JMLSG is consulting on some new draft text for Chapter 5 of Part 1 of its guidance dealing with pooled client accounts.
JMLSG considers the key risks of PCAs are where a customer’s clients misuse a PCA without the customer’s knowledge and where a customer is complicit in their misuse. It acknowledges that the purpose of a PCA is often self-evident but says firms should take reasonable measures to establish and document their purpose and may need to get information on, for example, the types of clients whose funds will be held, and the level of assets and size of transactions, as well as the possible exposure to high-risk industries and geographies.
Many PCAs will be low-risk, for instance if they are the client accounts of legal or accountancy professionals who are subject to the MLRs, if the funds are backed by government schemes or if the PCA is set up for a limited, domestic purpose. In some cases it will be appropriate to apply SDD, but in other cases the firm must take reasonable measures to identify and verify the identity of the owners whose funds are held in the PCA (this may take the form of a formal reliance agreement), or take other measures such as enhanced monitoring, requesting the customer enhances their practice or restricting the type of customers whose assets are held in the PCA. The guidance suggests that a firm enters into a written agreement with its customer under which the customer agrees to provide information on the owners of the funds in the PCA if the firms requests it.
Consultation closes on 10 June.