Anti-Money Laundering Policy

Introduction

This policy tells you:

• mhs homes group aims and objectives in identifying, preventing and investigating criminal activity through money laundering in all its forms.

• roles and responsibilities in preventing money laundering and terrorist financing

• mhs approach to this policy area

Who needs to know?

This policy is relevant for all colleagues but particularly for those who are involved in finance, development and sales (including Right To Buy), procurement and tenancy management.

Specific controls apply to shared ownership resale transactions. This is because in these transactions we act as an estate agent as we are an intermediary between seller and buyer. This means this area of the business must comply with the Money Laundering Regulations 2017[1] as set out in more detail below.

[1] Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017

Policy Statement

mhs is committed to the highest ethical standards and good governance. It has adopted a zero tolerance to all forms of fraud, bribery and corruption, including money laundering. The aim of this policy is to outline mhs’s commitment and approach to the prevention of money laundering and wider economic crime, ensure compliance with the relevant legislation and make all employees and relevant third parties aware of their responsibilities. The Anti-fraud, Bribery and Corruption Policy gives details of our approach to broader fraud, including responsibilities under the Economic Crime and Corporate Transparency Act 2023.

This policy establishes a framework for staff to follow to identify and mitigate money laundering risk and aid the prompt reporting of any suspicions of money laundering.

Money laundering can be defined as ‘a process that makes money with an illegal origin appear legal, so that the money can be used’. Money laundering can involve funds from serious organised crime but also small profits and savings from crimes such as tax evasion or benefit fraud. Property is also a high-risk area with large sums being processed in a single transaction.

mhs are not regulated by the Financial Conduct Authority or by the Office of Fair Trading under the Money Laundering Regulations but are required to be registered with the HMRC for estate agency services (which applies to resales of shared ownership properties). We follow the NHF guidance on anti-money laundering by establishing adequate controls and procedures to protect the organisation against money laundering.

Any employee could potentially be caught by money laundering and terrorist financing rules if they suspect money laundering or terrorist financing and either become involved in some way and/or do nothing about it.

Mhs refers to all entities within the mhs homes Group.

Purpose

By adopting this policy, mhs will ensure that we:

• Comply with current and relevant legislation, regulatory standards (mhs as registered charity and Heart of Medway as a Registered Provider) and contractual obligations

• Remain consistent with the strategic aims of mhs and best practice

• Provide effective control of the risks it is seeking to address

• Enshrine the organisation’s commitment to putting customers at the heart of our policy making process

• Continue to meet the diverse needs of our customers, stakeholders and staff

• Work well on an operational level

• Are sufficiently flexible to drive further service improvements and efficiencies

• Have appropriate levels of quality assurance, measures and monitoring

Scope

This policy applies to all mhs homes employees including those on temporary or agency contracts, Board members and Trustees. There is a particular focus on staff receiving rental income, Development Team or staff involved in the sale or marketing of homes (including Right to Buy). The policy sets out the procedures which must be followed, for example the reporting of suspicions of money laundering activity. This enables the organisation to comply with its legal obligations. Within the policy the term employees refers to all employees, senior management and Board Members.

Issues that may become the cause of concern may be covered by other procedures and policies. These include:

• Anti-Fraud, Bribery and Corruption Policy

• Whistleblowing Policy

• Data Protection Policy

• Right To Buy Policy

• Financial Regulations and standing orders

• Risk Management Framework

• Cash collection Policy

Roles and Responsibilities

The Board retains oversight of economic crime risk and ensuring the organisation maintains proportionate reasonable procedures to prevent fraud.

The Leadership team are responsible for ensuring that appropriate systems and controls are in place to prevent economic crime, including fraud, and that these are regularly reviewed in line with emerging risks and legislative change.

We have designated a member of staff as the Money Laundering Reporting Officer (MLRO), who will receive any report from any party of the business, keep records and if considered appropriate, make reports to the National Crime Agency (NCA). This role is carried out by the Executive Director of Governance and Risk. In absence of the MLRO, the Financial Director as deputy would receive and make reports. The MLRO reports any reports of suspected money laundering to the Finance, Risk Audit Committee (FRAC), under regular reporting of fraud.

Colleagues are required to report any suspicions of money laundering immediately to the MLRO. Disclosing suspicions on a timely basis is essential to ensure that mhs is not participating in illegal transactions.

Colleagues must not alert the suspect or take any action that may alert the suspect of their concerns. Alerting or notifying the suspect may be considered ‘tipping off’ which is a criminal offence.

Colleagues involved in re-sales (in the sales team), should be properly screened when they are taken on and during the course of their employment with mhs. This involves an assessment of their skills, knowledge and expertise and their conduct and integrity. An audit trail must be created (track through recruitment records and On Track)

We will make our 3rd party suppliers who have a responsibility to us for anti-money laundering controls aware of their responsibilities and may require them to evidence such compliance. These suppliers currently are sales agents who conduct shared ownership sales. The requirement to comply with the legislation sits with mhs.

Policy Detail

Anti-money laundering legislation places responsibility upon us to prevent money laundering. It covers a very wide area of financial transactions, including possessing, or in any way dealing with, or concealing, the proceeds of crime. It applies to all employees involved with monetary transactions.

Under the legislation it is a criminal offence to:

• Conceal, convert or transfer criminal property

• Assist a money launderer or enter into an arrangement which facilitates money laundering

• Acquire, use or possess criminal property

• ‘Tip off’ a person suspected to be involved in money laundering that they are suspected, or they are the subject of police investigations

• Fail to report a suspicion of money laundering

Registration

Our only current regulated activity is "estate agency work" as we deal with re-sales of shared ownership properties. We are required to be registered with the HMRC as a result.

Customer due diligence measures

We must undertake appropriate due diligence checks on customers to identify them and confirm they are who they say they are. This means confirming their identity and address in the first instance. Thereafter we may choose to check their source of funds and enhanced and/or ongoing due diligence may be required.

This must be done at the outset of a transaction and before any funds are received. If the customer fails to provide the appropriate information or anything is unclear, ask for more information.

We identify customers on the basis of documents, data or information obtained from a reliable and independent source, whilst be alert to the possibility of forged and stolen documents being used. Electronic methods of checks may be used where available.

We will take reasonable steps to verify beneficial ownership and control structures where corporate entities are involved, recognising that company register data may require independent validation.

Enhanced checks may need to be used in some cases where identity cannot be independently verified or where discrepancies exist between customer provided information and official records or if the interaction is not face-to-face or the customer is a politically exposed person (PEP) i.e. there are a high ranking public official either in the UK or overseas[1].

Enhanced due diligence must also be applied in relation to:

• Customers linked to high-risk third countries as defined by UK guidance [the list of high-risk jurisdictions should be reviewed when any third country is involved]

• Complex or unusual transactions with no clear economic purpose

We will not accept new or emerging payment methods, including crypto currency.

Ongoing monitoring of existing customers might be required. For example, a customer who suddenly has the funds to buy a housing association’s share of a property or to buy a property outright will, in most instances, have a reasonable explanation for the source of the funds. Ongoing monitoring of such activity should however be the catalyst for further enquiries to be made. Where a PEP is involved, enhanced ongoing monitoring must be applied.

A high-risk area for us is shared ownership where criminals might use front buyers to purchase properties, having provided them with the funds. In this situation, enhanced due diligence may involve examining the source of funds or looking closely at the prospective purchaser’s employment details and income. Those checks may reveal that the purchaser does not fit the profile of a regular customer.

Reliance on third party CDD

If for any reason it is not possible to obtain the original documents or certified documents required, then in exceptional circumstances we may be able to rely on copies of due diligence carried out by a third party, such as a solicitor. To rely on this due diligence the third party must be regulated under the Money Laundering Regulations themselves. Before relying on this, you must obtain the prior written consent of the:

• Third party whose due diligence you wish to rely on; and

• the MLRO.

A request for approval must state the reason for reliance, details of the third party on whom you are proposing to rely and including a copy of the written consent of the third party.

In this case you must also:

• Immediately obtain from the third party all the information needed to satisfy our requirements in relation to the customer, the customer’s beneficial owner (if applicable), or any person acting on behalf of the customer.

• Enter into arrangements with the third party which: (i) enable us to obtain from the third party immediately on request copies of any identification and verification data and any other relevant documentation on the identity of the customer, customer’s beneficial owner (if applicable), or any person acting on behalf of the customer (ii) require the third party to retain copies of the data and documents referred to in paragraph (i) for as long as we would be required to hold them (i.e. 5 years) had it carried out the due diligence itself.

If it has not been possible to carry out due diligence checks, we must not carry out transactions with those customers and consider making a suspicious activity report.

Reporting of suspicious activity

Reports must be made by staff to the MLRO as soon as practicable when they know or suspect, or have reasonable grounds for knowing or suspecting, that a person is engaged in money laundering or terrorist financing. Please see form at Appendix 1.

If you have any concerns, the safest route is to make a report to the MLRO. This is the best way to protect your position and that of mhs.

Failing to report such knowledge or suspicion is a criminal offence. The MLRO will decide if a report to the HMRC Fraud Line is required.

Risk Assessments

Mhs must take appropriate steps to identify and assess the risks of money laundering and terrorist financing to which the business is subject.

• Organisation-wide risk assessments:

We have assessed the money laundering risks that mhs faces and identified those areas within this policy. This is a dynamic process which is constantly under review, in particular when dealing in new types of business or with customers who are new to the business. Risk assessments will take into account emerging threats and external intelligence including regulatory updates and sector-specific risk alerts.

• Regulated transactions (resale of shared ownership units)

Undertaking a transaction specific risk assessment is a requirement for regulated transactions. The risk profile of a party needs to be approached on a case by case basis. This process should be undertaken at outset of the relationship with the customer and during the due diligence process.

This process will flag up any requirement for enhanced due diligence or ongoing monitoring and should be refreshed where the risk profile of a customer changes.

Record-keeping

We need to keep certain records to demonstrate compliance with the Regulations, namely:

• copies of, or references to, the evidence obtained of a customer’s identity for five years after the end of the customer relationship, or

• in the case of occasional transactions, five years from the date when the transaction was completed

• it is also necessary to maintain a written record of the risk assessment in relation to the transaction.

In relation to customer identification, we must keep:

• a copy of, or details about, the identification document presented, and verification evidence obtained, or

• information about where the evidence can be obtained.

If we use a third party to undertake customer due diligence measures, we must ensure that the third party complies with the record-keeping obligations. The purpose of keeping these records is to demonstrate the business’s compliance with the Regulations and to aid any resulting investigations. We cannot outsource our obligation to comply with the Money Laundering Regulations and therefore the risk of non-compliance remains with mhs even where a third party has been used to undertake customer due diligence.

We must also keep records of internal and external reports and decisions as part of the suspicious activity reporting, training and records of any updates in respect of money laundering methods and legislation which have been disseminated to staff.

Internal controls

Operational risk registers identify the controls required in each of the areas of business affected.

The checklists and guidance used for identity checks are key controls that we use to control the risk of money laundering.

Information Sharing

Mhs may share information with relevant authorities and other organisation where lawful and appropriate to prevent, detect or investigate economic crime.

[1] See https://www.lawsociety.org.uk/topics/anti-money-laundering/peps

Stakeholder Engagement

Colleagues across mhs have been involved in the revision of this policy including the AD Finance, Treasury & Systems and managers for the customer, sales, HR and ICT teams. No customer engagement has been sought due to the nature of the internal processes involved. Where customers are involved, such as home plan visits, the relevant procedures should be subject to customer engagement.

Training

We will provide training to relevant staff (including temporary staff) on the requirements of the legislation. This includes fraud prevention responsibilities, identification of suspicious transactions, identity verification and reporting procedures. Relevant staff are identified as follows: Housing Officers, Finance – Rents Team, Development and Sales Teams, Procurement Team, Legal Adviser.

Assurance and Monitoring

The Company Secretary has reviewed AML policies from other Housing Associations, legislative updates since the policy was last reviewed and the NHF guidance on anti-money laundering for its members (updated 2018).

Legal advice was received from Trowers & Hamlins concerning our risk assessment of activities which may be covered by AML legislation and our requirement to register with the HMRC.

Legal and Regulatory Overview

The relevant legislation is found in the Proceeds of Crime Act 2002, the Terrorism Act 2000 (as amended), the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (as amended), the Finance Act 2022, Estate Agents Acts 1979 and the Economic Crime and Corporate Transparency Act 2023.

Application to all employees

Under the Proceeds of Crime Act 2002 mhs and any member of staff may be guilty of an offence if it/they help an individual to launder funds from a criminal source. If we know or suspect that the funds may be from a criminal source, we must make the appropriate disclosure or there may be criminal sanctions imposed. If we tip off any person that such a disclosure has been made that is also a criminal offence, if it relates to shared ownership resales.

The Terrorism Act 2000 requires regulated businesses to report knowledge or having a reasonable case to suspect offences related to terrorist financing:

• Fundraising for the purposes of terrorism;

• Using or possessing money or other property for the purposes of terrorism;

• Involvement in funding arrangements;

• Money laundering-facilitating the retention or control of property (including money) which is destined for, or is the proceeds of terrorism.

The above offences under both the Proceeds of Crime Act and the Terrorism Act carry a sentence of up to 14 years imprisonment. In addition for the regulated areas (see below) failure to disclose knowledge or suspicion carries a maximum of 5 years imprisonment and tipping off a relevant party where that could prejudice an investigation, 2 years.

Regulated areas only (employees working on shared ownership resales)

The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 apply to those involved in "estate agency work" and at mhs this includes all shared ownership resale transactions. This means that in this area organisations must ensure that:

• They are registered for supervision with the relevant AML regulator (for mhs this is HMRC)

• They have systems and procedures in place to prevent money laundering and report suspicious activity;

• Customer Due Diligence and risk assessment is undertaken in respect of each transaction

• Staff are made aware of the procedures and systems;

• Staff are trained in how to recognise and deal with transactions which may be related to money laundering;

• Identification and transaction records are maintained for a period of five years; and

• A Money Laundering Reporting Officer (MLRO) is appointed.

In addition mhs have put in place staff screening measures for appointed officers and those working within the regulated part of the organisation.

The Finance Act 2022 introduced the Economic crime (Anti-Money Laundering) Levy (for the financial year 2022/23 onwards), requires all entities engaging in activities regulated under the Money Laundering Regulations to pay an annual levy, based on size of turnover rather than activity level. mhs is caught by this requirement based on resale activity of shared ownership properties.

The Economic and Corporate Transparency Act 2023 includes requirements relating to proactive fraud prevention and corporate criminal offences including failure to prevent fraud, enhanced transparency of corporate entities and strengthened identity verification expectations. We will maintain proportionate reasonable procedures to prevent fraud and economic crime.

The Estate Agents Acts 1979

We are required to be registered with and supervised by the HMRC as an Estate Agency Business in relation to resales of shared ownership properties as we fall within the definition of an estate agent at section 1 of this Act.

Principles

Equality statement

mhs homes has a duty to ensure that no person receives less favourable treatment from the organisation on the grounds of age, disability, gender reassignment, marriage, civil partnership, pregnancy, religion or belief, race, sex or sexual orientation.

​​​​​​​Data protection

mhs homes will only share information that meets the requirements of the Data Protection Act 2018 and the UK GDPR. Confidentiality and impartiality will be exercised by mhs homes at all times.

Feedback

We welcome suggestions and comments from people who use or provide our services. We believe that this can provide some important lessons to help us ensure that the service is improved for everyone.

If you have something to say about this policy or the information that is provided, then please let us know. Please refer any comments to the author of this document.

Links and Appendices

Appendix 1

Suspicious Activity Report

Appendix 2

Money Laundering - Warning Signs

The following examples could indicate money laundering may be taking place:

1. Checking a new customer’s identity is difficult or reluctance to provide details

2. Transactions or trade appearing to make no commercial or economic sense from the perspective of the other party: A money launderer’s objective is to disguise the origin of criminal funds and not necessarily to make a profit. A launderer may enter transactions at a financial loss if it assists disguising the source of funds and allows funds to enter the financial system.

3. Large volume/large cash transactions. All large cash payments should subject to extra care. Before accepting cash, the reasons for such payments should be fully understood. Payments should be encouraged through the banking system to avoid problems.

4. Payments received from third parties. Money launderers will often look to legitimate business activity to assist in ‘cleaning’ criminal funds. Making payments on behalf of a legitimate company can be attractive to both parties. For the legitimate company it can be useful source of funding and for the launderer the funds can be repaid through a banking system. The payor must be identified and verified.

5. When a shared ownership customer staircases a large share within a short period. Although there could be no issues with this scenario this does carry a potential risk.

Examples of tell-tale signs of organised money laundering include:

• Use of cash where other means of payment are normal

• Unusual transactions or ways of conducting business

• Unwillingness to answer questions/ general secretiveness

• Use of overseas companies or new companies

• Overpayments of rent where large refunds are needed.

• A tenant who has been in arrears for a long time suddenly pays lots of cash to us in a short space of time

• An elderly or vulnerable tenant known to be in receipt of benefits is found to have a substantial amount of cash at home

• Money paid by a third party who does not appear to be connected with the customer

• The customer requests payment to a third party who has no apparent connection with the customer

• Customer puts pressure on you to accept business before you can carry out necessary checks

• Customer makes an approach to purchase a property and then backs off realising identity checks required for money laundering purposes

• A cash transaction is unusually large and the customer will not disclose the source of funds.

• A transaction is carried out for less than market value with an unconnected person

• There appears to be no genuine reason for the customer using the business’s services

• Size or frequency of the transaction is not consistent with the normal activities of the customer.

• There has been a significant or unexpected improvement in the customer’s financial position. They are unable to give a proper explanation of where the money came from.

• The parties to or the agreed procedure in a transaction alters significantly very late in the process.