ECSH33120 - Understanding business activities

After the initial review [Link to ECSH 32700 Initial review] and initial contact [Link to ECSH 32800 Initial contact], you will start to build an overview of the business activities and prepare for an intervention.  

Understanding the business activities will help you to identify any information you need to clarify, any areas of concern, any areas of money laundering, terrorist financing and/or proliferation financing (ML/TF/PF) risk or any breaches to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017). You may need to ask further questions to clarify information. Some of the questions you may want to consider are detailed below. 

Understanding how the business operates and its activities  

It’s important to understand how the business operates and the business’s activities so that you can plan your approach to testing the business’s compliance with the MLR 2017. It will enable you to check that the business has identified and assessed the ML/TF/PF risks specific to its business and that it has implemented policies, controls and procedures to mitigate the risks identified.You will also be able to helpthe business to understand the risks if there are any gapsidentified.  

By understanding the business model, you will be able to ask further questions and select appropriate records and documents to examine [Link to ECSH 33700 Records testing].Having a good understanding of the business may also help you to identify factors affecting the business’s commerciality and credibility. 

You should consider the following aspects: 

Customers/clients 

who are the business’s customers?  

where are they based? 

are there any overseas? 

are any customers considered to be politically exposed persons (PEPs)? 

are the customers individuals, businesses, trusts etc or a mixture of entity type? 

are clients referred to the business? If so, where from? 

Location 

where is the business based?  

which locations does the business operate in? 

how many premises does the business operate from? 

what would you expect the premises to be like? 

who owns the premises?  

is the premises owned or rented?  

how much is the rent per month? 

Structure 

does the business have any branches? 

is the business part of a franchise? If so, are they the franchisor or franchisee? 

is the business part of a group structure? How does this work? 

for money service businesses, does the business operate as a principal, an agent or both? Does the business operate a large agent network (LAN)? 

for estate agency businesses, does the business have any agents? 

Lifestyle 

what is known about the lifestyle of the responsible persons? Consider their levels of assets or spending 

do the responsible persons have any other income or any other business interests? 

does the income from the business support the lifestyle of the responsible persons? 

is there any information linking the business, or responsible persons with any other regulated/unregulated activities? 

Staff (where applicable) 

how many staff members are there? 

how many are involved with relevant activity under the MLR 2017? 

what type of roles would you expect to find for this type of business? 

have the staff members been screened? 

have the staff members received training? 

do any staff share login details? 

who has management level access to systems? 

Marketing 

what types of marketing is carried out? 

does the business have a website? 

are the business activities advertised on the website?  

is the business a member of any trade body/ association? 

Products and/or services 

what products and/or services does the business provide to its customers? 

which business activities would be considered as relevant activity under the MLR 2017? 

does the business conduct any other business which is not in scope of the MLR 2017? 

Transactions 

what forms of payment are accepted?  

does the business accept or make any cash payments? 

what happens if the customer asks for a refund? 

does the business accept any linked transactions, how does the business identify linked transactions? 

Stock (where applicable) 

does the business hold any stock?  

what is the quantity of stock held?  

what is the value of the stock held?  

where is the stock kept? 

Delivery channels 

are customers met in person? 

does the business conduct any business online?