Use of reliance to carry out AML due diligence
IPA Insolvency Practitioner newsletter, June 2022
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Regulation 39 of the 2017 Money Laundering Regulations (as amended) (MLR17) advises that a relevant person (i.e. an IP) can rely on a third person to carry out due diligence identification and verification, and to assess and obtain appropriate information on the purpose and intended nature of the business relationship.
However, there are some important matters to consider before you rely on any third party to carry out due diligence work. Firstly, the other party on whom you are looking to rely upon must be a member of a regulated sector for AML purposes in the UK, or subject in a third country to an equivalent regulatory regime.
Most importantly, you must enter into an agreement (preferably in writing) with the third party which ensures that the third party will provide you – immediately on request – the due diligence documentation that they have obtained and used to carry out their due diligence enquiries.
If the third party fails to carry out adequate due diligence, the liability for the inadequate due diligence work will remain with you. It is therefore vital that you understand what work they have undertaken.
As outlined at paragraph F3.10 of the CCAB Appendix for Insolvency Practitioners, where you are relying on third parties, you should have regard to paragraphs 5.4.1 – 5.4.7 of the General CCAB Guidance and you should still carry out a risk assessment and perform ongoing monitoring.
If you are relying on a third party under Regulation 39, the agreement with the third party is a matter that can be reviewed as part of any general inspection visit or AML visit.