ANTI MONEY LAUNDERING & Bribery AWARENESS An overview

Objectives Understand what Money Laundering is and your obligations under the Money Laundering Regulations 2007 How to identify and report Suspicious Activity Understand the need to conduct Customer Due Diligence and an introduction to the Retail Client AML Requirements which can be found on the extranet Understand offences of Bribery under the Bribery Act Introduction to Intrinsic Gifts and Entertainment policy and your obligations

Content What is Money Laundering The three stages of Money Laundering What is Suspicious Activity and how to recognise it The Suspicious Activity Reporting Process Money Laundering Offences Customer Due Diligence Bribery & Conflicts of Interest Gifts and Entertainment Summary and next steps

What is money laundering Money laundering occurs every time a transaction takes place or a relationship is formed that involves any form of property from any crime It includes money or assets obtained criminally which are exchanged for money or assets that are ‘clean’, with no obvious link to any criminal activity This process typically involves three key stages known as: Placement Layering Integration

The three stages of money laundering PLACEMENT LAYERING INTEGRATION Where cash from criminal activity is placed into the financial system Usually involves a complex system of transactions designed to hide the source and ownership of the funds and confuse the authorities Where laundered funds are reintroduced into the legitimate economy, appearing to have come from a legitimate source

UK regulatory framework The laws, rules and guidance relating to anti money laundering in the UK is made of up of: Primary legislation Proceeds of Crime Act 2002 (POCA) Secondary legislation Money Laundering Regulations 2007 (MLR) Industry and Professional Guidance Guidance notes, e.g. Joint money Laundering Steering Group (JMLSG) Regulator/Supervisory Rules and Enforcement Financial Conduct Authority Systems & Controls (SYSC) Source Book Her Majesty’s Revenue & Customs (HMRC) Law Society Office of Fair Trading (OFT) (Estate Agents) Gambling Commission (Casinos)

Your obligations Although you don’t need to memorise the AML legislation, you are expected to understand what your obligations are as a result of it You need to know that Steve Elliot is Intrinsic’s Money Laundering Reporting Officer (MLRO) You need to understand how to recognise suspicious activity and know how to make a report

What is suspicious activity? Fraud An act of deception intended for personal gain or to cause a loss to another party Identity Theft When someone takes another person’s identity to perform fraud or other criminal act Tax Evasion Often entails taxpayers deliberately misrepresenting the true state of their affairs to the tax authorities to reduce their tax liability It includes dishonest tax reporting, such as declaring less income, profits or gains than the amounts actually earned, or overstating deductions

What is suspicious activity? Large amounts of money Coming from or to a high risk country and no reasonable explanation; for example the client claims the money is from the sale of a property but can provide no documentation to support this Benefit Fraud When someone obtains state benefit they are not entitled to, or deliberately fails to report a change in their personal circumstances Money Laundering Concealing the proceeds of crime; for example a customer who starts investing large amounts of money however not in keeping with client circumstances and investment history Remember - any transaction – any relationship - any property - any crime

How to recognise Suspicious Activity Money Laundering activity is usually noticed where: There is no legitimate reason for the relationship; e.g. the client is based in a different area and contacts you out of the blue The behaviour of the client is suspicious, e.g. a client puts great pressure on you to follow their instructions without providing you with all the answers that you need There is unusual or irregular activity compared with what you know about: Any previous dealings with the client their circumstances the reason for the relationship e.g. the client all of a sudden has a large amount of money to invest but it is not in keeping with their current income and expenditure If you determine that an activity may be suspicious you should report it immediately - using the Suspicious Activity Reporting (SAR) process

Suspicious activity reporting (SAR) process You can find the SAR process in the Extranet (https://extranet.intrinsicfs.com/financial-crime/) 1. Click on RISK, REGULATIONS AND COMPLAINTS 2. Click on FINANCIAL CRIME 3. Click on the SUSPICIOUS ACTIVITY REPORTING drop down and follow the steps

Suspicious activity reporting (SAR) process The steps are: Either download and complete the SAR, or contact the Financial Crime Team directly Ensure the SAR has all of the relevant details, is clear and descriptive (avoid jargon) Email the completed SAR to: SARS@intrinsicfs.com and include the client’s name within the email’s subject line Once you’ve submitted the SAR, you must not discuss it with anyone, except as advised by the Financial Crime Team – as this would be Tipping off, which is a criminal offence. Do not indicate your suspicions on your client’s file or attach the SAR form to it The ultimate decision to report is yours and you should not be influenced by another person’s views

Money Laundering Offences As well as ‘Tipping off’, ‘Assisting’ and ‘Failing to report’ are also criminal offences – resulting in imprisonment and/or fines: Tipping off Imprisonment for a maximum of 5 years and/or an unlimited fine Assisting Imprisonment for a maximum of 14 years and/or an unlimited fine Failing to report Imprisonment for a maximum of 5 years and/or an unlimited fine Being aware of your obligations, identifying suspicious activity and making a report meets your requirements under the Proceeds of Crime Act (POCA)

customer due diligence We need to know who our customers are; Money Laundering Regulations require that you take steps to identify your clients; not only is this a legal requirement but also guards against identity theft. Customer due diligence and monitoring must be carried out for two broad reasons: To be reasonably satisfied that customers are who they say they are and live where they say the live; this information may be required by law enforcement should your client be suspected of committing offences under the Proceeds of Crime or Terrorism Acts To determine whether they are acting on behalf of another and there is no legal reason (e.g. government sanctions) that the product or service requested can not be provided

Customer Due Diligence Money Laundering Regulations require firms have appropriate AML systems and controls in place to reflect the degree of risk associated with the business it conducts and its customer base. Intrinsic have carried out a risk assessment on both the product and services we provide to our customers as well as customer profiles to enable us to determine appropriate Customer Due Diligence measures on a risk-sensitive basis; these depend on customer type, business relationship, product or transaction.

Customer Due Diligence – Risk Assessment The risk assessment takes into account situations and products which can present a higher risk of money laundering or terrorist financing. This includes: Where the customer has not been physically present for identification Business relationships and occasional transactions with Politically Exposed Persons (individuals who have been entrusted with a public function i.e. a Member of parliament; further guidance can be found on the extranet click here) pre-approval from the financial crime team to carry out such a transaction is required Customers who are from or receive funds from a High Risk Country (further guidance on High Risk Countries can be found here), pre-approval from the financial crime team to carry out such a transaction is required

customer due diligence You can find the updated Risk Matrix, Flow Charts, Acceptable Form of ID List, Source of Funds, Source of Wealth and certification guidance on the Extranet, click here What it means to you: You will not need to complete URU for every client - the small premium exemption is still available and for low risk business, certified copies of client ID is sufficient Our list of acceptable proofs has increased the variety of documents you can use to verify a clients ID The ID process will be quicker for you as fewer concession requests will need to be made

Bribery What is Bribery? ‘An offer or receipt of any item of financial or other advantage from a person such as inducement to carry out a dishonest, illegal or trust-breaching act in the conduct of business’ The Bribery Act 2010 came into force on the 1st July 2011 and created the offences of: Offering, promising or giving a bribe Requesting or agreeing to receive or accept a bribe Bribing a public official Corporations failing to prevent bribery undertaken on its behalf

Corporate offence of Bribery The corporate offence of failing to prevent bribery undertaken on behalf of corporations applies to: All companies, partnerships and individuals doing business in the UK Applies to acts or omissions worldwide Intrinsic prohibits the offering, giving or accepting of any dishonest payment by its employees and members intended to alter theirs or another’s conduct or decision.

Conflicts of Interest A conflict of interest may arise when a person becomes involved in a business relationship that could influence their decision making or conduct when fulfilling their obligations to Intrinsic, for example; Encouraging a customer to purchase a less favourable product to receive a higher fee/commission Advising as a Trustee, holding a Power of Attorney, becoming an Executor or a Beneficiary for a Will in respect of your own customers The full conflicts of interest policy and guidance can be found here Intrinsic requires its members to provide confirmation of compliance with the Conflicts of Interest Policy. This is achieved during Competency Assessments.

What it means to you – Bribery & conflicts of Interest You must not offer, give or accept any dishonest payment intended to alter your own or another's conduct or decision. You will be asked to complete a Conflicts of Interest Attestation during Competency Assessments. Any potential Conflicts should be disclosed to Intrinsic immediately regardless of when the Attestation was last completed.

Gifts & Entertainment Intrinsic recognises that the giving and receiving of gifts and/or entertainment is a normal activity in the course of business. Intrinsic supports the activity provided it is reasonable in scale and nature, it is transparent and it does not cause decisions or conduct to be influenced. Intrinsic do not permit gifts to be made to Political Parties. The full Gifts and Entertainment policy can be found here

Gifts & Entertainment – Your Obligations Advisers Need to read the Gifts and Entertainment policy and report any gifts and entertainment offered/received over the value of £50.00 to their Practice Principal. Consent from your Principal should be obtained prior to offering or accepting any gifts or entertainment. Practice Principals need to keep a register of Gifts and Entertainment offered to and received by customers; the register should be made available to your field supervisor at the firms’ Annual Inspection Visit and other members of Intrinsic Staff upon request.

Summary Money Laundering and associated acts are a criminal offence Customer Due Diligence reflects the degree of risk associated with our business and customers It is crucial that you know how to recognise and report suspicious activity and who the MLRO is The offering or acceptance of a Bribe is a criminal offence Gifts and Entertainment offered or received should be reported to your Practice Principal who should keep a record

Next steps Familiarise yourself with the Retail Client AML Requirements by clicking here Read Intrinsic policies by clicking here Read the AML guidance published on the extranet by clicking here Take the multiple choice test allocated to you in ‘Your Learning Academy’ Complete a conflicts of Interest attestation if you have not already done so or a new conflict has arisen since your last return