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<p>The Fourth EU Money Laundering Directive seeks to prevent the financial and certain
non-financial sectors from being used for money laundering (the conversion, by various
means, of the proceeds of crime into apparently 'clean money') and terrorist financing
(the provision or collection of funds used to carry out any terrorist offences).</p><p>
</p><p>In addition to the financial sector, the directive applies to certain non-financial
sectors including lawyers, notaries, accountants, estate agents, providers of gambling
services, trust and company service providers, and to all providers of goods when
payments are made in cash in excess of €15,000.</p><p> </p><p>The directive introduces
additional requirements and safeguards ('enhanced due diligence') for situations posing
a higher risk of money laundering and terrorist financing, for example, trading with
correspondent banks situated outside the EU. Amongst those additional requirements
is a broader definition of Politically Exposed Persons (PEPs).</p><p> </p><p>Those
subject to the directive are required to:</p><p> </p><p> </p><p> </p><p>Identify and
verify the identity of their customer ('customer due diligence') and of the beneficial
owner (person(s) who ultimately owns or controls the customer on whose behalf a transaction
is being carried out, e.g. in the case of a company, the owner of a sufficient percentage
of the shares or votes), and to monitor their business relationship with the customer,</p><p>
</p><p>Report suspicions of money laundering or terrorist financing to the public
authorities</p><p> </p><p>Ensure that personnel are properly trained and that appropriate
internal preventive policies and procedures are set up.</p><p> </p><p>The Ministry
of Defence (MOD) is not a financial institution nor does it fall into the non-financial
sector organisations identified by the Directive, and it is not a provider of goods
where payments are made in cash in excess of €15,000.</p><p> </p><p>The responsibility
of implementing the requirements of the Directive is for the financial sector and
the non-financial sectors identified by the Directive and not the MOD.</p><p> </p><p>The
new Directive gives additional guidance in dealing with those risks and issues relating
to corrupt activities. As with all legislation it cannot differentiate between those
nations, sectors and institutions that are more or in the UK's case, less corrupt.
What this Directive attempts to do is give those organisations and sectors at risk
of money laundering and terrorist finances the ability to make their own judgements
as to what they deem as a high risk person (PEP) or transaction. Whilst ambassadors,
chargés d'affaires and high-ranking officers in the Armed Forces are included in the
Directive as PEP's, the financial institutions in particular will assess their individual
risk. In some countries the military are involved and in some cases run the political
and governing systems, this makes them a significant corruption risk. The UK, its
ambassadors, chargés d'affaires and high-ranking officers carry a lesser risk than
some others; it is therefore unlikely that the extended Directive will affect them.
But the interpretation of the Directive is for the financial and certain non-financial
sectors to interpret.</p><p> </p><p>The MOD takes its responsibility to prevent, detect,
deter and investigate fraud (including corruption, money laundering and terrorist
financing) very seriously and has undertaken detailed risk assessments to identify
its risks, where needed implementing additional preventative and detective controls
and undertakes due diligence on its suppliers.</p><p> </p><p>Transparency International
publishes a Government Defence Anti-Corruption Index based on 77 indicators which
assesses the existence, effectiveness and enforcement of a nation's ability to manage
the risk of corruption including money laundering.</p><p> </p><p>The UK MOD scored
an 'A' (very low corruption risk) in the 2015 index, the only country to achieve this
in the G20 and NATO as well as being one of only two in the world to achieve this.</p><p>
</p><p>Transparency International attributed the 'A' to the UK MOD having strong anti-corruption
systems underpinned by effective independent oversight mechanisms.</p><p> </p>
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