ECSH33313 - When customer due diligence is required: linked transactions
Source: gov.uk (2025-09-17)


Regulation 27 (https://www.legislation.gov.uk/uksi/2017/692/regulation/27) of The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017) includes instances when a business is required to apply customer due diligence (CDD) measures when transactions are “linked”.

Finding and evidencing linked transactions

Under regulation 27(3) MLR 2017, a high value dealer (https://www.gov.uk/hmrc-internal-manuals/economic-crime-supervision-handbook/ecsh51500) (HVD) must apply CDD measures if that dealer carries out an occasional transaction (https://www.gov.uk/hmrc-internal-manuals/economic-crime-supervision-handbook/ecsh33312) in cash that amounts to 10,000 euros or more, whether the transaction is executed in a single operation or in several operations which appear to be linked. You need to evidence how transactions “appear to be linked”, for example:
- Linked by the invoice - multiple cash payments against a single invoice which exceeds 10,000 euros, for example, instalments in cash of £2,000 until the goods have been paid in full. There is no limitation to the duration of the arrangement, and cash payments have been seen to be as low as £20. These are often linked by the same reference name or number being quoted (for example, a customer account reference shown on computerised accounts, or an invoice number quoted on a bank statement).
- Linked by the cash payment - several invoices to the same customer for goods, for example, three invoices of £5,000 paid in one cash payment of £15,000.
- Linked by the date of sale - goods purchased on the same day, or in close succession, split across a number of smaller invoices – for example, a supply of alcohol where each category of goods (say, different brands of beer) are shown on individual invoices and each one was paid in cash, where the total amount of cash received exceeds 10,000 euros.
- Linked by delivery – taking the example above, looking at delivery notes may show that all the supplies were delivered to the customer on the same day.
Under regulation 27(7C) MLR 2017, an art market participant (https://www.gov.uk/hmrc-internal-manuals/economic-crime-supervision-handbook/ecsh54500) (AMP) must apply CDD measures, in relation to any trade in a work of art when it carries out a transaction, or series of linked transactions, whose value amounts to 10,000 euros or more.

Similar to HVDs above, you must consider whether purchases of art are being deliberately broken down onto smaller invoices to avoid CDD measures. These can be identified by looking at a list of invoices, often raised on the same day or on consecutive days. You must ask the business if there is a reason the customer has been invoiced in this way, rather than raising one invoice for all the works of art.

The same applies to the storage of a work of art when it is the operator of a freeport and the value of the works of art so stored for a person, or series of linked persons, amounts to 10,000 euros or more. Here, the freeport must consider if there is a link between people storing works of art, for example an art collection owned by one individual but stored under different people’s names to avoid CDD measures. This could be to hide the true owner or origins of the work of art.

The definition of a letting agency business (LAB) in regulation 27(7A) doesn’t include the term “linked transaction” or “linked persons”. CDD measures must be applied in relation to any transaction which consists of the conclusion of an agreement for the letting of land (within the meaning given in regulation 13(7) MLR 2017):
- For a term of a month or more, and
- At a rent which during at least part of the term is, or is equivalent to, a monthly rent of 10,000 euros or more.
Like estate agency businesses (EAB), a business relationship (https://www.gov.uk/hmrc-internal-manuals/economic-crime-supervision-handbook/ecsh33311) is established by the letting agent with both the person who is letting the land and the person who is renting the land. There is no requirement to establish a “link” between transactions or persons.

Any other supervised business (not a letting agent, high value dealer, art market participant or money transmitter), must apply CDD measures if the person carries out an occasional transaction that amounts to 15,000 euros or more, whether the transaction is executed in a single operation or in several operations which appear to be linked. Following the guidance above, you should look at business records to try and identify if a link can be established. If you require help with this, for example, when there is a lot a data to be analysed, you can have the data processed by a data handler (https://www.gov.uk/hmrc-internal-manuals/economic-crime-supervision-handbook/ecsh32928).

It is important that you ask the business what systems it has in place to detect linked transactions to ensure that customers cannot deliberately split or “smurf” transactions into smaller amounts to avoid the CDD thresholds set either by the business or by MLR 2017.

You need to ask the business what it understands linked transactions to be in its business, its understanding of split transactions, and how it detects them. For example, for a Money Service Business (MSB) offering currency exchange, are there procedures in place to identify if the same customer comes in over five days exchanging £5,000 at a time, or two family members carrying out the transactions that cumulatively amount to €15,000. Other indicators of linked transactions could involve multiple customers living at the same address. For more sector specific examples, see the sector specific guidance on GOV.UK (https://www.gov.uk/government/collections/anti-money-laundering-supervision-detailed-information) and always consider the thresholds in place for the sector you are working on within the general guidance for when customer due diligence is required (https://www.gov.uk/hmrc-internal-manuals/economic-crime-supervision-handbook/ecsh33310).

You must understand how the business has assessed the risks of linked transactions, and how it believes its policies, controls and procedures (PCPs) identify linked transactions. You must also question what time period the business takes into consideration for linking transactions. You should check the business is taking a risk based approach to setting this. It may use 90 days or a rolling three-month period, which is suggested in the sector guidance for MSBs. As shown above, this is not appropriate for HVD or AMPs.

Testing linked transactions

You should test linked transactions in your records testing (https://www.gov.uk/hmrc-internal-manuals/economic-crime-supervision-handbook/ecsh33700), to see whether the business is maintaining (following) its PCPs and sufficiently mitigating the risks. You should consider:
- If the business has effective PCPs (https://www.gov.uk/hmrc-internal-manuals/economic-crime-supervision-handbook/ecsh33210) to identify linked transactions.
- Whether they effectively mitigate the risks.
- Whether any time period for linking transactions is appropriate.
- Whether the business is maintaining its own policy on this.
You should ask the business to consider whether transactions in the period you are looking at are linked or split, but also analyse the transactions for this yourself. To do this, you will need to review the risk indicators for the sector you are working on under “Understanding money laundering risks and taking action” available on GOV.UK (https://www.gov.uk/government/collections/anti-money-laundering-supervision-detailed-information) and the transaction information you have requested.

Transactions that appear to be linked that have not been identified by the business

If you identify any transactions which appear to be linked or split but which do not meet the criteria laid out in the business’s PCPs, you need to discuss these with the business and ask them whether they think these could be split or linked. Use the 5WH (who, what, when, why, where and how) to aid you in questioning the business on this topic.

You must note down any reasons the business states it does not believe they are linked/split and challenge them based on your knowledge of the risks associated with the sector, and why you have considered that they may be linked.

If the business agrees that these may be linked transactions, it is important to understand whether:
- The business had sufficient information that indicated that the transactions were linked.
- It gathered more information to help mitigate the risks.
- There were any controls in place that would identify this.
- Its compliance teams have flagged these issues in the past and what action has been taken in response.
This is so you can understand whether the business was knowingly aware of these potentially linked or split transactions and has turned a blind eye to conducting CDD or ongoing monitoring, and the requirements of reporting suspicious activity under the Proceeds of Crime Act 2002 (POCA). This evidence will be required for your Decision and evidence log (DEL) and support you in deciding if a sanction (https://www.gov.uk/hmrc-internal-manuals/economic-crime-supervision-handbook/ecsh80000) is appropriate.

When you are discussing linked or split transactions, depending on the business model, you may need to discuss:
- Whether relevant staff were trained to identify what the business has considered as indicators of linked/split transactions and what action they should take if they identify one of these indicators.
- What procedures are in place to avoid transactions being processed without detection/CDD measures applied, for example, thresholds being breached by customers using a number of different branches on the same day.
- How are the controls reviewed to ensure they are working effectively in identifying linked transactions.
These may evidence further breaches of MLR 2017.