Regulation 18A – Proliferation Financing

IPA Insolvency Practitioner newsletter AML Digest, December 2023

Regulation 18A of MLR17 relates to Proliferation Financing and the requirement on relevant persons – which includes IPs – to identify and assess the risks of Proliferation Financing to which its business is subject.

Proliferation Financing (PF) is: ‘the act of providing funds or financial services for use, in whole or in part, in the manufacture, acquisition, development, export, trans-shipment, brokering, transport, transfer, stockpiling of, or otherwise in connection with the possession or use of, chemical, biological, radiological or nuclear weapons, including the provision of funds or financial services in connection with the means of delivery of such weapons and other CBRN-related goods and technology, in contravention of a relevant financial sanctions obligation’. (MLR17 p9 Reg 16A)

The IPA has advised previously that firm risk assessments must take into account the risks from PF to the work undertaken by an IP’s firm. On visits and compliance reviews, it is a common finding that no consideration of PF has been carried out.

The assessment of risk to insolvency from PF is low. However, the considerations of PF follow the same principles as the requirements to consider the risks of money laundering as set out in Reg 18.

The IPA has recommended that – where appropriate – your Reg 18A considerations can sit within and as part of the overall Reg 18 assessment. It is likely that any issue with PF may arise in regards to the type of trade which a business you are asked to advise or to take an appointment across dealt with.

The business types could include trading such as:

• Chemical production
• Large scale agricultural production – especially fertilisers
• Electronic/computer components
• Overseas money transaction services
• Overseas logistics

Your due diligence of a potential appointment should be picking up possible areas of concern and noting these potential risk areas will highlight to your staff that where such a business is seeking an appointment that flagging up PF concerns will be required. Please ensure that PF consideration is included in your Reg 18 – or where appropriate – that you have a separate Reg 18A risk assessment.