Anti-Money Laundering webinar: red flags and trusts

STEP hosted a webinar on 1 December which highlighted the red flags that practitioners should be aware of in the course of setting up and administering trusts. It included a presentation from the National Economic Crime Centre (NECC) of the UK’s National Crime Agency (NCA)

Toby Crooks TEP of Rawlinson & Hunter moderated the event and was joined by Lauren Rapeport of Withers to give the STEP view.

Alice Boulton, NEEC and Emma Lynham, Deputy Threat Lead – Money Laundering, Bribery and Corruption, presented from the NCA.

Delegates heard that various types of trusts are vulnerable to criminal use and remain one of several legal instruments exploited to launder illicit funds.

The majority of trusts are assessed as not being used for criminal purposes. However, trusts incorporated in the UK and overseas are deemed by the NCA to remain attractive to criminals due to a perceived limitation in regulation.

The NCA stated that trusts were attractive to criminals because of the perceived anonymity they offer and that they allow owners to retain control of assets. However, UK and international legislation is helping enforcement agencies like the NCA.

The NCA recently analysed cases involving Russian illicit finance. They found routine use of complex corporate structures to move and conceal illicit funds. Professional enablers appeared in some form in over 50 per cent and 41.6 per cent of cases involved a Trust and Company Service Provider (TCSP).

The NCA highlighted the following red flags to watch out for which they had come across in money laundering and sanctions evasion cases. Use of:

  • Trusts to ensure the owner retains indirect control or otherwise could retain a benefit from the asset transferred.
  • Trusted proxies as settlors, trustees or beneficiaries.
  • Trusts for no apparent legitimate reason.

Delegates heard that the UK definition of a professional enabler is an individual or organisation that is providing professional services (such as a TCSP, the legal profession, accountant, etc) to enable criminality. Their behavior is suspected to be deliberate, improper, dishonest, and/or there is a failure to meet their obligations.

Practitioners can help the NCA through the following methods:

  • Effective and ongoing Customer Due Diligence (CDD). The importance of really knowing your client was stressed as being of the utmost importance.  
  • Participating in public private cells.
  • Share timely and accurate information with the Joint Money Laundering Intelligence Taskforce (JMLIT).
  • Act on the results of the National Assessment Centre Commission on Trusts, which is due to be published in 2023.
  • Identify the geopolitical and practical risks relevant to the business.
  • Stay informed on the risks via their respective regulator/supervisor.
  • Implement effective mechanisms and systems to identify money laundering.

Robert Carington is Policy Executive at STEP

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