligence
For lists of the documentation to be obtained and verified in respect of specific business types please refer to Part 6 of this handbook.
What is CDD?
The CDD measures that must be carried out involve:
a) Identifying the customer and verifying the identity
b) Identifying the beneficial owner, where relevant, and verifying their identity
c) Obtaining information on the purpose and intended nature of the relationship
d) Conducting on-going monitoring of the relationship
e) In the case of legal entities the firm must understand the ownership and control structure. These measures are designed to make it harder for the financial services industry to be used to launder money or fund terrorism.
Timing of, and non-compliance with, CDD measures
Capiteus will ensure that it has completed appropriate client due diligence prior to taking on the client. The Compliance Officer/MLRO may, at his discretion, allow an account to be opened before all the documentation has been obtained if it is necessary in order not to interrupt the normal conduct of business and there is little risk of money laundering. In these cases the decision must be fully documented and all outstanding documentation obtained as soon as possible.
If Capiteus is unable to comply with the required CDD measures in relation to a customer then the firm must not undertake any transactions for that client and should terminate any existing relationship. At this point it will be necessary to consider making a Suspicious Transaction Report to the MLRO. If the client does not possess the right documents then the firm should consider whether there are any other ways of being reasonably satisfied as to the client’s identity. Where an account is to be terminated due to a lack of CDD the MLRO should be consulted as to the appropriate way to unwind the relationship.
Who is the Customer?
The term customer is not defined by the ML regulations but, in general, will be the party with whom the business relationship would be established. If in doubt as to who should be identified as the customer please seek guidance from the Compliance Officer or MLRO.
Who is the beneficial Owner?
The ML Regulations require that anyone owning or controlling 25% or more of a legal entity is identified and that their identity be verified in line with the firm’s risk-based approach.
If a client has already been identified by Capiteus, no additional information needs to be obtained in respect of such a client unless the information already available is either out of date; or if the client’s risk profile has changed. This may happen if the firm supplies a different product or service to the client or if Capiteus becomes aware of any information that results in a change to the client’s risk profile.
Simplified Due Diligence
Simplified Due Diligence can be applied to certain low-risk entities. Whilst this means there is no requirement to perform checks on the client’s identity or beneficial ownership structure it is necessary to prove that they fall within the SDD exemption. SDD can be applied to:
Financial institutions in the UK, EU or comparable jurisdictions that are themselves subject to the ML Regulations or equivalent
Companies listed on a regulated market
UK and EU public authorities
Legal and accountancy firms in the UK and the EU that are members of a recognised professional body (e.g. The Law Society or the Institute of Chartered Accountants in England and Wales)
Community institutions (e.g. European Investment Bank, Environment Agency, Europol)
Further detail on the application of SDD to these entities can be found in Part 6.
Enhanced Due Diligence
Under the risk-based approach adopted by Capiteus EDD will need to be conducted on any clients falling into the high-risk category. In addition to these clients the regulations state three specific types of relationship where EDD must be applied. These are:
Where the client is not physically present
In respect of correspondent banking relationships
Any relationship or transaction involving a Politically Exposed Person (“PEP”)
Specific guidance on the application of enhanced due diligence is contained in Part 6.
Exception to Full Identification
While we will use our standard onboarding procedure to verify the identity of our clients whenever possible; it may be the case that a client cannot provide standard information, or there are other factors that may influence the client’s risk profile. Capiteus’s procedure cannot accommodate every eventuality and in some cases the Compliance Officer/MLRO will need to exercise their judgment. This may justify a deviation from the firm’s standard client on-boarding procedure. All such exceptions must be agreed upon and documented by the Compliance Officer or MLRO in accordance with Capiteus’s risk-based approach. Acceptance by Capiteus of a client who is unable to provide standard information does not guarantee that client will be accepted as a client by the institutions with which Capiteus does business, each of which has its own due diligence procedures. If in doubt, please consult the Compliance Officer or the MLRO.
Capacity of the Client
I. Client Acting as an Agent
Regulated Financial Sector Firms
When identifying a client that acts on behalf of underlying customers AND is either of the following:
a) An FCA regulated financial sector firm; or
b) A non-UK firm located in a comparable jurisdiction AND regulated by an overseas regulator
Capiteus will not need to identify the underlying customers, even if their identity is disclosed to us, unless we take instruction directly from the underlying customers. In all other cases Capiteus will obtain identification and verification evidence in respect of both an intermediary and an underlying customer in accordance with our risk-based approach.
Firms Located in Non-Comparable Jurisdictions
Unless we are satisfied that the agent firm operates client identification procedures equivalent to the UK standards, the underlying customers must be identified or business declined.
Unregulated Agents Based in Comparable Jurisdictions
Unless Capiteus is satisfied that the agent firm operates client identification procedures equivalent to the UK standards, the underlying customers must be identified or business declined.
Agents in Non-Cooperative Countries and Territories
Business cannot proceed unless the underlying customers have been identified in accordance with Capiteus’s risk-based approach.
II. Capiteus Acting Solely as an Introducer
Capiteus may act solely as an introducer between the client and the firm providing a product or service (“Provider Firm”). Capiteus will play no part in the actual transaction and have no other relationship with either of the parties.
In such cases the identification and verification obligations will lie with the Provider Firm, and not with Capiteus, provided that:
1. Capiteus does not give advice to the client; and
2. Capiteus does not play any part in the negotiation or execution of the transaction; unless Capiteus is acting as an agent of the Provider Firm.
Standard of Verification Evidence
The level of documentation required for each client will vary depending on the risk category of a particular client.
Financial Services Targets
It is a criminal offence to make funds or financial services available to sanctioned entities and people (targets) on the list maintained by the HM Treasury. This would include dealing directly with these targets, and dealing with these targets through intermediaries (such as lawyers or accountants).
Please consult the Bank of England Consolidated List of Financial Sanctions Targets for up-to-date information.
Origin of Documents
Generally, when identifying a client, a document issued by a government department or agency, or by a court will provide a high level of confidence. Capiteus will normally accept non-government issued documentary evidence verifying identity only if it originates from a public sector body or a regulated financial services firm in a comparable jurisdiction, or is supplemented by knowledge that Capiteus has of the person or entity, which it has documented
Home Visit Evidencing Address
If Capiteus’s member/employee has visited the client at their business (or home, for individuals) address, a record of this visit may constitute evidence corroborating that the client is located at this address (i.e. as a second document).
Documents in a Foreign Language
If documents are in a foreign language, Capiteus will take appropriate steps to be reasonably satisfied that the documents do in fact provide evidence of the client’s identity and other factors. This is likely to involve translation of either all or part of a document. Where a Capiteus representative is sufficiently fluent in the language concerned, their translation can be accepted; in all other cases a professional translator shall be employed and affix their attestation of the translation’s accuracy to a copy of the document being translated. Where necessary it is permissible for the translation to be restricted to the relevant parts of a document, provided such restricted translation contains all the information required.
Documentary and Electronic Evidence
Capiteus may rely on either documentary, electronic or a combination of documentary and electronic identification evidence. If we choose to rely on electronic evidence only, we must use data from multiple sources, and across time, or incorporate qualitative checks that assess the strength of the information supplied. For example, a utility bill which is generated online will be afforded the same status as an original document provided it has been generated in the presence of a Capiteus representative. We cannot rely exclusively on electronic systems that access data from a single source only (e.g. a single check against the Electoral Roll). For further information on the use of electronic evidence please consult the Compliance Officer or MLRO.
Certification of Documents
Where possible, we will seek to make our own copy of identification documents. Where this is not possible, we will seek to obtain certified copies of identification documents. In these cases each document needs to contain a statement that the document is a certified copy of the original and must be dated and signed by one of those, listed in the non-exhaustive list detailed below. Where certification is carried out by a foreign official, or in a foreign language, the Compliance Officer or MLRO must be satisfied as to the veracity of the certifier and any translation must be carried out in accordance with the procedures for documents in a foreign language outlined earlier in this handbook.
Solicitor or notary public
Auditor or Accountant
Consulate or government official
Capiteus’s representative who has seen the original.
In addition, a person who certifies a document should provide their contact details.
Capiteus will generally not accept documents certified by an officer of the client.
Capiteus understands that although the information on the websites of its clients or potential clients may be helpful, it is not independently verified. While Capiteus may use such information as corroborative evidence, it will not exclusively rely on it; an exception can be made by the Compliance Officer/MLRO for low-risk clients.
Listed and some unlisted public companies are subject to a high level of disclosure in relation to ownership and business activities; and may have public filing obligations. Private companies and some partnerships, although not subject to such a level of disclosure, often have public filing obligations. Whenever possible and appropriate, Capiteus will seek to use reliable public information in its identification process.
On some occasions, and where appropriate, Capiteus may be provided with a list of those authorised to give instructions for the movement of funds or assets, along with an appropriate instrument authorising one or more directors (or equivalent) to give Capiteus such instructions. Capiteus will use this information in determining whom to identify, using its risk-based approach.
Non Face To Face Clients
Given Capiteus’s business model, it is unlikely we would not meet our clients face to face. Given our business and the type of service we provide, it is unlikely that clients accepted in such a manner will be deliberately avoiding face-to-face contact. Therefore non face-to-face business will not in itself magnify a money laundering risk posed by a particular client. However non face-to-face identification carries an inherent risk of impersonation fraud. To address this risk Capiteus will perform at least one additional verification check for non face to face clients, such as:
Verifying additional aspects of the client’s identity (or the same or different aspect of identity by electronic means)
Sending Terms of Business or other applicable documentation to a verified address (to be signed and returned by the client)
Requiring copy documents to be certified by an appropriate person
Controller of Funds
If it appears that another person may have control over the funds which form or otherwise relate to the relationship with our client, we will seek to identify the controller as well as the client, if and when justified by risk.
Passport copies should be in black and white, not colour (wherever possible).
Clients should be discouraged from sending original valuable documents by post.
Consideration should be given as to whether the documents relied upon may have been forged.
PART 6: IDENTIFICATION EVIDENCE
The purpose of this section is to provide detailed guidelines to representatives in respect of obtaining onboarding documentation. The information below covers the types of legal entity that are likely to be clients of Capiteus. However, due to the diversity of legal structures in place it is not possible to cover all possible scenarios below. If a potential new client does not appear to fit into any of the categories detailed below you should seek guidance from the MLRO as to the most appropriate type of documentation to obtain.
There are five parts to Customer Due Diligence:
a) Knowing who the applicant for business is (identification)
b) Is the client who they say they are (verification)
c) Ascertaining the nature and purpose of the relationship
d) Keeping information up to date
e) Ongoing monitoring to assess if in line with what is expected
This part covers the first three steps
Clients entitled to Simplified Due Diligence (SDD)
Regulated Financial Institutions
Where the new client is a regulated financial institution in the UK, EU, FATF or comparable jurisdiction there is no requirement to perform identity or verification checks. It is however a requirement that Capiteus has reasonable grounds for believing the customer is an institution covered by SDD. Therefore when dealing with regulated firms Capiteus will obtain the following information:
The evidence of the client’s regulated status; AND
The evidence of the client’s address
UK Public Authorities and European Community institutions
In respect of UK public authorities and European Community institutions Capiteus may apply SDD. Therefore when dealing with a UK public authority or community institution Capiteus will obtain the following information:
The evidence of the client’s public status; AND
The evidence of the client’s address
Companies listed on an EU regulated market or equivalent exchange
Companies listed on an EU regulated market or equivalent exchange are publicly owned and accountable. For all such customers Capiteus will obtain the evidence of address as well as reliable evidence that the client is either of the following:
A publicly quoted company (that is subject to public disclosure rules), or
A 50% (or more) consolidated subsidiary of a publicly quoted company
Whilst the SDD standards are lower for the types of client mentioned above it does not negate the need to obtain and verify further information if the risk assessment of the new clients suggests this may be appropriate. If a regulated market is located within the EEA there is no requirement to undertake checks on the market itself. Capiteus will however, record the steps it has taken to ascertain the status of the market. If the market is outside the EEA, but is one which subjects companies whose securities are admitted to trading to disclosure obligations which are contained in international standards and are equivalent to the specified disclosure obligation in the EU, similar treatment is permitted.
Companies subject to the licensing and prudential regime of a statutory regulator in the EU
This would include companies that are subject to regulators such as OFWAT OFGEM or OFCOM or an EU equivalent e.g. power and telecommunications companies
Members of recognised professional bodies
This will include legal and accountancy firms in the UK and EU that are members of a recognised professional body. Capiteus will obtain appropriate evidence that the firm is a member of the recognised professional body and this will be held on file.
Clients Subject to Full Identification Requirements
Unregulated Private Companies and Limited Partnerships
Capiteus, when identifying a company or limited partnership will seek to understand its legal form, ownership structure and business. The amount of information that we will seek to obtain will depend on the money laundering risk posed by a particular company. Money Laundering Risk is discussed in Part 4. Different information requirements in relation to different types of entity are detailed below. For all such clients, Capiteus as a matter of course, will seek to obtain the following Standard Information; that is, information required for all clients. Additional information will need to be obtained in relation to Medium- and High-risk clients.
Standard Information for Medium Risk Clients
Capiteus will obtain the following standard information in respect of each corporate client. The extent of verification of this information will depend on the risk posed by a particular client. When verifying the identity of a client in accordance with a risk-based approach, we will take into account the below-mentioned examples of documentation that can be used for such verification.
1. An official document containing the client’s full name and registered number. Examples:
A copy of Certificate of Incorporation or Partnership Agreement (if any)
Companies House (or equivalent registry) search
2. Evidence of client’s registered office in the country of its incorporation. Examples:
A confirmation of the address by a reputable professional person
Companies House (or equivalent registry) search
3. Evidence of client’s business address. Examples:
A copy of a utility bill;
A government-issued document
A record of visit to the client’s place of business
4. Names of all directors
5. Names of all direct and indirect beneficial owners owning 25% or more of the entity. Where no beneficial owner has an interest of 25% or more, the Compliance Officer will determine whose identity should be verified, taking a risk-based approach.
6. Copy of latest audited accounts where available.
7. A group/shareholding chart (where relevant). Wherever possible this information must be obtained from an independent source such as Companies House or from a reputable business information provider. Further detail of the standard of evidence is given in Part 5.
The identity of beneficial owners owning 25% or more of the company and the identity of at least one director must be verified in line with the requirements for private individuals.
For Limited Partnerships which are Medium Risk Clients
Limited Partnerships are treated in the same way as a private company the only difference being a list of partners will be obtained in place of the lists of directors and beneficial owners. The identity of the partners or other beneficial owners with a beneficial interest of 25% or more of the partnership, including the General Partner/Managing Partner, must be verified in line with the requirements for private individuals. If the General Partner/Managing Partner is a corporate entity, the identity of the ultimate beneficial owner of that corporate entity must be verified.
In relation to High risk clients we will obtain at least the following information, additional to both the standard information for Medium risk clients (save for overlapping requirements), or both:
1. Identification information for two executive directors (if applicable), in accordance with identification requirements for individuals; AND
2. In respect of Politically Exposed Persons (“PEPS”) senior management approval will need to be obtained together with details of the source of funds/wealth involved.
Legal and accountancy firms
Firms that are members of a recognised professional body (accountants and lawyers) will often be set up as limited companies or partnerships. As they will be classified as low risk from a money laundering perspective Capiteus has decided that there is no need to obtain the various documents that would apply to a private company or partnership that was not a member of a recognised professional body (Medium Risk Clients).
Capiteus will treat partnerships and other unincorporated businesses in accordance with the requirements and guidelines set out above for private companies (this will not apply to partnerships that are members of a recognised professional body). The standard information for all such businesses will consist of:
1. Evidence of trading address
2. Nature of business activities
3. List of all partners
4. Copy of partnership deed
5. A copy of the latest (audited, where available) financial statements.
The identity of the partners or other beneficial owners with a beneficial interest of 25% or more of the partnership must be verified in line with the requirements for private individuals. If any of the partners is a corporate entity, the identity of the ultimate beneficial owner of that corporate entity must be verified in accordance with the requirements for individuals.
Non-UK Governments and Public Authorities
When accepting a new client that is a government body or public authority in a country other than the UK the approach to identification and verification has to be tailored. The guidance below should be sufficient to identify and verify most organisations but in the case of any doubt please seek advice from the MLRO.
The following information should be obtained:
Full name of entity
Nature and status of entity
Address of entity
Name of home state authority
Names of directors (or equivalent)
The firm will verify the name, address and where possible the home state authority. For higher-risk organisations the firm will undertake verification of identity on two directors.
Trusts, Foundations and Similar Entities
It is likely that our client base will include trusts. Capiteus will treat trusts in accordance with its risk-based approach. In relation to trusts we will have regard to the following considerations, as well as to the general considerations outlined above in implementing our risk-based approach:
Transparency of the trust’s activities
Complexity of the trust’s structure (e.g. the presence of numerous layers of ownership)
Location of the trust (e.g. in a “tax-haven” previously associated with money laundering)
In many cases a trust will not be a separate legal entity but should still be regarded as the customer. The trustees of a trust will be considered the controllers. The purpose and objects of most trusts are set out in a trust deed. Please consult the Compliance Officer or MLRO if you are unsure as to who your client is. Most trusts accepted as clients of Capiteus will fall into the medium-risk category. If the trustees of a trust are all regulated entities or publicly listed companies it may be possible to consider them low risk if there is nothing to suggest they should be treated otherwise. For each trust we will seek to obtain the following information:
Full name of the trust
Nature and purpose of the trust (e.g., discretionary, testamentary, bare)
Country of establishment of the trust
Names of all trustees
Names of any beneficial owners (see below concerning verification)
Name and address of any protector or controller
If the client is to be low-risk then it will be necessary to demonstrate that all trustees (i.e. controllers) are either regulated institutions or listed companies.
Trusts set up under testamentary arrangements and small, local trusts funded by small, individual donations from local communities, serving local needs, will be classified as Medium risk. In addition to verifying information in accordance with procedures for Low-risk clients, we will obtain the following information
Either a register search in the country of establishment;
Or a summary of the instrument establishing the trust.
Offshore trusts and trusts with complex structures will be classified as High-risk. In respect of High risk trusts Capiteus will seek to obtain and, where appropriate, verify some or all the following additional information in addition to the information required for Low and Medium-risk clients:
Names of the donor, settlor or grantor of the funds (where there are large numbers of small donors, donors of 10% or more only)
Domicile of business/activity
Nature of business or activities of the trust
Operating address of the trust
Names and/or classes of the trust’s beneficiaries
For all trusts the identity of the beneficial owners will need to be verified. These will be:
The trustees or individuals having control over the trust
any individual who is entitled to a specified interest (that is, a vested, not a contingent, interest) in at least 25% of the capital of the trust property
Following its assessment of the money laundering risk presented by the trust, the firm may decide to verify the identities of additional trustees, and/or of the settlers.
In cases where Capiteus needs to identify a private individual, it will always seek to obtain the following information:
Date of birth
In verifying the individual’s identity we will obtain:
A. A government-issued document which incorporates:
The client’s full name and photograph; AND
Either their residential address;
Or their date of birth
B. A government-issued document (without a photograph) which incorporates the client’s full name,
A second document, either government-issued, or issued by a judicial authority, a public sector body or authority, or another FCA regulated firm in the UK financial services sector, or in a comparable jurisdiction, which incorporates:
The client’s full name; AND
Either their residential address;
Or their date of birth
Client identification performed electronically should mirror the above requirements. Where business is conducted face-to-face, we will, whenever possible, seek to review the originals of any documents involved in the verification. In the case of private individuals that have not been met by the firm an additional piece of acceptable documentation must be obtained.
If the client has been deemed to be of higher risk then the following applies:
Verifying the identity of higher-risk individuals
Full name, date and place of birth must be verified using either:
a) a current passport (to include the photograph page and pages containing reference numbers, date country of issue, nationality and place of birth); or
b) a national identity card ((to include the photograph page and pages containing reference numbers, date country of issue, nationality and place of birth).
Verification of the address of higher-risk individuals
At least one of the following pieces of original documentary evidence confirming the individual’s current residential address is required for all relationships classified as medium or high risk.
(The documents are listed in order of preference - Not all documents are appropriate in some countries):
a) Current national identity card (if not used to verify identity)
b) Current photographic driving licence
c) Correspondence from a central or local government department or agency e.g. tax assessment or notice of tax code (issued during the previous 12 months)
d) Social security card (if current residential address is included)
e) Council tax demand letter or statement (issued during the previous 12 months);
f) Bank statement or credit card statement which shows the name and address (issued less than 3 months previously);
g) Mortgage statement (issued less than 3 months previously);
h) Utility bill (but not ones printed off the internet, unless generated in the presence of a Capiteus representative).
If an individual has lived at their current residential address for less than 12 months Capiteus will require a document which confirms the individual’s previous residential address. Please note – a C/O address or PO Box is not acceptable. In certain locations where a formal postal system does not exist or is not sufficiently developed, a description of the location (e.g., “dirt lane heading East from highway 59 [mile 16], the second house on the right past the dairy”) can be accepted by the MLRO if a Capiteus representative has attended at the address and certifies the description as accurate. Acceptance by Capiteus of such a description does not guarantee acceptance by the institutions with which Capiteus does business.
Politically Exposed Persons (‘PEPS’)
It is necessary for enhanced due diligence (“EDD”) to be conducted where a client is a PEP or where one or more of the directors or beneficiary owners of a client are a PEP. A PEP is defined as an individual who has, at any time in the preceding year, been entrusted with prominent public functions, or is an immediate family member or known close associate of such a person. A prominent public function could include but is not limited to the list below, however care must be taken to take into consideration general levels of corruption and other influencing factors in the country/territory concerned, as well as of current United Nations-imposed and other sanctions which may apply:
Heads of state, heads of government, minister and deputy or assistant ministers
Members of Parliament (MPs)
Members of supreme courts or other high-level judicial bodies
Members of courts of auditors or of the boards of central banks
Ambassadors, chargés d’affaires and high ranking officers in the armed forces
Members of administrative, management or supervisory boards of state-owned enterprises
In respect of PEPs Capiteus must have
senior management sign off on the onboarding process
satisfactory evidence of the source of wealth and source of funds which are involved in the business relationship or transaction.
PART 7: INTRODUCTIONS BY INTERMEDIARIES
Capiteus may accept a confirmation from an intermediary that a client’s identity has been appropriately verified. We will take account of the following considerations when deciding whether it is reasonable for us to rely on an intermediary to have properly identified the client:
The public disciplinary record of the intermediary, to the extent it is available.
The nature of the client, the product or service sought and the sums involved.
Any adverse experience of the intermediary’s general efficiency in business dealings.
Any other knowledge, whether obtained at the outset of the relationship or subsequently that we have regarding the standing of the intermediary.
Regulated Financial Sector Firms
Provided the introducer satisfies the general criteria above, Capiteus will normally be able to rely on an introduction Certificate1 from an FCA or EU-regulated firm or a regulated financial institution in a comparable
Capiteus will accept Introduction Certificates from lawyers, accountants and other professionals but may carry out additional due diligence on the introducing firm. Capiteus may rely on the copies of verification documentation supplied by a professional firm to us, provided that these have been assessed by Capiteus as satisfactory.
Firms in Non-Comparable Jurisdictions
If the introducing firm is located in a non-comparable jurisdiction, Capiteus will either:
1. Identify the introduced client itself; or
2. Rely on an Introduction Certificate if it is accompanied by copies of identification documents certified in accordance with UK standards.
Firms in Non-Cooperative Countries and Territories
We must not rely on an introducer located in a NCCT to have undertaken client identification. Capiteus will perform its own client due diligence in accordance with the risk-based approach.
Where a client is introduced by one part of a financial sector group to another, it is not necessary for their identity to be re-verified, provided that:
1. The client’s identity has been verified by the introducing part of the group in line with standards in the UK, EU or a comparable jurisdiction; and
2. A group introduction confirmation is obtained and held with the client’s records (except if Capiteus has day-to-day access to all group client information and records)
Production of Documents
Any Introducer must be able to supply copies of the client due diligence documents to Capiteus on request. The documentation should be provided within 48 hours unless an extended timeframe is agreed between both parties.
If at any time you become concerned that an introducer is not obtaining sufficient information on clients and/or is unable to provide copies of documents on request then this matter must be referred to the MLRO.
PART 8: SUSPICIOUS TRANSACTIONS
Obligation to Report
Every representative of Capiteus is required to make a formal report to the MLRO if, in the course of their day to day business activities, they know, suspect, or have reasonable grounds for either knowing or suspecting money laundering or terrorist financing. Reporting in accordance with this requirement will not result in the breach of the UK Data Protection Act 1998 or similar legislation in other territories, confidentiality or any other contractual or statutory provisions.
Remember that a duty to report a suspicion of money laundering exists even if a potential client does not conduct any business through Capiteus, or if we decline the business. The obligation to report is in respect of anyone, whether the firm’s client or not. This is different from the obligation to report fraud that applies to Capiteus’s actual, and not potential, clients only.
It is important to understand that a person could be found guilty of a failure to report even if they did not actually suspect but ought to have suspected money laundering. The test is whether an honest and reasonable person, working within the financial services industry, would have formed a suspicion based on the facts available at the time. Generally, to satisfy this test you would have to know your client, their business and the rationale for their instruction, activity or transaction. A failure to make adequate enquiries or assess relevant facts will not provide protection against the objective test of reasonable suspicion.
Timing of Reporting
The obligation is to make a report as soon as reasonably practicable.
Discharge of Individual Responsibility
By submitting a report to the MLRO you will discharge your individual responsibility under s330 POCA 2002, thus protecting yourself from criminal prosecution in the UK for the offence of a failure to disclose. Therefore, when reporting a suspicion, you will receive a formal written acknowledgment from the MLRO. Please retain it for your own records.
Consultation with a Colleague or Line Manager
It is acceptable to discuss your suspicion with your line manager. However, if after consulting your line manager you remain suspicious, it is your responsibility to ensure that a report is submitted to the MLRO. While a line manager may comment on the proposed report, they do not have the authority to block or attempt to block any report being made to the MLRO. Should you encounter an attempt to prevent a report being made, you should discuss this with the MLRO directly. In addition, if you consult a colleague, this colleague will have knowledge on the basis of which they must consider whether or not to make a report to the MLRO. To avoid making duplicate reports, the colleague, if suspicious, should only report if they are reasonably satisfied that the other person will not make such a report. To reduce the risk of inadvertently tipping off a client the case should be discussed with as few people as possible.
Continuous Obligation to Report
Making a report does not remove the need to notify the MLRO of further suspicions that may arise with the same or different client. If further suspicions arise additional reports must be made to the MLRO.
After Submission of a Report
Until the MLRO informs you that no report to NCA or other relevant authority is to be made, any further transactions or activity in respect of the suspected client must be reported to the MLRO as soon as they arise.
The MLRO will consider the report and surrounding circumstances and decide whether or not to submit an external report to NCA or other relevant authority. If the MLRO decides to do so, they must do this as soon as practicable. In order to undertake this investigation the MLRO may need further information or access to client files. The MLRO must be given free access to all client records. If further information needs to be obtained from the client or from an intermediary then this should normally be obtained by the representative with the client relationship. This is to minimise the risk of alerting the client or intermediary that a disclosure of NCA or other relevant authority is being considered. The MLRO will record all internal enquiries made in relation to the report of a suspicion and the basis for their decision to make or not to make a report to NCA or other relevant authority. A failure to make a report when there are reasonable grounds for a suspicion may constitute assistance under ss.327-329 POCA 2002. If a disclosure to the MLRO causes them to acquire knowledge or suspicion of money laundering (or gives them reasonable grounds for such knowledge or suspicion) and the MLRO fails to make a report to NCA or other relevant authority, then they will be committing the offence of a failure to disclose under s. 331 POCA 2002.
Pre-Transaction Reporting to NCA or other relevant authority
If a pre-transaction report is made by the MLRO to NCA or other relevant authority, no business may be conducted with or for a client until you receive consent from NCA or other relevant authority. NCA has 7 working days (other relevant authorities may have longer), from the working day following the day of the disclosure, in which to respond to the MLRO. Timescales may differ in non-UK jurisdictions. Dealing with or advising a client before receiving consent from NCA or other relevant authority may constitute one of the offences under ss.327-329 POCA 2002, that is concealing, arrangements or acquisition, use and possession. Note there are no provisions under the UK Terrorism Act for consent to be given within a specified period. If a report is made to SOCS under this Act no related transaction or activity is allowed to proceed until Capiteus has been contacted by NCA, other relevant authority or a law enforcement agency. The MLRO will inform you whether NCA or other relevant authority consents to you dealing with the client or not. Please liaise directly with the MLRO who will provide guidance on what information may be provided to a client or potential client.
Post-Transaction Reporting to NCA or other relevant authority
Since NCA or other relevant authority cannot provide consent after a transaction or activity has already occurred, it will provide an acknowledgment of receipt of a report to the MLRO. In the absence of an indication to the contrary from the MLRO, you may deal with the client as normal. However you must inform the MLRO of every interaction with the client and seek guidance on how to deal with that client.
Contact with Client and Third Parties
Any contact from the client questioning the delay in processing their transaction needs to be handled very carefully. In these circumstances please liaise closely with the MLRO. Whether or not NCA allows you to proceed with a transaction, you may not tip off the client that a disclosure to the authorities has been made. Neither may you disclose that such a disclosure has been made in response to a data protection request. Unless specifically authorised to do so, you must not discuss any reports of suspicions of money laundering with third parties. Any requests for information from third parties, such as the Police or Customs, must be immediately referred to the MLRO.
Any evidence to be presented in Court will be obtained under a court order. The following are the types of UK order that may be served on Capiteus as part of an investigation. Comparable orders may be served in other jurisdictions.
Customer information order
Account monitoring order
Search and seize warrant
Order for financial information under Terrorism Act
All such orders should be passed to the MLRO immediately who will liaise with Capiteus’s legal advisers as appropriate.
Failure to Make a Report
In addition to the sanctions under the POCA 2002, Capiteus will take disciplinary action against any representative(s) who fails to report a suspicion without a reasonable excuse.
Form of Reporting
Please make your report to the MLRO in writing. Please give as much information as possible to assist the MLRO.
Examples of Suspicious Activity
Below is a list of activities that may give rise to a suspicion of money laundering or terrorist financing. This is not an exhaustive list of circumstances; neither will they necessarily give rise to a suspicion. However any of these occurrences is likely to form a basis for further enquiry in most cases. It will be ultimately a matter for your own consideration to decide whether or not to report a suspicion.
Transactions with no apparent purpose or that make no economic sense
Transactions of a size or pattern which is out of line with transactions normally undertaken by the client
The client refuses to provide the information requested
Accounts that are used for a short period of time only
Dormant accounts that get reactivated
Extensive use of offshore vehicles or structures, especially if they do not make economic sense
Unnecessary routing of funds through third party accounts
Ongoing Relationships with Suspicious Clients
Capiteus’s policy is not to maintain relationships if the firm believes that we may be used for money laundering. Where a client has been involved in a suspicious transaction, the MLRO, together with the senior management, makes a decision regarding the ongoing relationship with that client. If we decide to continue a client relationship, we may implement increased monitoring of the client’s account. Where a client has been the subject of a referral to NCA or other relevant authority by the MLRO, the MLRO must be informed before any action is taken to exit the relationship. In such circumstances the MLRO will consult NCA or other relevant authority to obtain permission to terminate the client relationship.
Data Protection – Subject Assess Requests (SARS)
Occasionally a SAR will be received in respect of a client where an internal or external suspicious transaction report has been made. Whilst the Data Protection Act (“DPA”) seeks to ensure all information is included in any response to a SAR request; it does allow, under Section 29 of the DPA, to omit information which may prejudice the prevention or detection of crime. Any such request will need to be handled sensitively and will require the MLRO to liaise with NCA or other relevant authority as well as their legal advisers when deciding whether to omit any information. Any decision in respect of the Section 29 exemption must be clearly documented.
Under Section 341 POCA it is an offence to destroy any documentation which may be relevant to a money laundering investigation. Records of all internal and external reports together with any supporting documentation must be retained for 5 years from the date of the report. If, however, the firm is aware of an ongoing investigation in relation to any report it must be retained until the relevant agency has confirmed that the case is now closed.
PART 9: TRAINING AND AWARENESS
For the purpose of this manual “awareness” refers to actions taken by Capiteus to ensure that on an ongoing basis personnel are informed of money laundering and associated risks as well as their individual and collective responsibilities. “Training” refers to a more specific process whereby representatives are educated on specific areas, their attendance is recorded and understanding measured. Capiteus has a legal responsibility to ensure that personnel receive appropriate anti-money laundering training. Failure to provide training may constitute a criminal offence.
It is our policy to ensure that all representatives are aware of and kept up to date with money laundering developments. This Handbook serves as the basis for awareness within Capiteus. It will be supplemented with additional material as and when necessary. At the start of their time at Capiteus, every representative must be given a copy of this Handbook and must sign an Anti-Money Laundering Declaration to confirm that they have read and understood the provisions of this Handbook.
Capiteus provides training to representatives upon recruitment and on an annual basis. The requirement to train relevant representatives is also applicable to any part-time, temporary or consulting representatives. Anti-money laundering training will, as a minimum, comprise the following issues:
The need to obtain sufficient evidence of identity
Recognition and reporting of suspicions of money laundering via the MLRO to NCA or other relevant authority
The identity and responsibilities of the MLRO
Anti money laundering rules, guidance and regulations
Effects of breaches of money laundering legislation on Capiteus and its representatives
The attendance or completion of anti-money laundering training is mandatory for all relevant personnel. If, after attending training, you feel that you would benefit from further clarification on certain subjects; please contact the MLRO.
Capiteus maintains records of the names of the attendees, dates of their participation in training, the content of the course and, where applicable, test results. These records will be reviewed periodically by the Compliance Officer and/or MLRO.
PART 10: MONITORING
In monitoring clients’ activities, Capiteus places reliance on two main factors:
1. Having up-to-date client information; and
2. Asking pertinent questions to elicit the reasons for unusual transactions
Up-To-Date Client Information
We ensure that the information we keep about our clients is up-to-date through regularly performing client reviews. The frequency of such reviews is determined by the client’s risk category. We review our clients with the following frequency:
Low-risk clients are re-assessed every 5 years
Medium-risk clients are re-assessed every 3 years
High-risk clients are re-assessed annually
The purpose of these reviews is to identify any significant changes to the corporate structure (where applicable), management and activities of the client. Unless the MLRO resolves otherwise, it is not always necessary to obtain all the information required for account opening or to re-verify all identification information. These reviews are coordinated by the MLRO. In addition to reviewing changes to the client’s structure, management and profile an overall review of the client’s activity over the period is normally conducted. This will allow Capiteus to assess if there have been changes in the client’s activity which could be considered unusual given the information held about the client. Notwithstanding these timescales, should any representative become aware of a change in the circumstances of a client, for example change of ownership structure or move into a new business area, this information should be recorded on the client file immediately. If this information could affect the risk assessment of the client then the MLRO should be informed. The MLRO will then decide if there is a need to re-evaluate the client’s risk assessment.
We consider that a combination of anti-money laundering training and commercial awareness will enable our representatives to monitor for, recognise and report suspicious activities. We will seek to understand the rationale for the client undertaking a particular transaction or activity. When identifying unusual or potentially suspicious activity our representatives will use their knowledge of the client and of what would be normal in a given set of circumstances. In general terms, all representatives should have regard to the following considerations when monitoring client accounts, as well as factors detailed in other Parts of this Handbook:
Whether the financial performance of an enterprise (where appropriate) or an individual client is in line with the nature and scale of its business, and whether the corporate finance services it seeks appear legitimate in the context of those activities.
The unusual nature of a transaction: e.g., abnormal size or frequency for that client or type of client
The nature of a series of transactions: for example, a number of cash payments
The geographic destination or origin of a payment: for example, to or from a high-risk jurisdiction
The parties concerned: for example, a request to make a payment to or from a person on an HM Treasury or United Nations Sanctions List.
Evidence of all monitoring undertaking by Capiteus will be retained for a period of at least 5 years from the date of the review.
PART 11: RECORD RETENTION
This Part provides guidance on the record-keeping procedures that Capiteus needs to meet their obligations in respect of the prevention of money laundering and terrorist financing. Keeping adequate records will ensure that Capiteus can:
Provide an audit trail for all advice given and activity undertaken on a client’s behalf
Provide adequate information to the law enforcement agencies to assist with their investigations
Undertake monitoring of client activity against expectations
Identify and report any suspicious activity
Provide evidence of meeting all statutory and regulatory obligations
What records have to be kept?
The following material must be kept:
Client information, including evidence of identification
Details of all transactions made on behalf of each client
Internal and external reports of suspicion
Information not acted upon
Training and compliance monitoring
Information about the effectiveness of training
Keeping the required records for the specified time period will not result in Capiteus breaching the Data Protection Act 1998. This information will be made available to the competent authorities in the context of any relevant criminal investigations and prosecutions.
Client identification records must be kept for a period of at least 5 years from the date of the end of a client relationship. That is either the date of the last transaction with the client or the closure of client account, whichever is the latest.
Transaction records must be kept for a period of at least 5 years from the date of the transaction. They should be maintained in a form which provides satisfactory audit trail of all transactions effected via Capiteus allowing their reconstruction.
Third party Record Keeping
If Capiteus has an appointed representative then it is Capiteus’s responsibility to ensure the representative complies with the record-keeping obligations. This principle also applies to the use of third-party service providers such as introducers or administrators.
Internal and External Suspicious Transaction Reports
We will retain the following records of any reports of suspicions of money laundering regardless of whether the MLRO made a report to NCA or other relevant authority. These records will consist of:
Records of actions taken under the internal and external reporting requirements
When the MLRO has reviewed an internal report and decided not to make a report to NCA or other relevant authority, a record of all the information considered
Copies of reports of suspicions submitted to NCA or other relevant authority
These records will be retained for 5 years from the date the report is made. However if Capiteus is aware that either NCA or other relevant authority or another law enforcement agency is conducting an investigation into a client, Capiteus will retain all records in relation to that client until the agency confirms that the case is closed. If, within 5 years of a disclosure being made, Capiteus has not been advised of an ongoing investigation, it may destroy the records.
Anti-Money Laundering Training Records
We will retain the following records for at least 5 years in relation to Anti-Money Laundering (“AML”) training:
Date(s) AML training was given
Nature and content of the training
Names of people who received the training
The results of the tests taken, if applicable
Compliance Monitoring Records
The following records are retained for at least 5 years in relation to compliance monitoring:
Annual MLRO report to the board and any other reports to senior management
Records of consideration of those reports and of any action taken as a consequence
Refused Business Records
Where business has been refused because it does not meet our client identification, verification and KYC standards, a record of the refusal will be retained for 5 years.
Wire Transfer and Electronic Payment Records
Capiteus does not handle client money, accordingly there should be no need to maintain records of wire transfer and electronic payments involving client money as this is the responsibility of the institutions with whom Capiteus does business. In the event that senior management, with the approval of the MLRO, agrees to any exceptions to this rule, all electronic payment messages must contain sufficient information to identify the parties involved (i.e. both the party making the payment and the beneficiary). This information should include full names, addresses and account numbers. Where this information cannot be provided in the electronic payment message, full records must be retained.
Format and Retrieval of Records
Capiteus aims to reduce the volume and density of records. While still complying with the statutory requirements we may choose to keep records:
By way of original documents
By way of photocopies of original documents
In scanned form
In computerised or electronic form
In any other secure form made possible by future advances in technology
Capiteus may keep records either offsite or outside the UK/EU, but will remain responsible for ensuring that all required records can be made available without undue delay and meet the UK/EU or other regulatory requirements. Capiteus will ensure that all records, however kept, are capable of being retrieved within 48 hours.
Sanctions and Penalties
Where a firm fails to observe the record-keeping requirements either the firm, or relevant person(s) or both are open to prosecution. This may include imprisonment for up to 2 years, an unlimited fine and/or regulatory censure.