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HMRC internal manual

Money Laundering Regulations: Compliance

HM Revenue & Customs
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High Value Dealers: Specific Compliance Checks at a HVD

-– Listed below are three scenarios that illustrate common compliance failings that are likely to be found when inspecting an HVD.

Scenario 1 Regulation 20: internal controls and record keeping procedures.

* Risk that transaction records may be incomplete and that all HVPs cannot be identified.
* Test: Is there a complete audit trail for each HVP?
* Method: Trace a single HVP from receipt to banking. Is there a complete audit trail?
* Test: Confirm that all relevant transactions are recorded.
* Method: Reconcile receipts to banking. Calculate the daily cash receipts total from the cash book to the daily totals shown in banking counterfoils/paying in books. Compare to receipts shown on bank statements. Are the amounts consistent?
* Evaluation/Conclusion. If not, can the business provide a satisfactory explanation? If the difference cannot be satisfactorily explained the business has failed to comply. It needs to create a complete audit trail giving each transaction a unique reference number that is copied to documentation in the audit trail. Consideration should be given to the issue of a warning letter or penalty and whether an intelligence report should be submitted on Form MLR145. 

Scenario 2 Regulations 20 and 14 internal controls and enhanced due diligence procedures.

* Risk that customers who initially propose to pay for goods over €15,000 in value by credit or debit card or by cheque and at the last minute present cash as the means of payment prior to taking ownership of the goods.
* Test: What are the procedures to prevent unsolicited HVPs?
* Method: Get an explanation of the standard procedures for accepting HVPs. Is every stage controlled? Is it possible for AML procedures to be by-passed by staff? Is there an authorisation process in place? Does the Nominated Officer have oversight of transaction data? How would the business handle such a request? Would business be refused and a disclosure made? Or would the business implement enhanced due diligence procedures? If so what are they?
* Evaluation/ Conclusion: If internal controls and EDD procedures are inadequate the business has failed to comply. The Nominated Officer should put in place an authorisation process or take sole responsibility for acceptance of cash payments. Business must decide on additional measures that it could introduce to mitigate the risk and scrutinise the source of the funds. Staff training should be reviewed and disclosure must be considered.

Scenario 3 Regulations 20 and 14 internal controls and enhanced due diligence procedures.

* Risk that customer cannot provide a valid reason for making a HVP or satisfactorily explain the source of funds.
* Test: Are HVPs still being accepted from the customer? Has the Nominated Officer made a disclosure to SOCA?
* Method: Check transaction records. Check records of disclosures and discuss and record reasons for non disclosure with the relevant staff and the Nominated Officer.
* Evaluation/Conclusion: If the business is still accepting HVPs then they have failed to comply with the Regulations. Remind the Nominated Officer of his/her legal duty to disclose to SOCA where there are reasonable grounds for suspicion.

If there are reasonable grounds for suspicion you must consider the appropriate warning or penalty action to take and whether an intelligence report on Form MLR145 should be sent.