A record number of records

I know I said last time that I wouldn’t be doing anything until the UK’s new Money Laundering Regulations 2017 and their attendant guidance notes are finalised and approved (we’re working towards 26 June 2017), but that doesn’t stop me having a think about them.  And one change they have brought in (or – more correctly – are proposing bringing in) concerns record-keeping.  I know: yawn-o-rama.  But still, important to those of you tasked with designing and implementing in-house record-keeping procedures.

In the olden days of the Third Money Laundering Directive (written on vellum by monks, you may recall), the distinction was drawn between KYC records (yes, way back before CDD was born) and transaction records.  The former had to be kept for at least five years from the date of the end of the business relationship, and the latter for at least five years from the date of the completion of the transaction.  But this time round – see Article 40 of the Fourth Money Laundering Directive – the line has moved.  Now the two categories are: CDD and transaction records relating to business relationships; and transaction records relating to occasional transactions.  For the former, it’s five years from the end of the business relationship, and for the latter, five years from the completion of the transaction.  You may need a Venn diagram at this point, but the category affected is transaction records associated with a business relationship – which must now be kept for much longer.  You can no longer bin them once the transaction itself is five years old, but must wait until the client has been gone for five years.  (Gone from you, I mean: not departed this life.  That’s probably coming in the sixth directive.)

I did warn you: dull but important.  (And I’m as certain as I can be that we can count on this change, as it’s MLD4-driven, not a UK localisation.)

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6 Responses to A record number of records

  1. CDWOS says:

    Susan,
    Fascinating to see you make the difference for your UK clients between EU3 (never fully implemented in the UK!) and EU4 record keeping requirements as you will know from your many visits to Britain’s South Sea Islands(!!) that the EU4 approach was adopted here quite some time ago. Watching you draw the distinction between yesterday and tomorrow over the past weeks has had a distinct “deja vu” feel but none the less fascinating to watch and read for that. Keep up the good work……………… And for you next Project GDPR and 25th May 2018!!! Many an interesting discussion to be had!!!!!

  2. Hello Charles

    I’ve had a quick look, and I actually think that the position in Guernsey is the same as the UK – i.e. (at the moment) the distinction is made between CDD records and transaction records. And (although I am less sure of my ground here, not being an advocate), I also think it is actually the same in Jersey.

    If you look at the (Jersey) ML Order, Article 20 says:
    “(1) Where the records described in Article 19(2)(a) or (2A) relate to a business relationship, a
    relevant person must keep those records for a period of at least 5 years commencing with the date on which the business relationship ends.
    “(2) Where the records described in Article 19(2)(a) or (2A) relate to a one-off transaction, a relevant person must keep those records for a period of at least 5 years commencing with the date on which the one-off transaction is completed.”

    Article 2A is all about older records, but if you then go back to Article 19(2)(a), it says:
    “a record comprising –
    (i) a copy of the evidence of identity obtained pursuant to the application of customer due diligence measures or information that enables a copy of such evidence to be obtained, and
    (ii) all the supporting documents, data or information that have been obtained in respect of a business relationship or one-off transaction following the application of customer due diligence measures.”

    Reference to non-one-off transaction records appears in 19(2)(b): “a record containing details relating to each transaction carried out by the relevant person in the course of any business relationship or one-off transaction”.

    So – and my mind has gone a bit squidgy at this point – I think it’s unclear what to do about transaction records relating to relationships.

    And the Handbook seems to suggest that the correct interpretation is the same as in the UK and Guernsey (at the moment). Paragraph 15 of Section10 of the FSB Handbook says:
    “Article 20(3) of the Money Laundering Order requires a relevant person to keep records relating
    to transactions for at least five years from the date when all activities relating to the transaction
    are completed.”

    I’m sorry I started this!

  3. David Winch says:

    I am sure you have studied the draft 2017 ML Regulations – or should I say The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.
    Regs 39 & 40 seem to cover the point you make.
    Note however draft reg 39(4) which requires the deletion of the personal data after the period has expired unless the data subject has consented to its retention.
    I am guessing such consent will be a standard term of consumer contracts from here on in!
    David

  4. There is certainly no shortage of demands to challenge the ingenuity and determination of MLROs and compliance officers!

  5. CDWOS says:

    Susan,
    A very comprehensive reply, thank you. Based upon your reading of our Order I need to go and re-read it again (aren’t we sad!!).

    You are absolutely right that in the absence of direct or clear guidance we tend to look to the UK for precedent as much of our legislation is based on yours even if not identical.

    It remains interesting in the light of the rather patchy historic implementation of AML in the UK to watch as you (general not specific) address the new legislation and how it should be interpreted.

    Having ‘principles’ based regulation certainly does create a variety of possible interpretations on a theme which I personally find fascinating despite the challenge of trying constantly to ‘get it right’.

  6. Pingback: Thoroughly Modern Piggies | I hate money laundering

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