Anyone who already has to comply with anti-money laundering regulations, such as solicitors, financial advisors, accountants, estate agents, should have an awareness of the new proliferation financing regulations which came into force on the 1st September 2022.
What is Proliferation Financing?
It is a bit of a mouthful, but proliferation financing is the act of providing funds or financial services for use, in whole or in part, in the manufacture, acquisition, development, export, trans-shipment, brokering, transport, transfer, stockpiling of, or otherwise in connection with the possession or use of, chemical, biological, radiological or nuclear (CBRN) weapons, including the provision of funds or financial services in connection with the means of delivery of such weapons and other CBRN-related goods and technology, in contravention of a relevant financial sanctions obligation.
What does that mean for me?
Consider this an additional limb to your existing AML procedures. You are now being asked to also consider the possibility of whether your client and their transaction is involved in proliferation funding in addition to whether there could be money laundering and terrorist financing.
What are the warning signs?
In essence they are all the red flags that already exist for money laundering. You do in addition have to be aware of:
- Sanctioned individuals,
- those on national lists concerning high-risk entities,
- military or research bodies connected with a high-risk jurisdiction of proliferation concern (mainly Iran and North Korea),
- clients who are involved in the supply, purchase or sale of dual-use and sensitive goods (although the risk might be lower where the client is itself aware of proliferation risks and has systems and processes to ensure its compliance with export control obligations),
- clients who engage in complex trade deals.
Dual-use and sensitive goods?
Dual-use items (including software and technology) are items which can be used for both civil and military purposes. The term also includes all goods which have non-explosive uses or assist in any way with the manufacture of nuclear weapons or other nuclear explosive devices. There is government guidance here:
What if I have a concern or suspect my client of being involved in proliferation financing?
Then you report it to the NCA just as you would if there was an AML issue.
This does not look like it will impact me very much.
In my view, unless you have many international clients, especially ones in North Korea or Iran, this may not be of great concern, but you should still have an awareness of this issue, as those individuals involved in both money laundering and proliferation financing are likely to choose an organisation which may not have any experience in these fields. You are however expected to carry out a proliferation financing risk assessment if you already have an AML one.
For more information about Proliferation Financing or for guidance on keeping up to date with all the latest regulations financial crime regulation and making sure your business is compliant please contact John Grace on 01749 835273 or email firstname.lastname@example.org