ECSH33314 - When customer due diligence is required: how to convert the euro threshold

For businesses operating in sectors where there is a euro threshold – see ECSH 33310 When customer due diligence is required, there is no set sterling (GBP) equivalent. Whilst you may recommend that a business includes a sterling amount in its procedures, this cannot be enforced. You should establish how the business is converting the euro amount shown in The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017) to decide if it must apply customer due diligence (CDD) measures.

Regulation 3(2) of MLR 2017 states that references to an amount in euros includes reference to an equivalent amount in any currency. And the equivalent in sterling (or any other currency) on a particular day is determined by converting the sum in euros into its equivalent in sterling (or other currency), using the London closing exchange rate for the euro and the relevant currency for the previous working day. In simple terms, the business must demonstrate that it used the exchange rates on the day the transaction took place.

To confirm this, you should ask the business:

  • What source/s of information it uses to obtain the exchange rate.
  • Who calculates the exchange rate, for example individual customer-facing staff whilst completing a transaction, or is it built into a till or operating system.
  • If it sets its own internal threshold (for example, a 10,000 euro sector may apply its CDD measures to transactions of £8,000 or more).
  • If there is a sterling limit, who sets it and how is it communicated to staff, if appropriate.
  • How often is the limit reviewed?
  • What controls and compliance monitoring procedures are in place to ensure staff adhere to the threshold/s.

Check that the information obtained in response to the above questions is shown within policies, controls and procedure documents and training material (where required).

When checking CDD measures, you must always confirm that the transaction was “in scope” for supervision – see ECSH33310 When customer due diligence is required.

When selecting historical transactions to test, you can use the monthly conversion rates for Customs and VAT purposes, published on GOV.UK, as a guide. If, however, you find CDD measures have not been applied to a transaction and the business disputes that the threshold had been reached, you will need to establish the exact rate on the day of the transaction. You can do this using open-source checks, providing the results can be relied upon as evidence. Equally, if a business can provide evidence as to the exchange rate it used, you will need to take this into consideration when establishing if the business took all reasonable steps to comply with the requirement. See ECSH34005 for more information.