3. Money Laundering and the Proceeds of Crime Act

Question 1

What are the required nominated officers in a law firm?

Answer 1

Money Laundering Reporting Officer
Money Laundering Compliance Officer (if appropriate depending on size and nature of firm)

Question 2

Who can be an MLRO?

Answer 2

A senior member of the firm

Question 3

What value amounts to a transfer of funds which would give rise to customer due diligence requirements?

Answer 3

1,000 EUR

Question 4

Over what value amounts to an occasional transaction which would give rise to customer due diligence requirements?

Answer 4

15,000 EUR or more

Question 5

When must verification of a client’s identify be obtained?

Answer 5

As soon as possible after first contact

Question 6

In what events may verification of a client’s identity be obtained during the establishment of a business relationship?

Answer 6

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

Question 7

What is the basis on which a solicitor is obliged to verify identity of clients under standard due diligence?

Answer 7

On documents / information in either case obtained from a reliable source which is independent of the person whose identity is being verified

Question 8

What is a standard identifier for a natural person?

Answer 8

Passport / driving licence

Question 9

What is a standard identifier for a partnership?

Answer 9

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

Question 10

What are standard identifiers for companies?

Answer 10

Name
Company number
Registered offer / principal place of business
Identify law to which is it subject / constitution / other governing documents

Question 11

If simplified due diligence does not apply, what else might be necessary to identify for partnership / company?

Answer 11

Beneficial owners

Question 12

What constitutes a beneficial owner of a company?

Answer 12

 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

Question 13

What constitutes a beneficial owner of a partnership?

Answer 13

 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

Question 14

When is simplified due diligence permitted?

Answer 14

When firm determines through individual risk assessment that the business relationship or transaction present low risk of money laundering or terrorist financing

Question 15

When is enhanced due diligence required?

Answer 15

When there is something about arrangement or transaction which creates high risk of money laundering

Question 16

What are the situations in which enhanced due diligence must be carried out?

Answer 16

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

Question 17

What is a PEP?

Answer 17

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

Question 18

What ongoing obligations does a solicitor have if enhanced due diligence has been required?

Answer 18

Monitoring of business relationships to ensure transactions are consistent with solicitor’s knowledge of client

Question 19

How long must firms maintain records following end of business relationship?

Answer 19

5 years

Question 20

What is the offence of Arranging under Section 328 of the POCA 2002?

Answer 20

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

Question 21

What is the threshold for know or suspect for Arranging?

Answer 21

Suspicion - subjective test with low bar

Question 22

What type of procedure if excluded from Arranging?

Answer 22

Litigation proceedings

Question 23

What is the authorised disclosure defence?

Answer 23

Disclosure by person who but for the disclosure would be committing an offence

Disclosure to firm’s nominated officer as soon as practicably possible

Question 24

If the authorised disclosure is made prior to the prohibited act taking place, what is the process?

Answer 24

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

Question 25

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?

Answer 25

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

Question 26

What requirements must be met for the defence of authorised disclosure to apply, if the solicitor discloses after the prohibited act?

Answer 26

Disclosure made as soon as is practicable

Solicitor has good reason for failure to disclosure before completion

Disclosure made on solicitor’s own initiative

Question 27

What is the overseas defence?

Answer 27

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

Question 28

What is the offence of Acquisition under Section 329 of the POCA 2002?

Answer 28

Typically used to prosecute those who had no involvement with original crim but enjoyed benefit

Question 29

Which defences are available for s 329 Acquisition?

Answer 29

Authorised disclosure
Overseas defence
Adequate consideration defence

Question 30

What is the defence of adequate consideration?

Answer 30

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

Question 31

What is the maximum sentence for the s 329 offence of acquisition?

Answer 31

14 years’ imprisonment

Question 32

What is the offence of Concealing under Section 327 of the POCA 2002?

Answer 32

To conceal, disguise, convert or transfer criminal property or remove it from England Wales Scotland or Northern Ireland

Question 33

What is the offence of Failure to disclose under Section 330 of the POCA 2002?

Answer 33

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

Question 34

What is the applicable test for the s 330 failure to disclose offence?

Answer 34

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

Question 35

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?

Answer 35

No

Question 36

What is the maximum sentence for the s 330 offence of failure to disclose?

Answer 36

5 years’ imprisonment

Question 37

What is the difference between the s 330 and s 331 offences of failing to disclose?

Answer 37

S 331 is applicable to nominated officer’s failure to disclose

Question 38

What is the offence of tipping off under Section 333A of the POCA 2002?

Answer 38

Alerting someone suspected of money laundering (or an associate) to the fact that an investigation has started or is anticipated

Question 39

What are the two aspects of the s 333A offence of tipping off?

Answer 39

Disclosing a disclosure

Disclosure an investigation

Question 40

What are the available defences for s 33A tipping off?

Answer 40

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

Question 41

What is the penalty for the s 333A offence of tipping off?

Answer 41

Unlimited fine and/ or maximum prison sentence of two years

Question 42

How does the offence of prejudicing an investigation under s 342 differ to the offence of tipping off?

Answer 42

It applies to non-regulated individuals

Question 43

What could be a warning sign of money laundering or terrorist financing in relation to the client?

Answer 43

 Secretive, obstructive or evasive, avoids personal contact
 Refuses to provide information or documentation
 Has criminal associations

Question 44

What could be a warning sign of money laundering or terrorist financing in relation to the funding?

Answer 44

 Unexplained large cash payments
 Payments from a third party
 Loans from non-institutional lenders
 Use of multiple / foreign accounts

Question 45

What could be a warning sign of money laundering or terrorist financing in relation to the transaction?

Answer 45

 Loss-making
 Instructions are repetitive (without reason)
 Unexplained urgency
 No obvious commercial purpose
 Litigation which is settled too easily / quickly

Question 46

What could be a warning sign of money laundering or terrorist financing in relation to the instructions?

Answer 46

 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

Question 47

What could be a warning sign of money laundering or terrorist financing regarding geographical concerns?

Answer 47

 Unexplained movement of monies between other jurisdictions
 Appear to be / are connections with suspect jurisdictions