3. Money Laundering and the Proceeds of Crime Act Flashcards
What are the required nominated officers in a law firm?
Money Laundering Reporting Officer
Money Laundering Compliance Officer (if appropriate depending on size and nature of firm)
Who can be an MLRO?
A senior member of the firm
What value amounts to a transfer of funds which would give rise to customer due diligence requirements?
1,000 EUR
Over what value amounts to an occasional transaction which would give rise to customer due diligence requirements?
15,000 EUR or more
When must verification of a client’s identify be obtained?
As soon as possible after first contact
In what events may verification of a client’s identity be obtained during the establishment of a business relationship?
There is little risk of money laundering / terrorist financing
Necessary to not interrupt the normal conduct of business
Identify is verified as soon as practicable after contact is first established
What is the basis on which a solicitor is obliged to verify identity of clients under standard due diligence?
On documents / information in either case obtained from a reliable source which is independent of the person whose identity is being verified
What is a standard identifier for a natural person?
Passport / driving licence
What is a standard identifier for a partnership?
Information on individual partners
If a well-known, reputable organisation with long-standing history, it is sufficient to obtain name, registered or trading address and nature of business
What are standard identifiers for companies?
Name
Company number
Registered offer / principal place of business
Identify law to which is it subject / constitution / other governing documents
If simplified due diligence does not apply, what else might be necessary to identify for partnership / company?
Beneficial owners
What constitutes a beneficial owner of a company?
Any individual who exercises ultimate control over the management of the body corporate
Any individual who ultimately owns or controls more than 25% of shares / voting rights
Individual who controls the body corporate
What constitutes a beneficial owner of a partnership?
Ultimately is entitled to or controls more than 25% share of the capital or profits of the partnership, or more than 25% of the voting rights in the partnership, or
Otherwise exercises control over the management of the partnership
When is simplified due diligence permitted?
When firm determines through individual risk assessment that the business relationship or transaction present low risk of money laundering or terrorist financing
When is enhanced due diligence required?
When there is something about arrangement or transaction which creates high risk of money laundering
What are the situations in which enhanced due diligence must be carried out?
o Case identified as one where there is a high risk of money laundering or terrorist financing in the firm’s risk assessment or in the information made available by the SRA and Law Society
o Client or the counter-part to the transaction is in a high-risk third country (as defined in Regulations)
o Client has provided false or stolen identification documentation or information and solicitor has decided to continue dealing
o Client is a politically exposed person (PEP), or a family member / known close associate of a PEP
o Transaction is complex or unusually large, there is an unusual pattern of transactions, or transactions have no apparent economic or legal purpose
o Any other relevant situation
What is a PEP?
Politically exposed person - individual entrusted with prominent public functions, including Heads of State, MPs, members of supreme courts, ambassadors, members of the administrative, management or supervisory bodies of State-owned enterprises
What ongoing obligations does a solicitor have if enhanced due diligence has been required?
Monitoring of business relationships to ensure transactions are consistent with solicitor’s knowledge of client
How long must firms maintain records following end of business relationship?
5 years
What is the offence of Arranging under Section 328 of the POCA 2002?
Committed if someone enters into or becomes concerned in an arrangement which they know or suspect facilitates the acquisition, retention, use or control of criminal property by or on someone else’s behalf
What is the threshold for know or suspect for Arranging?
Suspicion - subjective test with low bar
What type of procedure if excluded from Arranging?
Litigation proceedings
What is the authorised disclosure defence?
Disclosure by person who but for the disclosure would be committing an offence
Disclosure to firm’s nominated officer as soon as practicably possible
If the authorised disclosure is made prior to the prohibited act taking place, what is the process?
Nominated officer makes suspicious activity report to NCA
Consent to continue cannot be given by nominated officer until consent received by NCA OR no response within 7 working days OR following refusal of consent, it is then granted within 31 days following refusal or period of 31 days has expired from date of refusal
If the authorised disclosure is made during to the prohibited act taking place, what must be satisfied by solicitor in order for defence to work?
Disclosure made while prohibited act is ongoing
AND
Reported as soon as solicitor realised
AND
Disclosure made as soon as practicable after solicitor first knows or suspects that the property constituted or represents a person’s benefit from criminal conduct, and disclosure is made on solicitor’s own initiative
What requirements must be met for the defence of authorised disclosure to apply, if the solicitor discloses after the prohibited act?
Disclosure made as soon as is practicable
Solicitor has good reason for failure to disclosure before completion
Disclosure made on solicitor’s own initiative
What is the overseas defence?
Where the individual knew / believed that the criminal conduct occurred abroad and the conduct in question was lawful in the country where it took place
What is the offence of Acquisition under Section 329 of the POCA 2002?
Typically used to prosecute those who had no involvement with original crim but enjoyed benefit
Which defences are available for s 329 Acquisition?
Authorised disclosure
Overseas defence
Adequate consideration defence
What is the defence of adequate consideration?
o Offence will not be committed if there was adequate consideration for acquiring, using and possessing the criminal property, unless the individual knew or suspected that those goods or services might help to carry out criminal conduct
o Defence applies where professional advisers, such as solicitors, receive money for or on account of costs, including disbursements
o Fees charged must be reasonable and the defence is not available if the value of the work is significantly less than the money received
What is the maximum sentence for the s 329 offence of acquisition?
14 years’ imprisonment
What is the offence of Concealing under Section 327 of the POCA 2002?
To conceal, disguise, convert or transfer criminal property or remove it from England Wales Scotland or Northern Ireland
What is the offence of Failure to disclose under Section 330 of the POCA 2002?
Person commits and offence if:
o Knows / suspects / has reasonable grounds to suspect money laundering
o Information comes to them in course of a business in the regulated sector
o Information may assist in identifying the money launderer or the location of any laundered property, and
o They do not disclose as soon as is practicable
What is the applicable test for the s 330 failure to disclose offence?
Objective test - solicitor will commit this offence even where the solicitor genuinely did not know or suspect that a person was engaged in money laundering, i.e. courts will consider whether they should have known or suspected
Is the s 330 offence of failure to disclose committed where solicitors intended to make a disclosure but has a reasonable excuse for not doing so?
No
What is the maximum sentence for the s 330 offence of failure to disclose?
5 years’ imprisonment
What is the difference between the s 330 and s 331 offences of failing to disclose?
S 331 is applicable to nominated officer’s failure to disclose
What is the offence of tipping off under Section 333A of the POCA 2002?
Alerting someone suspected of money laundering (or an associate) to the fact that an investigation has started or is anticipated
What are the two aspects of the s 333A offence of tipping off?
Disclosing a disclosure
Disclosure an investigation
What are the available defences for s 33A tipping off?
o Person who made the disclosure did not know or suspect that the disclosure would prejudice an investigation into money laundering
o Disclosure made by an adviser to their client for the purposes of dissuading the client from engaging in the alleged money laundering
What is the penalty for the s 333A offence of tipping off?
Unlimited fine and/ or maximum prison sentence of two years
How does the offence of prejudicing an investigation under s 342 differ to the offence of tipping off?
It applies to non-regulated individuals
What could be a warning sign of money laundering or terrorist financing in relation to the client?
Secretive, obstructive or evasive, avoids personal contact
Refuses to provide information or documentation
Has criminal associations
What could be a warning sign of money laundering or terrorist financing in relation to the funding?
Unexplained large cash payments
Payments from a third party
Loans from non-institutional lenders
Use of multiple / foreign accounts
What could be a warning sign of money laundering or terrorist financing in relation to the transaction?
Loss-making
Instructions are repetitive (without reason)
Unexplained urgency
No obvious commercial purpose
Litigation which is settled too easily / quickly
What could be a warning sign of money laundering or terrorist financing in relation to the instructions?
Instructions outside yours / your firm’s area of expertise or normal business
Client is not local to your firm and there is no explanation as to why the firm has been chosen
Client is willing to pay high fees
Client appears unconcerned about the transaction
What could be a warning sign of money laundering or terrorist financing regarding geographical concerns?
Unexplained movement of monies between other jurisdictions
Appear to be / are connections with suspect jurisdictions
