Law Soc: COVID-19-Related Money Laundering and Terrorist Financing - Risks and policy responses
Publisher: Law Society
Effective: 12 May 2020
Conducting Client Due Diligence in a Remote Operating Environment
A remote working environment creates challenges when it comes to undertaking client due diligence ('CDD') measures, given the practical difficulties associated with the lack of face-to-face contact with clients and challenges in completing hard copy forms.
The Financial Action Task Force ('FATF') recently published a paper in which it noted that the pandemic has led to a rise in certain types of criminal activities (such as fraud, cybercrime, misuse of government funds and international financial assistance) and this is likely to give rise to new sources of illicit proceeds for money laundering and terrorist financing.
A copy of the FATF paper is available here.
Law firms are urged to find ways to effectively carry out client due diligence. The following are examples:
Showing identity documentation in a video call
Get into a video call with the client and ask him to flash his identity card. Ask the client also to send photos of his identity card for records.
Using electronic rather than hard copy CDD forms
Use soft copies with an e-mail affirmation of a document in place of a wet ink signature.
Monitoring for Unusual or Suspicious Activity
The fact that we are working from home does not mean that we are no longer able to effectively monitor for unusual or suspicious activity. We must be careful to scrutinise the background of transactions that we may be instructed on, to ensure that they are legitimate and not fronts for illicit activity.
We should continue to engage with clients to understand how their business activities are changing in the light of global environment. Real estate and corporate lawyers should be aware that money launderers may have shifted their focus into real estate or in distressed businesses that need financial support.
Using screening tools to check for negative information
Consider subscribing to third party screening solutions to conduct background checks or negative information searches.
Click here to read the full advisory.