The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017), SI 2017/692 form part of the UK’s overall anti-money laundering (AML), counter-terrorist financing (CTF) and counter-proliferation financing regime. The MLR 2017 set administrative requirements which run parallel to the criminal element of the AML, CTF and counter-proliferation financing regime contained in the Proceeds of Crime Act 2002 (POCA 2002), the Terrorism Act 2000 (TA 2000) and various sanctions measures. There is some overlap with this legislation. The MLR 2017 apply to certain categories of persons acting in the course of business carried on in the UK (see Practice Note: Money Laundering Regulations 2017—scope and application—law firms). The main categories likely to be relevant to solicitors and law firms are: • independent legal professionals participating in certain financial or real property transactions • trust or company service providers • auditors, insolvency practitioners, external accountants and tax advisers • estate agents The category that is most likely to be applicable to law

This Practice Note provides guidance on client due diligence (CDD) which is a central pillar of the anti-money laundering (AML) and counter-terrorist financing (CTF) regime. CDD requirements underpin the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017), SI 2017/692, as amended. Counter-proliferation financing is an established component of the AML and CTF regime. Requirements in relation to counter-proliferation financing were introduced through amendments to the MLR 2017 and include in relation to systems and controls, risk assessment, etc. No specific counter-proliferation financing requirements were added in relation to CDD, and existing CDD provisions in the MLR 2017 were not amended to include mention of proliferation financing. As things stand, therefore, counter-proliferation financing is not covered in this Practice Note. For more information, see Practice Note: Counter-proliferation financing—CPF—the basics. Where the MLR 2017 apply, conducting CDD is an absolute requirement. It is not in itself subject to the risk-based approach. Certain components of CDD, however, allow for flexibility and positively require risk assessment. The

This Practice Note provides guidance on customer due diligence (CDD) which is a central pillar of the anti-money laundering (AML) and counter-terrorist financing (CTF) regime. CDD requirements underpin the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017), SI 2017/692, as amended. You should check whether the MLR 2017 contain additional or varied requirements for your sector and whether your regulatory body has any additional, sector specific requirements in relation to CDD. Counter-proliferation financing is an established component of the AML and CTF regime. Requirements in relation to counter-proliferation financing were introduced through amendments to the MLR 2017 and include in relation to systems and controls, risk assessment, etc. No specific counter-proliferation financing requirements were added in relation to CDD, and existing CDD provisions in the MLR 2017 were not amended to include mention of proliferation financing. As things stand, therefore, counter-proliferation financing is not covered in this Practice Note. For more information, see Practice Note: Counter-proliferation financing—CPF—the basics. Where the MLR 2017 apply, conducting

1 Deputy nominated officer details Name of firm [Insert name] Name of deputy nominated officer [Insert name] Reports to nominated officer [Insert name of nominated officer] Full time/part time ☐ Full time☐ Part time Details of any other roles held within the firm [Insert details] Date appointed by the firm [Insert date] 2 Role summary 2.1 Act as deputy to the person appointed by the firm as nominated officer in accordance with the Money Laundering Regulations 2017 (MLR 2017)—the nominated officer. 2.2 In the absence of the firm’s nominated officer: 2.2.1 receive and review internal suspicious activity reports (SARs) and determine whether they give rise to knowledge or suspicion (or reasonable grounds for knowledge or suspicion) that a person is engaged in money laundering, terrorist financing or proliferation financing; 2.2.2 decide whether to report suspicious activity to the National Crime Agency (NCA), make external SARs where necessary, and be the main point of contact with the NCA. 2.3 Support the nominated officer in ensuring systems and controls are in place to enable the firm, including its managers and employees, to comply with their obligations under: 2.3.1 the Proceeds of Crime Act 2002 (POCA 2002);

This Practice Note explains your obligations around enhanced due diligence (EDD) and what it means for you in practice. It reflects the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017), SI 2017/692, as amended. It provides guidance which is of general application. You should check whether the MLR 2017 contain additional or varied requirements for your sector and whether your regulatory body has any additional, sector specific requirements in relation to EDD. EDD triggers You must apply EDD measures and enhanced ongoing monitoring: • in any case identified as presenting a high risk of money laundering, terrorist financing or proliferation financing in your organisation-wide risk assessment or by your supervisory authority • in any business relationship with a person established in a Financial Action Task Force (FATF) call for action country or in relation to any relevant transaction where either of the parties to the transaction is established in a FATF call for action country—see section: FATF call for action countries • where you have determined

This Practice Note explains your obligations around enhanced due diligence (EDD) and what it means for you in practice. It reflects the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017), SI 2017/692, as amended. EDD triggers You must apply EDD measures and enhanced ongoing monitoring: • in any case identified as presenting a high risk of money laundering, terrorist financing or proliferation financing in your firm-wide risk assessment or by your supervisory authority • in any business relationship with a person established in a Financial Action Task Force (FATF) call for action country or in relation to any relevant transaction where either of the parties to the transaction is established in a FATF call for action country—see section: FATF call for action countries • where you have determined that the client/potential client is a politically exposed person (PEP), or a family member or known close associate of a PEP • where you discover that a client has provided false or stolen identification documentation or information for client

The information in this Practice Note has been drawn from various SRA reports/publications and events. A strong anti-money laundering (AML), counter-terrorist financing (CTF) and counter-proliferation financing culture reduces risk, aids compliance and protects reputation. You should seek to create an environment where staff are aware of their AML, CTF and counter-proliferation financing responsibilities and can understand and fulfil them. Building a strong AML, CTF and counter-proliferation financing culture involves several elements. Key strands include having a well-briefed, trained nominated officer and appropriate policies and procedures in place based on the firm’s risk assessment. These should be monitored, improved and enforced. The UK General Data Protection Regulation (UK GDPR) has an impact on the data which firms must retain for AML, CTF and counter-proliferation financing purposes. The rights to erasure and objection have a bearing on what information firms can hold about their clients. Firms need to consider how to balance the requirements of the MLR 2017 and the UK GDPR. The MLR 2017 require firms to make provision for data protection

The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017), SI 2017/692, as amended, set out various requirements for the assessment and management of money laundering, terrorist financing and proliferation financing risks to which your organisation's business is subject. The management of these risks often falls to the nominated officer (also referred to as the money laundering reporting officer, or MLRO) and robust governance and strong reporting lines are needed to assist the organisation and its nominated officer to discharge their responsibilities. This Practice Note sets out some of the key considerations for establishing appropriate governance structures and reporting lines as part of the management of the risks of money laundering, terrorist financing and proliferation financing to which your organisation may be subject. It provides guidance which is of general application. You should check whether the MLR 2017 contain additional or varied requirements for your sector and whether your regulatory body has any additional, sector specific requirements in relation to governance and reporting lines. This

Background to Money Laundering Regulations 2017 The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017), SI 2017/692 form part of the UK’s overall anti-money laundering and counter-terrorist financing regime. They implemented the EU’s Fourth Anti-Money Laundering Directive (Directive (EU) 2015/849) (4MLD) andreplaced the Money Laundering Regulations 2007, SI 2007/2157. The Money Laundering and Terrorist Financing (Amendment) Regulations 2019, SI 2019/1511 and Money Laundering and Terrorist Financing (Amendment) (EU Exit) Regulations 2020 (MLR 2020), SI 2020/991, implemented elements of the EU’s Fifth Anti-Money Laundering Directive (Directive (EU) 2018/843) (5MLD) including significant extensions to the registration requirements for trusts.. HMRC initial deadline for these new registrations of ‘non-taxable trusts’ was 1 September 2022 (and amending legislation, through the Money Laundering and Terrorist Financing (Amendment) Regulations 2022, SI 2022/137, has been made to this effect). In September 2016, HM Treasury consulted on the transposition of 4MLDConsultation on the transposition of the Fourth Money Laundering Directive. A further consultation was issued on 15 March 2017 accompanied by draft regulations. The final version of MLR 2017

The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017), SI 2017/692 introduced a requirement for certain organisations to establish an independent audit function, to audit their compliance with the MLR 2017. This Practice Note provides guidance on establishing an independent audit function. It sets out the key responsibilities of and best practices for the independent audit function and the differences between independent audit and your money laundering, terrorist financing and proliferation financing risk assessment. This Practice Note reflects the requirements of the MLR 2017, as amended. It provides guidance which is of general application. You should check whether the MLR 2017 contain additional or varied requirements for your sector and whether your regulatory body has any additional, sector specific requirements in relation to independent audit. The requirement to establish an independent audit function The MLR 2017 require you to establish an independent audit function only where it is appropriate having regard to the size and nature of your business. In determining what is appropriate with

1 Establishment of independent audit function The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017), SI 2017/692 require firms subject to the Regulations to establish an independent audit function where this is appropriate having regard to the size and nature of their business. Having regard to the firm’s size, business and the outcome of the firm’s money laundering, terrorist financing and proliferation financing risk assessment, we have decided to establish an independent internal audit function. This document sets out the purpose, scope, activities and duties of the firm’s independent audit function. 2 Governance and reporting lines 2.1 The independent audit function will be led by [insert name of head of audit function], who will report directly to [insert, eg the board]. Other members of the independent audit function will report to and be supervised by [insert name of head of audit function]. 2.2 The chart in the Appendix shows:

1 Preparing for the audit This section sets out a checklist of issues to be addressed pre-audit. Action Completed Comments and action points Determine scope of the audit (and if targeted, determine precisely what is being targeted) [Insert date completed] [Insert any comments or action points] Obtain copy of firm-wide money laundering, terrorist financing and proliferation financing risk assessment [Insert date completed] [Insert any comments or action points] Obtain copies of all anti-money laundering (AML), counter-terrorist financing (CTF) and counter-proliferation financing compliance policies and procedures [Insert date completed] [Insert any comments or action points] Determine how many files are to be reviewed and which business areas, departments or practice areas they should come from [Insert date completed] [Insert any comments or action points] Identify client / matter files for review [Insert date completed] [Insert any comments or action points] Arrange access to all relevant internal systems, files and records, eg:—practice management system—document management system—client/matter onboarding records—client due diligence (CDD) records—compliance breaches registers [Insert date completed] [Insert any comments or action points] Arrange access to any externally provided systems used in connection with AML, CTF and counter-proliferation financing, eg external verification systems or training courses [Insert