lme anti money laundering memo

7/22/2019 LME Anti Money Laundering Memo

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Anti-Money Laundering Training

JULY 2013

Over the past years those involved in hiding the proceeds of crime have resorted to

increasingly sophisticated ways of disguising the source of their funds. As a result,

new legislation aimed at catching those involved has become necessary. The UKs

Money Laundering Regulations of 2007 and other legislation now place a heavy

onus on businesses and staff.

It is the responsibility of the London Metal Exchange senior management to provide

a procedure for the monitoring and reporting of suspicious activity, and to ensure

that all employees are aware of this Anti-Money Laundering (AML) process.

Accordingly, as part of the LME drive to comply with the UKs money laundering

rules, you must confirm by declaration,that you are familiar with the following:

Your responsibilities under the LMEs Anti-Money Laundering (AML)

procedures;

The identity of your Money Laundering Reporting Officer (MLRO);

The potential effect on the LME of you breaching any of the money

laundering regulations.

Please read and digest the inform at ion that fol lows and com plete & return the

Declaration (detailed at the end of this document) to the General Counsels

off ice as soo n as possible

The following information should be read carefully, as it will help you to

understand the AML process at the LME.This information should take around

twenty minutes to read, and includes the following sections:

What is money laundering?

The money laundering process;


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In order to change the form of criminal proceeds, money laundering has traditionally

been thought of as involving three independent steps that may occur

simultaneously:

1. Placement:Physically placing bulk cash proceeds.

2. Layering:Separating the proceeds from criminal activity from their origins

through layers of complex financial transactions.

3. Integration:Providing an apparently legitimate explanation for the illicit

proceeds.

For money laundering to be successful there must be no 'paper trail' to

connect these three steps. Thus, the money laundering regulations now

established set out to ensure that a 'paper-trail' does exist.

As noted above, however, even being in possession of criminal property would

constitute a money laundering offence.

The UK's Money Laundering Laws

The UK has long recognised the problem of money laundering. Consequently, anti-

money laundering legislation has been in place for many years. In response to

international initiatives and European Union directives the UK legislation has

evolved over recent years and is now contained in a number of statutes and

regulations.

Underpinned by the UK's 'Proceeds of Crime Act 2002' (Part 7), the 'Money

Laundering Regulations of 2007', came into force on 15 December 2009 and

imposed new legal obligations on most companies and organisations, (known under

the regulations as the regulated sector.). The Money Laundering Regulations

created a number of anti-money laundering (AML) compliance requirements which

the regulated sector must undertake. The Proceeds of Crime Act also creates

obligations to report suspicions of money laundering by regulated sector firms.

Importantly, a failure to comply can result in criminal prosecution.


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Essentially, the obligations are:

To identify customers;

To inform the criminal prosecution authorities if money laundering is

suspected; and,

To take internal measures to prevent money laundering.

These regulations represent an important development in the UK's strategy to tackle

both money-laundering and terrorist-financing, as the proceeds of money-laundering

allow criminals to profit from their crimes and are used to fund organised crime and

terrorist activity. Thus, the integrity of the UK financial system is dependent on there

being vigorous measures in place.

In light of the above, the Financial Conduct Authority (FCA) has indicated that it

expects the LME, as with other institutions, to take reasonable steps to ensure that

the firm's employees understand:

The UK's current AML regime, and,

His/her individual AML responsibilities with respect to the firm.

The LME does not generally handle client money and very few LME employees

handle money received by the LME from third partiesmainly members and data

vendors. Nevertheless, the FCA has said it would like all employees to receive a

basic understanding of the AML regime.

LMEs obligations

There are five key anti-money laundering requirements that are specific to the LME,

and these are extremely important to consider when looking at how to manage

money laundering risk.

Appointment of a Money Laundering Reporting Officer ('MLRO') who willdetermine internal controls and procedures;


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Monitoring;

Record keeping;

Reporting of suspicious transactions;

Staff Training and awareness.

Your Money Laundering Reporting Officer ('MLRO')

The MLRO is the focal point within every company for overseeing all anti-money

laundering matters. Your MLRO will work independently of the business functions

and be responsible for all issues pertaining to AML compliance and reporting.

At the LME, your MLRO is the Finance Director. If you have any queries or

suspicions relating to money laundering, please speak to your MLRO. If the MLRO

is absent, or you work within the Compliance department, you should speak to the

Deputy Chief Executive or the General Counsel & Head of Enforcement in the

first instance.

Later on, you will learn more about the important role your MLRO maintains within

the LME.

Know your Client ('KYC')

The single most important rule for preventing and detecting money laundering is the

process termed Know your Client (KYC).

Whenever an institution or an individual applies to become a member of the LME, it

is important not only to understand who the member is, but also to understand why

they want to do business on the LME. The FCAs anti-money laundering rules

require all institutions to perform checks that confirm the identification of clients.

Because trading on the LME, including trading through LME Select, constitutes the

carrying on of a regulated activity in the United Kingdom, category 1, category 2 and

category 4 members of the LME are required to be authorised under the Financial


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Services and Markets Act 2000. On an application for membership, the LME

checks with the applicant to ensure that it has in place anti-money laundering

procedures which comply with the FCA requirements. This is an important part of

the KYC process.

The Know Your Client ('KYC') Process

The 'KYC' process is at the heart of any AML programme. So, in order to guard

against money laundering, the LME needs you to:

Ensure that the identity of each new member is verified;

Ensure that suspicious member applications or transactions arerecognised as such and reported;

Ensure that if a member comes under investigation in the future, the LME

can provide its part of the audit trail.

The same principles apply in relation to any third party who is proposing to enter

into a commercial arrangement with the LME, which will involve the payment ofmoney to the LME. It is important to ensure that any suspicious counterparty

and/counterparties or transaction is recognised as such and reported.

This process is known by the expression, KNOW-YOUR-CLIENT. It is a

phrase that should be uppermost in your mind when dealing with new

commercial arrangements.


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Monitoring, Recording & Reporting

There may be occasions where you can acquire a good deal of information about

members or commercial counterparties in the course of your work. You could,

therefore, come upon situations where a suspicion of money laundering ought to be

raised.

You must not assume that a member will always spot suspicious behaviour and

subsequently report it. Recognising suspicious behaviour and subsequentlyreporting it is a legal obligation that applies to everyone. So even if a member has

reported suspicious activity, you will be liable if you were also aware of that activity

and did not report it. The reporting obligation also applies if a reasonable person in

your position would have been suspicious based on the information available to you

i.e. this is a negligence test.

If you have knowledge or suspicion of money laundering, or there are

reasonable grounds to have such knowledge or suspicion, you must report it

yourself directly to your MLRO, who will arrange for the matter to beinvestigated.

Should you possess knowledge or suspicion of money laundering you must, in the

first instance, report the circumstances orally to your MLRO; thus ensuring that the

MLRO, (or the deputy if the MLRO is unavailable,) is made aware of the situation

straight away. Without delay following your oral report, you should document the

facts and forward them to your MLRO, thus confirming in writing your knowledge or

suspicion of money laundering.

Once you have done this you have effectively DISCHARGED YOUR

RESPONSIBILITY.

It is now the responsibility of your MLRO to act.

Retention of records

Verification of identity and relationship opening records, including an indication of

the nature of the evidence obtained and a copy of the evidence (or, where this is not


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'Tipping-off'a money launderer that he or she are being investigated,

could mean up to 2-years in prison, or a fine, or both.

Money Laundering Red Flags

The following are examples of 'red flags'for money laundering. This list is not all-

inclusive, but may help you to recognise possible money laundering schemes. You

should be focused primarily on reporting suspicious transactions, not on determining

that the activities are linked to money laundering.

Bewarethe member/counterparty that enters into transactions which

make little or no commercial sense or which go against normal market

practice;

Bewarethe member/counterparty that is happy to enter into a bad deal;

Bewarethe member/counterparty that is unwilling to explain the purpose

of a transaction with no obvious motive;

Bewarethe member/counterparty that suddenly changes their pattern oftrading;

Bewarethe member/counterparty that enters into deals beyond their

apparent financial means;

Bewarethe member/counterparty that makes payments in cash;

Bewarethe member/counterparty that wishes to deal in bearer securities;

Bewarethe member/counterparty that transfers positions to apparently

unrelated third parties; and

Bewarethe member/counterparty that takes part in transactions across a

number of different jurisdictions, as they could be transferring funds from

one country to another.


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General Rule:Any actual or proposed activity/transaction which is out of the

ordinary should raise questions.

How to report suspicions of money laundering

The law imposes a personal obligation onYOUto report to your MLROactual or

suspected money laundering activities connected with any criminal conduct.

To avoid conviction (and the possibility of a fine and/or imprisonment) you musteither:

Ensure that your knowledge or suspicions are reported; or

Demonstrate that you did not know or suspect that the funds were theproceeds of criminal conduct and that there were no reasonable grounds

for you to have such knowledge or suspicion.

If you have any suspicions at all about a transaction, a firm or an individual, you

should report them to the MLRO, currently the Finance Director. If the MLRO is

absent, or if you work within the Compliance Department, you should report your

suspicions to the Deputy Chief Executive or the General Counsel & Head of

Enforcement in the first instance. As soon as you have done so, you have fulfilled

all of your legal obligations. The MLRO will take responsibility and, if appropriate,

pass on the information to the relevant authorities.

If you are suspicious about a transfer of funds, transfer of positions, or other

transaction, which you are aware is planned but which has not yet taken place, you

must not become involved in the transaction or allow it to proceed without the

MLRO's express consent

After you have reported the suspicious activity to your MLRO, he will consider how

serious the situation is and subsequently decide whether a report should or should

not be made to the Serious Organised Crime Agency (SOCA).

At no time do you have to make this decision. The responsibility is entirely

your MLRO's.


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The MLRO is the focal pointwithin your company for overseeing all anti-money

laundering matters. Therefore, you must ensure that your MLRO has reasonable

access to all the informationthat could help him when considering disclosures

received from you.

You must nottipoffany person that a potential case of money laundering has

been reported or is being investigated, (whether they are the subject of a suspicion

or anybody else). You should not speak to the person about whom you are

suspicious, as doing so might alert him/her to the fact that he/she is beinginvestigated. This could prejudice a proper investigation and might constitute the

offence of "tipping-off".

Once you have reported your suspicions to the MLRO you have effectively

DISCHARGED YOUR RESPONSIBILITYand as a result, placed all future liability

concerning your suspicions firmly with your MLRO.

If you have any queries about this training information or your responsibilities please

contact the Finance Director, the Deputy Chief Executive or the General Counsel &

Head of Enforcement.


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NOW, PLEASE COMPLETE THE DECLARATION BELOW.

I confirm that I have read the above information and am familiar with :

My responsibility under LMEs Anti-Money Laundering (AML)

procedures;

The identity of my Money Laundering Reporting Officer (MLRO);

The potential effect of any breach of the money laundering regulations on

LME.

Name : Department :

Signature:

lme anti money laundering memo

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