1. MLR Flashcards
Two statutes that apply for AML
PoCA 2002 + MLR 2017
What two officers does every firm need to work within ambit of MLR
MLRO + MLCO
When is no MLRO needed in a firm
If sole practitioner
Where does MLCO need to sit
On BoD or management body
Can MLCO = MLRO?
Yes
What four general positions are responsible for ensuring compliance w/ PoCA and MLR?
COLP, COFA, Ps and firm
What does firm need to identify ML
Policies and procedures
What is money laundering?
Disguising criminal source, converting funds, disguising trail, and launderer retains control
When can S be liable for handling laundered money?
If deposited into client account or setting up structure for ML
Can S reveal details of account, or receive deposit of cash w/o knowledge?
No - breach of CoC + SRA
Two scenarios when there is a high risk of ML
FATF identifies high risk J, or AMLG suggests country w/ corruption/suspicious activity
What part of AMLG refers to ‘suspicious’ activity
12
What kinds of activities for clients are generally low risk for ML
Personal injury/litigation
Example of two high risk Js
DPRK and Iran
What part of PoCA is relevant to ML
Part 7
Who does Part 7 PoCA apply to?
All solicitors
What is criminal property defined as in PoCA?
Resulting from criminal conduct
Who can commit an offence under PoCA?
Any person
What is the difference between who can commit offences under PoCA and under MLR
Any person can commit under PoCA - only S in certain cases under MLR
Two general kinds of offences under PoCA
Direct involvement and non-direct involvement
Where are the three direct involvement offences under PoCA
327 - 329
How do the defences work for the direct involvement offences under PoCA
Same for all three
What are the defences to direct involvement offences
338 disclosure + 335 appropriate consent, no 338 but reasonable excuse, and prohibited act but function of enforcing PoCA
Where is ‘authorised disclosure’ in PoCA
338
What is ‘authorised disclosure’ in PoCA
To constable/customs officer/NO by alleged offence that property = criminal
Who is ‘NO’ in firms for PoCA 338 disclosure
MLRO
How do the conditions for a 338 disclosure change
Depending on if made before, during or after
What is a fourth defence to direct involvement offences (in terms of where activity took place)
Criminal conduct outside UK and lawful in that J (and not prescribed by SoS)
When do the non-direct involvement offences apply
If working in a regulated sector per Schedule 9
What is the ‘regulated sector’ under PoCA
Tax advice and real property transactions
What is the non-direct involvement offence
Failure to disclosure to NO in ‘regulated sector’ when have info + can identify whereabouts of person/property
When is the original S clear in the regulated sector (non-direct involvement offence)
Once disclosed to NO - NO then decides whether to disclose to NCA
If NO discloses to NCA, until when do they have to wait for consent
7 working days from disclosure
Why can a client never be told why there is a delay, when carrying out PoCA disclosures
333A tipping off offence
What are the penalties for failure to disclose
Imprisonment/fine
What types of work are unlikely to be caught by MLR
Litigation and employment law
What Regulation of MLR requires firm to assess risk of ML
18
Is risk assessment carried out on the basis of an individual client’s risk?
No
What does AMLG add to Regulation 18 risk assessment
Customer risk factors and high risk service area (para 2)
What are customer risk factors under AMLG
High turnover of clients, J w/ deficient AML or certain sector
What are high risk service areas under AMLG
Real property and complex transactions
What part of MLR shows when CDD applies
27
When does CDD apply
If relevant person and 1/4 triggers exist
What are the four triggers for CDD
BR, OT, suspicious, or doubt veracity
Part of MLR on what is a ‘relevant person’
Regulations 8 + 12
Part of MLR on ‘BR’
4
Part of MLR on ‘OT’
3
What is an OT for Reg 27 MLR
No BR + transfer is more than 1,000 euros/transaction 15,000 euros or more
When might you ‘suspect’ ML, so Reg 27 applies
AMLG Ch.12 - unusual instructions or FATF list
What happens under MLR if new instructions for existing client
CDD should already have been done, so continuing O under 28(11)
Where is standard CDD under MLR
28
What does the process of standard CDD depend on
Nature of the client
What is the process of SCDD if client = individua
Identify + verify identity, and assess purpose of BR/OT
What is the process of SCDD for company
Obtain + verify name, company number, address, law, constitution, BoD and senior persons
What happens if company beneficially owned by another (for Reg 28 SCDD)
Identify + verify BO
How is beneficial owner defined in MLR
Any individual exercising ultimate control, or holding over 25% of voting rights
When is there no need to seek out law, BoD/senior persons or analysis of BO for company under SCDD?
If company is listed
What is insufficient to verify company for SCDD
To just check PSC reg
What happens if all possible means of identifying BO of company for SCDD have been exhausted
Treat senior person responsible as BO
What is the usual process for monitoring existing clients
By annual review
What material covers ‘acceptable verification’ for SCDD
AMLG para 4.9
Examples of acceptable ID for individual
Passport, driving licence, G doc
Examples of acceptable ID for P, LP and LLP
If well-known, name, reg address + nature - if small, identify as individual
When is SCDD generally carried out
Before under Reg 30
When can SCDD be carried out during
BR + necessary + ASAP + low risk
What part of MLR allow reliance on CDD carried out by 3rd
Reg 39
What must 3rd be to rely on their CDD under Reg 39
Subject to MLR + MLD4, and carrying on business in EEA
When can 3rd’s CDD NOT be relied on
3rd is high-risk country under MLD4, unless branch/majority owned sub of person established in EEA under MLD4
What must the arrangement be between 3rd and firm if relying on 3rd’s CDD
Written, w/ firm able to get immediate access to necessary info
If relying on 3rd’s CDD, how long must they keep records for
5 years
Who is liable for failure to apply correct CDD measures if firm relying on 3rd
Firm
Can law firm apply CDD via agent/provider?
Yes, as long as agreement states law firm is liable for any failure
Two alternative types of CDD
Simplified and enhanced
Where is simplified CDD under MLR
37
When might simplified CDD be applied
Low risk J, listed company, or e.g. life insurance policies or ISAs
When might firm discontinue with simplified CDD
Doubt veracity or suspects ML
Where is enhanced CDD under MLR
33 - 35
What is enhanced CDD
Applied in addition to SCDD, including ongoing monitoring
When does enhanced CDD apply, per AMLG
If any 33(1) risk factor is present
When might enhanced CDD be used
High-risk J, product/delivery channels, or PEP
What covers minimum retention time of records under MLR
40
Where are the offences under MLR
86 - 88, and 92
What is the nature of the offence if contravening MLR
Criminal offence
Reg 87 offence MLR
Prejudicing investigation
Reg 88 MLR offence
Disclosure offences
Reg 92 MLR
Offence by C/P committed w/ consent of, or lack of control by, officer, means officer is ALSO guilty
What Reg MLR requires RP to have appropriate ML policies and procedures
19
What Reg MLR requires staff to be trained if they are a relevant employee
Reg 34
