Anti-Money Laundering/ Counter-Terrorist Financing/ Sanctions/ Criminal Finance

Chapter Text

Notaries must be familiar with and comply with all anti-money-laundering, counter-terrorism, sanctions and criminal finance legislation and regulations as they apply to notaries.

Anti-Money Laundering and Counter-Terrorist Financing

The application of the Anti-Money Laundering and Counter-Terrorism legislation to notaries is explained and illustrated in an Official AML Guidance document drafted by the Legal Sector Affinity Group and approved by the Treasury.  The Official AML Guidance is freely available to download from the website of the Faculty Office.  The Official AML Guidance is in the process of being updated to reflect changes to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 introduced in January 2020 by the Money Laundering and Terrorist Financing (Amendment) Regulations 2019 (together, the Money Laundering Regulations).

Notaries are required to be familiar with the Official AML Guidance and to follow it when providing notarial services [Prevention of Money Laundering Rules 2008 3(2)].  Failure to be familiar with the Official AML Guidance and/or failure to follow it when providing notarial services is Notarial Misconduct [Prevention of Money Laundering Rules 2008 3(3)].

In addition to the requirement imposed on notaries by the Master of the Faculties to be familiar with and to follow the Official AML Guidance, following the Official AML Guidance is also of key importance for deciding whether or not a notary has committed an offence under the anti-money-laundering and anti-terrorism legislation, or has complied with the Money Laundering Regulations [Section 21A(6) of the Terrorism Act, Section 330(8) of the Proceeds of Crime Act,Regulation 76(6) and Regulation 86(2) of the Money Laundering Regulations].  Following the Official AML Guidance is a defence against a charge of failing to make a disclosure or to apply customer due diligence measures.

As highlighted in the Official AML Guidance, it is an offence under Section 303 of the Proceeds of Crime Act for a notary to fail to make a disclosure to the National Crime Agency if they know or suspect or they have reasonable grounds for knowing or suspecting that another person is engaged in money laundering where such information came to the notary in the course of a business in the regulated sector [see definition of regulated sector in Schedule 9(1)(n) of the Proceeds of Crime Act].

The Proceeds of Crime Act and the Money Laundering Regulations impose obligations on a notary when the work in which they are involved falls within one of the work types set out in the definition of regulated sector.  These work types are:

(i)      the buying and selling of real property or business entities

(ii)     the managing of client money, securities or other assets

(iii)   the opening or management of bank, savings or securities accounts

(iv)    the organisation of contributions necessary for the creation, operation or management of companies, or

(v)     the creation, operation or management of trusts, companies or similar structures. [Schedule 9(1)(n) of the Proceeds of Crime Act and Regulation 12(1) of the Money Laundering Regulations]

The Official AML Guidance, however, expands on this definition and states that the Money Laundering Regulations do NOT apply to work undertaken by a notary as a public certifying officer where they have no substantive role in the underlying transaction.  They go on to state that the Money Laundering Regulations do not apply to many aspects of a notary’s practice including, for example, the taking of affidavits and declarations, protests, translating, certifying the execution of documents and authentication work in general.

A notary should, therefore, have carefully considered processes and procedures in place to distinguish between their work as a public certifying officer and their work where they have a substantive role in the underlying transaction.  There may be situations in which the distinction is difficult to draw.  In the course of providing notarial services, a notary may be asked to provide assistance that goes beyond the notary’s strict authentication function.  For example, a notary will often advise clients on the appropriate manner of executing a deed under the law of England and Wales, and may also assist with the preparation of additional documents such as minutes of a meeting of the board of directors of a company.  In these circumstances a notary should pay particularly close attention to the Official AML Guidance and consider whether or not the service provided falls within the exemptions specified therein.

The Money Laundering and Terrorist Financing (Amendment) Regulations 2019 introduced a requirement for supervised entities and individuals to report to Companies House any discrepancy between the information they hold about the beneficial owner of a company, limited liability partnership, Scottish limited or qualifying partnership and the information that appears on the public people with significant control (PSC) register maintained by Companies House.  If you discover a discrepancy when you are undertaking customer due diligence, you must report the discrepancy to Companies House using the form on the Companies House website.

Sanctions

Notaries must comply with any asset-freezing financial sanctions and financial restrictions imposed on individuals, entities, states and industries under United Nations resolutions, EU Regulations, or domestic legislation and with all guidance issued by the Office for Sanctions Implementation (OFSI).

As independent legal professionals [The European Union Financial Sanctions (Amendment of Information Provisions) Regulations 2017], notaries are additionally legally obliged to report to OFSI if they know or suspect that a breach of financial sanctions has occurred, that a person is subject to financial sanctions (a designated person) or that they hold frozen assets, where that knowledge or suspicion came to the notary while conducting their business.

Criminal Finances Act 2017

Notaries who work in partnership with other notaries or who work through corporate entities should familiarise themselves with the provisions of Part 3 of the Criminal Finances Act 2017 and the corporate offence of failure to prevent the facilitation of tax evasion.

If you fall within the definition of relevant body in the legislation, you should consider putting in place the prevention procedures you consider reasonable to prevent persons who are associated with your firm from committing UK Tax offences.

Outcomes

• Notaries act as effective gatekeepers in international efforts to prevent terrorism and money laundering.
• Notaries and their staff have sufficient training to implement anti-money-laundering and anti-terrorism legislation when providing notarial services.
• Notaries submit Suspicious Activity Reports to the National Crime Agency when appropriate so to do.
• Suspicious Activity Reports submitted by notaries are of high quality.
• The reputation of the notarial profession is safeguarded from the dangers of notaries lending an appearance of legitimacy to a fraudulent transaction, assisting money launderers, terrorists or sanctioned individuals.

Positive Indicators

• You monitor incoming instructions and consider whether or not any given instruction falls within the work types set out in the Money Laundering Regulations and whether your role goes beyond that of a public certifying officer with no substantive role in the underlying transaction.
• You take a risk-based approach by managing your notarial practice with regard to the risks of your services being used for money laundering or terrorist financing.
• You prepare a practice-wide risk assessment as required by Regulation 18 of the Money Laundering Regulations and take into account information made available by the Faculty Office (your supervisor) and the size and nature of your business.
• You report suspicions of money laundering or terrorist funding promptly to the National Crime Agency or, if appropriate, the nominated officer (also known as Money Laundering Reporting Officer) at your firm.
• You keep up to date with developments in anti-money-laundering and anti-terrorism legislation and revisions to the Official AML Guidance as well as updates from OFSI and any amendments to the Criminal Finances legislation.
• You are able to demonstrate from your records that the customer due diligence measures you have taken are appropriate taking into account the risks of money laundering and terrorist financing.
• You comply with any asset-freezing financial sanctions and financial restrictions imposed on individuals, entities, states and industries under United Nations resolutions, EU Regulations, or domestic legislation and with all guidance issued by the Office for Sanctions Implementation (OFSI).
• You report any sanctions breaches to OFSI.
• You report any discrepancy between the information you hold about the beneficial owner of a company, limited liability partnership, Scottish limited or qualifying partnership and the information on the public people with significant control (PSC) register maintained by Companies House.
• You monitor the effectiveness of the controls that you put in place to manage the risks of your practice being used for money laundering or terrorist financing.
• You consider whether the provisions of Part 3 of the Criminal Finances Act 2017 apply to your practice.
• You put in place procedures designed to prevent persons associated with your practice from committing UK Tax evasion facilitation offences in line with section 45(2) of the Criminal Finances Act 2017, if required.
• You ensure that ongoing training is provided to your staff in anti-money-laundering and anti-terrorism measures and, if required, the offences of the facilitation of tax evasion.

Negative Indicators

• You facilitate a transaction that results in money laundering or the funding of terrorism.
• You act in a matter that involves a breach of sanctions.
• You fail to report a breach of sanctions to OFSI.
• You fail to collate appropriate customer due diligence on a client when your work falls within the provisions of the Money Laundering Regulations.
• You fail to report a discrepancy between the information you hold about the beneficial owner of a company, limited liability partnership, Scottish limited or qualifying partnership and the information on the public people with significant control (PSC) register maintained by Companies House.
• You tip off a client whom you suspect of money laundering.
• You fail to monitor your client relationships on an ongoing basis, which results in your practice being used for money laundering or terrorist financing after initial checks on the client revealed no cause for concern.
• You fail to prepare and review (as appropriate) your firm wide anti-money laundering and terrorist financing risk assessment.

https://www.facultyoffice.org.uk/code-of-practice/anti-money-laundering/