23) ANTI-MONEY LAUNDERING Flashcards
WHAT IS MONEY LAUNDERING?
Filtering proceeds of criminal activity through legitimate financial means to make the origin of the funds difficult to trace or to make such funds legitimate.
Examples of money laundering
Opening an acc with a small sum and then depositing large sums in cash
Investing in a collective investment which is then encashed within a short time
Arranging a mortg or loan that is quickly paid off using cash.
Which are the principal money laundering offences?
1) Concealing criminal property
It is a criminal offence to conceal, disguise, convert or transfer criminal property
2) Arranging
A person who suspects or knows to be a criminal acti and gets involved in the process by enabling someone else to acquire, retain, use or control criminal property.
(The other person also knows or suspects criminal acti)
3) Acquiring, using or possessing
It is a criminal offence for a person to acquire, use or possess any property that they suspect or know to be the proceeds of criminal acti
Explain ‘failure to disclose’ and ‘tipping off’
Failure to disclose
Proceeds of Crime Act 2002 introduced reqt that a person who has reasonable grounds for knowing/suspecting someone is engaged in money laundering to be reported.
Tipping off
It is an offence for a person to disclose to a person who is suspected of money laundering that an investigation is being/may be carried out.
Define property, criminal activity and criminal property
Property - assets of every kind, tangible or intangible, movable or immovable, as well as legal documents giving title to such assets
Criminal acti - Specified in the Vienna Convention, and also any other criminal acti designated a such by each member state
Criminal property - property that consists, directly or indirectly, wholly or in part, of a benefit from criminal conduct, where the alleged offender knows or suspects that it constitutes a benefit.
What are the recommendtions in the Fourth Money Laundering Directive?
In response to recomm made by Financial Action Task Force (FATF) ** Reqt to adopt risk based approach to imple of AML measures such as customer due diligence (understand nature of threat and devote most resour to areas of greatest risk. Relevant person to produce written AML risk report and accordingly propose written policies to be approved by firm's snr mgt **'politically exposed persons' to include those with prominent posn in their home country - considered vulnerable to corruption **New criminal offence - to make reckless statement in ML context that is false or misleading (fine/max 2 yr sentence)
Fourth ML Directive also
includes ‘tax crimes’ within EU legisln for 1st time
strengthens co-opn betn member states
more transparency ard ‘beneficial ownership of legal entities’ -each memb state to maint central register of such entities (beneficial owners are those who own or control 25 per cent of a legal entity)
What is the work of the Financial Action Task Force
FATF
Intergovernmental orgn estd 1989 to co-ordinate intern’l fight against ML - 2001 expanded to include terrorist financing.
-Makes policies-
Law enforcement is left to local authorities which in UK is National Crime Agency
3 areas of work
-Each country to have minimum std in their criminal justice and regulatory sys - the std set by FATF in a list of 40 recomm
- evaluate indiv countries for imple of these std
- to identify trends in ML methods
FATF alos maintains a list of ‘non-co-operative countries and territories’ - wh do not have adeq AML measures
What is customer due diligence CDD
Very imp ele in final serv indus against ML to confirm identity of customers - in reln to transac considered as higher risk.
One client may be introduced to a firm by ano finanl intermediary, it is permissible to rely on identifn carried out by the other firm - imp for finanl advise, mortg etc
What are the circumstances requiring identification procedures to be carried out
New busi relationship
- opening new acc, selling new investt or policy
Occasional transaction exceeding 15000 euros
- single transac or series of linked transac
Life assurance policies
- when value of annual premiums exceeds 1000euros or single premium exceeds 2500 euros
Suspicion
- every case whr identity of applicant may be in question, reasonable measures must be taken to identify the person on whose behalf the applicant if acting
Doubts
- about proof of identity obtained
Change of circumstances
-new evidence to be obtd for existing cust when circumstances change
What is the role of FCA in AML?
FCA can take enforcement action against firms and impose sanctions for non-compliance with ML Reguln
In its SNr Mgt Sys & Control (SYSC) section of Handbook FCA req that all authorised firms
- establish proce, sys and accountabilities to minimise risk of ML
- give respon of AML sys and controls to a snr mgr
- appoint a MLRO (Money laundering reporting officer)
- have a documented risk policy in reln to ML
- give regular trg to staff reg AML rules, incl failure to comply conseq
- edu staff abt potential problems
- ensure proce are up to date and reflect govt, FATF and FCA guidance on AML
- requisition an annual report from MLRO
strengthen proce and controls to remedy deficiencies identified in report
Indi in firm
to report suspicious circums in SARs (SUspicious Activity Report)
Refrain from alerting those being investigated
What is Joint Money Laundering Steering Group?
Made up of leading UK UK trade assoc in finanl serv indus. - to promote good prac in countering ML and to give practical assis in interpreting UK ML regulns mainly by publn of guidance notes - notes describe steps for cust identity verification and confirm source of customers’ funds.
What is the role of Money Laundering Reporting Officer?
MLRO
co-ordinates firm’s AML acti based on all SARs recd by members of staff. Acc to SARs recd, makes a report to Snr Mgt team wh contains
- assessment of firm’s compliance with Jt ML Steering Gp guidance notes
- indicate how FATF findings have been used during the yr
- provide info abt reports of suspected ML incidents submitted by staff during the yr
-
AML training requirements
Firms must - make staff aware of ML and provide trg to recog and handle ML transac
Staff must be aware of law, indi respon and firm’s proce, identity of firm’s MLRO and their respon, impact to breach to AML rules
Penalties for Money-laundering offences
FCA can discipline firms and indi for breaches,
or prosecute for breaking law
Conviction carries upto 14 yrs + unlimited fine
failing to disclose or tipping off - upto 5 yrs sentech + unltd fine
Partner/Director failing to comply with ML reguln - fine, upto 2 yrs (or both) or civil penalties
