How do you determine whether a matter is subject to AML?

When does a matter fall under the Anti-Money Laundering legislation? 

For notaries, tax advisors, accountants, administrative offices, investment institutions, and solicitors, matters or clients quickly fall within the scope of the Anti-Money Laundering legislation (AML). Put simply, all matters and parties that deal with money or involve money generally fall under the AML.   

Of course, in practice, the situation is a bit more nuanced. To determine whether a matter qualifies as an AML matter, specific criteria are applied. If a matter meets any of the criteria below, then the work falls under AML.

Providing advice or assistance regarding:  

• the purchase or sale of registered property;  
• the establishment of a mortgage on a registered property;  
• the management of funds (securities, coins, banknotes, precious metals, etc.);  
• the incorporation or management of companies;  
• the purchase and sale of shares in, or the full or partial acquisition or sale of, businesses; activities in the area of taxation;  
• acting independently and professionally or commercially on behalf of a client in any financial or real estate transaction.
   

What is the exception?

Not every matter or client falls under AML. Below are some key exceptions: 

• Litigation exemption: Conducting legal proceedings concerning one of the above subjects does fall within AML but does not require full client due diligence. The procedure qualifies as an exemption and does not require complete AML investigation.
  
  
• Establishing legal position: As long as you are still determining the legal position, AML obligations do not apply. This is true even in legal areas where AML would normally apply, such as property or corporate law. 

Important: A matter can change status/colour during the course of your service. This occurs once you go beyond determining the legal position and start offering services that do fall within AML. This shift is critical but is often overlooked in practice. 

What is important during the supervisor's audit?

To properly answer the regulator’s question about how you determine whether a matter falls under AML, it is essential to have the following in order: 

• Make and document a case-by-case assessment: You must document whether AML applies for each matter. A mental assessment is not sufficient. The regulator wants to see written documentation explaining your decision. If no written record is available, the regulator may dig deeper into your assessment, potentially triggering a discussion. 

• Ensure the assessment is part of your AML office policy: Your office policy must describe the criteria you use for assessment, where you document this, and how it can be verified. Also record how and in what format your decisions are logged per file.
  
  
• Adapt to changes in matter status: Monitor whether matters change in nature. The regulator wants to see that you actively identify when a matter begins to fall under AML and that you then conduct the necessary due diligence.

Practical tip

“For us, four elements are key to setting up an effective AML process and determining whether a matter qualifies as an AML matter. These are: 

1. Regular AML training for the entire team
2. A clear working instruction – documented in the office manual
3. A supportive AML software tool
   
4. An internal point of responsibility 

Especially appointing someone (formally or informally) as the internal AML specialist is highly recommended. Give this person the mandate and trust to make AML-related decisions, such as when enhanced due diligence is required. 

If you implement these four elements, the process of determining whether a matter falls under AML becomes more logical and workable.” 

Conclusion

In anticipation of a visit from the regulator, it is increasingly important to document in writing, for each matter, whether AML does or does not apply and to continuously monitor your ongoing cases. Clients may change in risk profile, and as described above, matters may shift in nature over time. It is crucial to adapt accordingly. 

Ensure you record all this in a practical and structured way; both in your overall AML office policy and per individual matter. Provide written reasoning based on the risks you identify. This can be done manually or with the help of AML software, such as RegLab. 

The advantage of using software is that it enables you to quickly respond to follow-up questions, such as: “How many legal entities in your client base are from high-risk countries?” Additionally, data generated automatically by such tools can provide your office with valuable insights; not just about compliance, but also regarding your overall business operations.