COMPLIANCE
requested, it should raise suspicions of potential money laundering activities. Payroll providers must establish a clear understanding of the client profile before onboarding them as a client. If clients are unable or unwilling to provide essential information, payroll providers should refuse engagement to mitigate the associated risks. Strategies to mitigate risks To mitigate the risks associated with money laundering, payroll providers should implement the following strategies:
and address any irregularities promptly.
and transactions are essential to stay updated on any changes that may increase money laundering risks. Payroll providers should
Establish a clear understanding of the client profile before onboarding Payroll providers should establish a clear understanding
establish a robust review process to ensure compliance with evolving AML requirements and promptly address any emerging risks. Report any suspicions of money laundering or terrorist financing to the National Crime Agency (NCA) If throughout your day-to-day duties, you become suspicious that a client or potential client may be involved in money laundering or terrorist financing you must report this to the NCA via a ‘suspicious activity report'. Failure to do so could result in five years' imprisonment, an unlimited fine or both. Protect yourselves To summarise, in this tough economic climate, small businesses especially are increasingly at risk of being exploited by money laundering criminals. By understanding the indicators of potential risks and implementing effective mitigation strategies, payroll providers can protect themselves and their clients from the detrimental effects of money laundering. Regular training, due diligence and adherence to AML regulations are critical to maintaining the integrity of payroll services and safeguarding the financial system from illicit activities. n Following a successful AML workshop at the CIPP's Annual Conference and Exhibition in October 2023, the CIPP has collaborated with the IAB to offer an introductory training module on AML. The module is one of eight in the series and can be purchased at a discount from the CIPP website. Please see here for further information: https:// ow.ly/OMTv50Qj7hB .
of the client's profile and business operations before engaging their
services. This includes learning about the client's industry, sources of income and associated risks. This proactive approach ensures clients are transparent regarding their operations, reducing the likelihood of money laundering activities.
Carry out due diligence on all persons with significant control (PSCs)
"When a client is evasive or
Payroll providers should conduct thorough due diligence on all PSCs associated with the client's business. This includes verifying their identity, establishing their source of funds and assessing their risk profile. By scrutinising the PSCs, payroll providers can identify and mitigate potential money laundering risks.
provides only basic information when requested, it should raise suspicions of potential money laundering activities"
Conduct in-person visits to business premises Regular in-person visits to the client's business premises
Refuse engagement if unable to determine information
can provide valuable insights into their operations. Observing the activities and verifying the existence of the business can help identify any discrepancies or suspicious practices. Personal interactions can also help build trust and deter potential money launderers.
or when information requests are declined If a client fails to provide essential
information or declines requests for additional information, payroll providers should refuse engagement. It’s crucial to work with clients who are committed to transparency and compliance. By taking a strong stance on due diligence, potential money laundering risks can be mitigated effectively. Carry out regular reviews to capture changes Periodic reviews of a client's profile, activities
Carry out regular audits Regular audits of payroll transactions and processes are crucial in identifying and
preventing money laundering activities. By implementing robust internal controls, such as segregation of duties and financial reconciliations, payroll providers can detect
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| Professional in Payroll, Pensions and Reward |
Issue 97 | February 2024
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