Other Guidance

These measures aim to mitigate the risks associated with money laundering, terrorist financing, and other illicit activities.

Compliance Requirement: Monitoring customer transactions to ensure they align with the customer’s risk profile and expected behaviour (UK Money Laundering Regulations 2017 (MLR 2017) – Regulation 28).

Customer involvement in transactions that do not match their expected behaviour or risk profile (JMLSG Guidance, Part 1, Section 5.3.7.). Conduct ongoing monitoring of customer transactions to ensure they align with the customer’s risk profile and expected behaviour (UK Money Laundering Regulations 2017 (MLR 2017) – Regulation 28).

Transactions structured to avoid regulatory reporting thresholds (FATF Recommendation 11, Interpretive Note to Recommendation 11, Paragraph 3.). Report suspicious activity or transactions to the UK Financial Intelligence Unit (FIU) via a Suspicious Activity Report (SAR) (Proceeds of Crime Act 2002 (POCA) – Section 330).

Sudden withdrawal of funds after a large deposit, possibly indicating layering activities in money laundering (JMLSG Guidance, Part 1, Section 5.3.23.). Conduct an ongoing risk assessment of customers, considering factors such as geographic location, type of transactions, and the customer’s business activities (UK Money Laundering Regulations 2017 (MLR 2017) – Regulation 18).

Customers using multiple currencies or making frequent currency exchanges without clear economic rationale (FATF Recommendation 19, Interpretive Note to Recommendation 19, Paragraph 2.). Implement a risk-based approach to customer due diligence, including simplified due diligence (SDD) for low-risk customers and enhanced due diligence (EDD) for high-risk customers (UK Money Laundering Regulations 2017 (MLR 2017) – Regulation 28).

Transactions involving unregulated or loosely regulated virtual asset service providers (VASPs) (FATF Recommendation 15, Interpretive Note to Recommendation 15, Paragraph 7(b).). Assess transactions with counterparties that have weak or non-existent AML/CTF controls (FATF Recommendation 1, Interpretive Note to Recommendation 1, Paragraph 13).

The use of nominee accounts, trusts, or third parties to obscure the true beneficial owner of funds (FATF Recommendation 24, Interpretive Note to Recommendation 24, Paragraph 5.). Conduct enhanced due diligence (EDD) on customers and beneficial owners to verify their identity and assess the risks associated with the transaction (UK Money Laundering Regulations 2017 (MLR 2017) – Regulation 28).

Frequent deposits or withdrawals of small amounts of cash or cryptocurrencies, possibly indicating structuring or smurfing activities (JMLSG Guidance, Part 1, Section 5.3.25.). Monitor customer transactions for unusual patterns or suspicious activities and report any concerns to the nominated officer (UK Money Laundering Regulations 2017 (MLR 2017) – Regulation 28).

Customers who avoid face-to-face interaction or insist on using non-traceable communication methods (JMLSG Guidance, Part 1, Section 5.3.75.). Provide training and education to employees on AML/CTF regulations, procedures, and risks, with an emphasis on identifying red flags related to customer communication (UK Money Laundering Regulations 2017 (MLR 2017) – Regulation 24).

Customers who refuse to cooperate with customer due diligence or enhanced due diligence procedures (JMLSG Guidance, Part 1, Section 5.3.3.). Escalate concerns to the nominated officer and consider terminating the business relationship if the customer continues to be uncooperative (UK Money Laundering Regulations 2017 (MLR 2017) – Regulation 21).

Involvement of politically exposed persons (PEPs) in transactions without a clear rationale (JMLSG Guidance, Part 1, Section 5.5.1.). Establish a risk-based approach for dealing with PEPs, including obtaining senior management approval, conducting enhanced due diligence, and monitoring ongoing transactions (UK Money Laundering Regulations 2017 (MLR 2017) – Regulation 28).

The customer is reluctant to provide information about the purpose of their transactions or the nature of their business (JMLSG Guidance, Part 1, Section 5.3.19.). Conduct enhanced due diligence to gather more information about the customer and their business activities, and assess the risks associated with the transaction (UK Money Laundering Regulations 2017 (MLR 2017) – Regulation 28).

Transactions with unregistered or unlicensed Money Service Businesses (MSBs) (UK Money Laundering Regulations 2017 (MLR 2017) – Regulation 56.). Verify the registration and licensing status of MSBs before entering into a business relationship or facilitating transactions and report any concerns to the nominated officer (UK Money Laundering Regulations 2017 (MLR 2017) – Regulation 21).

Customers who are hesitant to provide details about their source of funds or source of wealth (FATF Recommendation 10, Interpretive Note to Recommendation 10, Paragraph 11.). Perform enhanced due diligence, including verifying the customer’s source of funds and source of wealth, and assess the risks associated with the transaction (UK Money Laundering Regulations 2017 (MLR 2017) – Regulation 28).

Involvement of a customer or counterparty in negative news or adverse media that may be relevant to the transaction (JMLSG Guidance, Part 1, Section 5.3.67.). Conduct ongoing monitoring of customers and counterparties, including screening against adverse media and other relevant sources of information (UK Money Laundering Regulations 2017 (MLR 2017) – Regulation 28).

Transactions that show signs of trade-based money laundering, such as over- or under-invoicing (FATF Trade-Based Money Laundering Guidance, Section 5.2.). Implement controls to detect and prevent trade-based money laundering, including verifying the legitimacy of invoices and other trade documentation, and monitoring for unusual pricing or trade patterns (FATF Trade-Based Money Laundering Guidance, Section 5.2).

Transactions with businesses operating in sectors known for high levels of corruption, such as arms or natural resource extraction (FATF Recommendation 18, Interpretive Note to Recommendation 18, Paragraph 3.). Apply enhanced due diligence measures to customers and transactions associated with high-risk sectors and monitor for signs of corruption or other illicit activities (UK Money Laundering Regulations 2017 (MLR 2017) – Regulation 28).

Customers who exhibit unusual nervousness, evasiveness, or reluctance to answer questions about their transactions (JMLSG Guidance, Part 1, Section 5.3.71.). Provide training and education to employees on identifying red flags related to customer behaviour and communication and escalate concerns to the nominated officer for further investigation (UK Money Laundering Regulations 2017 (MLR 2017) – Regulation 24).

Unusually large transactions or rapid movements of funds between different types of financial instruments or assets (JMLSG Guidance, Part 1, Section 5.3.26.). Monitor customer transactions for patterns that may indicate money laundering or other illicit activities and report any suspicious activity to the nominated officer (UK Money Laundering Regulations 2017 (MLR 2017) – Regulation 28).

Involvement in transactions with unclear, missing, or inconsistent information about the parties, origin, or destination of the funds (JMLSG Guidance, Part 1, Section 5.3.24.). Apply enhanced due diligence measures to obtain and verify missing or inconsistent information, and assess the risks associated with the transaction (UK Money Laundering Regulations 2017 (MLR 2017) – Regulation 28).

Transactions with counterparties that have weak or non-existent AML/CTF controls (FATF Recommendation 1, Interpretive Note to Recommendation 1, Paragraph 13.). Establish and maintain relationships only with counterparties that have robust AML/CTF controls in place and monitor ongoing transactions for signs of non-compliance (UK Money Laundering Regulations 2017 (MLR 2017) – Regulation 28).

Transactions involving the use of cash, bearer negotiable instruments, or other high-risk instruments (FATF Recommendation 12, Interpretive Note to Recommendation 12, Paragraph 1.). Implement policies and procedures to manage the risks associated with high-risk instruments, including conducting enhanced due diligence, obtaining senior management approval, and reporting suspicious transactions (UK Money Laundering Regulations 2017 (MLR 2017) – Regulation 28).

Customers with a history of repeated or multiple suspicious transactions, as identified in previous monitoring activities (JMLSG Guidance, Part 1, Section 5.3.28.). Conduct enhanced due diligence on customers with a history of suspicious transactions and consider terminating the business relationship if the customer continues to engage in high-risk activities (UK Money Laundering Regulations 2017 (MLR 2017) – Regulation 28).

Transactions that appear to be linked or structured to obscure the true nature, purpose, or beneficiaries of the funds (FATF Recommendation 11, Interpretive Note to Recommendation 11, Paragraph 4.). Investigate and report suspicious transactions or patterns to the nominated officer and apply enhanced due diligence measures to better understand the risks associated with the transaction (UK Money Laundering Regulations 2017 (MLR 2017) – Regulation 28).

Implementing these preventative measures, in accordance with relevant regulations and guidance, will help organizations mitigate the risks associated with financial crime typologies in crypto assets and promote a more transparent and compliant financial ecosystem.