When HM Treasury issued its list of equivalent jurisdictions earlier this year, many in the regulated sector were surprised at some of the inclusions.
While similar legislation may well have been passed in these jurisdictions, solicitors dealing with their counterparts in countries on the list knew that the law and practice did not always coincide.
Equivalence is relevant for those in the regulated sector when they are looking to rely on other regulated persons for client due diligence checks (under regulation 17), or for taking advantage of simplified due diligence provisions (under regulation 13).
While the Treasury list is a starting point when assessing equivalence, the risk-based approach means that you should consider whether further checks are necessary, particularly in the light of contrary evidence regarding your client or the regulated person you wish to rely upon.
When using the reliance provisions you need to remember that you will still be criminally liable for any failures by the person you have relied upon.
You should check whether the person is appropriately registered, is whom they say they are, and that they are obtaining the information you require.
When you use the simplified due diligence provisions, you should consider the overall risk of the client and the transaction.
You will open your practice to higher levels of risk and reduce your ability to monitor a transaction effectively if, for example:
- you know your client company is under investigation for bribery or fraud, or
- the financial institution you are acting for has just been taken over and their public records have not yet been updated.
The Joint Money Laundering Steering Group has recently issued further guidance for the financial sector on key indicators to help you decide whether to use the equivalence provisions with respect to different jurisdictions, whether they are on HM Treasury's list or not.
Read the guidance