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SQE 1 > 4. Money Laundering > Flashcards

4. Money Laundering Flashcards

1
Q

What are the three phases of money laundering?

A
  1. Placement
  2. Layering
  3. Integration
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2
Q

Can passive possession of criminal property be money laundering?

A

Yes

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3
Q

What happens during placement?

A

Cash generated from crime is placed in the financial system

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4
Q

What does layering involve?

A

Obscuring the origins of the proceeds of crime by passing them through complex transactions

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5
Q

What is integration and what are some examples of how it can be achieved?

A

Making the funds appear to be legitimate.

Investing funds in businesses or other forms of investment.

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6
Q

At what stages is a solicitor most likely to become involved in money laundering?

A

Layering or integration stages

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7
Q

To whom does the Proceeds of Crime Act generally apply?

A

Everyone

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8
Q

However, to whom are certain offences, e.g. failure to report and tipping off under POCA reserved for?

A

Persons engaged in activities in the regulated sector

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9
Q

What is the presumption of a predicate offence in the context of money laundering?

A

Money laundering offences presume that a criminal offence has occurred in order to generate the criminal property being laundered

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10
Q

Is a conviction of a predicate offence required for a prosecution for a money laundering offence?

A

No

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11
Q

Are there inchoate offences related to money laundering offences?

A

Yes. It is an offence to conspire or attempt to launder, and to counsel, aid, abet, or procure money laundering.

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12
Q

What is the maximum penalty for the principal money laundering offences?

A

14 years in prison and/or unlimited fine

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13
Q

What are the three direct money laundering offences?

A
  1. Concealing
  2. Arrangement
  3. Acquisition, use, or possession
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14
Q

When does a person commit the offence of concealing?

A

When they conceal, disguise, convert, or transfer criminal property or remove it from the UK

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15
Q

What is criminal property?

A

Any property derived from criminal conduct, including money, real and personal property, and intangible property whether in the UK or not

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16
Q

What is the extent to which concealing or disguising applies?

A

Concealing or disguising the property’s nature, but also its source, location, or ownership

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17
Q

What is the mental state required to commit the offence of concealing (and arrangement and acquisition)?

A

Subjectively know or suspect that the property represents a benefit from criminal conduct

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18
Q

What are the three timings which determine the authorised disclosure defence available to a charge of concealing (and arrangement and acquisition)?

A
  1. Before concealing
  2. During concealing
  3. After concealing
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19
Q

What is the authorised disclosure defence if disclosure is made before concealing?

A

It is a full defence if a person makes an authorised disclosure of the act to police, customs officer, or other nominated officer within the organisation, before the act

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20
Q

What is the authorised disclosure defence if disclosure is made during concealing?

A

It is a full defence during the act if:

  1. Person had no relevant knowledge or suspicion when the act started
  2. Disclosure was made as soon as practicable after knowledge or suspicion; and
  3. Disclosure was made on the person’s own initiative (not prompted by imminent discovery/encouragement of another)
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21
Q

What is required to avail of the authorised disclosure defence if disclosure is made after concealing?

A

There must have been good reason why a disclosure was not made

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22
Q

Which way is the conflict between disclosure as a defence to concealing and the duty of confidentiality resolved?

A

Disclosure is an exception to the general duty of confidentiality

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23
Q

In what instance can a solicitor be excused from disclosing in the context of concealing?

A

Where legal professional privilege applies

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24
Q

In what situation could a solicitor not rely on legal professional privilege in the context of concealing?

A

Where the solicitor knows the transaction they are working on is a money laundering offence, or they suspect it and their suspicions are true.

Therefore, the offence can be committed by suspecting or knowing, but where LPP applies, the solicitor must know in order to lose the privilege, or suspect it and be right in the facts.

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25
Q

In the context of concealing, what if a solicitor merely suspects the transaction they are working on is a money laundering offence?

A

Although suspecting is enough to satisfy the mens rea, the ability to rely on the privilege as a defence is only lost when they know, or their suspicions are found to be true

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26
Q

When does a person commit the offence of arrangement?

A

When they know or suspect what they are doing facilitates the acquisition, retention, use, or control of criminal property by or on behalf of another person

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27
Q

Conduct in what context is exempt from the offence of arrangement?

A

The offence does not cover or affect the ordinary conduct of litigation, from issue to disposal of final judgment

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28
Q

What is one exception to the litigation exemption to arrangement?

A

Sham litigation for the purpose of money laundering would be an offence

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29
Q

What are the defences to arrangement?

A

The same disclosure defence as concealing

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30
Q

When does a person commit the offence of acquisition?

A

When they acquire, use, or possess criminal property

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31
Q

In the context of acquisition, what is possession?

A

Physical custody

32
Q

What are the defences to acquisition?

A

The same disclosure defence as concealing and arrangement, plus one additional defence

33
Q

What is the additional defence to acquisition?

A

If the criminal property was acquired, used, or possessed for adequate consideration, and they did not know or suspect it was criminal property

34
Q

What is an instance in which the consideration defence to acquisition would not apply?

A

When the accused knows or suspects that the consideration may help another to carry out criminal conduct

35
Q

What are the three indirect money laundering offences?

A
  1. Failure to report
  2. Tipping off
  3. Prejudicing an investigation
36
Q

When does a person commit the offence of failure to report?

A

When they suspect, know about, or should have suspected or known about money laundering and/or terrorist financing and do not make a suspicious activity report

37
Q

What activities would be a flag for money laundering?

A
  1. Depositing money with solicitor and then requesting return of funds
  2. Transfers between bank accounts, in multiple names, multiple banks, and multiple countries
  3. Overpayment of tax
38
Q

What is the scope of information which must be reported?

A

Anything coming the the solicitor in the course of business, and not just relating to their clients/matters

39
Q

Who are some of the parties that could give rise to the requirement to file a suspicious activity report?

A
  1. Potential clients
  2. Associates
  3. Counterparties of clients
  4. Acquisition targets
  5. Employees of businesses solicitor is dealing with
40
Q

Within what timescale must the solicitor make their report, and what is one acceptable reason for delaying?

A

As soon as practicable. Delay may be excused if the reason is legal advice is being sought, provided action is still prompt.

41
Q

What are some available defences to failure to report?

A
  1. The information falls within a privilege not excluded by AML laws
  2. Information came to solicitor from a client (a) in connection with giving of legal advice to the client or (b) seeking legal advice
42
Q

What is the lack of training defence to failure to report?

A

Employees in firms who have no knowledge or suspicion of money laundering, even though they should, have a defence if they have not received training

43
Q

Who is liable for failure to train staff?

A

The firm’s partners are liable for breach of the Regulations

44
Q

What offence is lack of training not a defence to?

A

Failing to report activity related to terrorist financing

45
Q

What are the two ways the offence of tipping off can be committed?

A
  1. Disclosing to a third person that a suspicious activity report has been made if that disclosure might prejudice any investigations
  2. Disclosing an investigation to a third person
46
Q

Does tipping off have to be in writing and direct?

A

Tipping off can be in writing, oral, or by conduct (e.g. waiting too long or wanting to delay and making a person suspicious), and it can be direct or indirect

47
Q

What standard practice will not amount to tipping off?

A

Including a paragraph about obligations under money laundering legislation in standard terms of engagement

48
Q

What are the four defences to tipping off?

A
  1. Disclosures within an undertaking or group
  2. Disclosures between lawyers
  3. Disclosures to supervisory bodies
  4. Disclosures by professional advisors to the suspect client for offence abatement
49
Q

What is the defence of disclosure within an undertaking or group?

A

It is not tipping off to disclose to an employee, colleague, officer, or partner in the same undertaking/group that a SAR has been made

50
Q

What two criteria must be satisfied for disclosure to a different undertaking/group to not be tipping off?

A
  1. Entities share common owners, management, or control, and
  2. Carry on business in EEA or country with money laundering laws equivalent to the EU
51
Q

What four elements must be satisfied for disclosure between lawyers to not be tipping off?

A
  1. Disclosure made to legal professional in EEA or country with money laundering laws equivalent to the EU
  2. Disclosure relates to client/former client or both parties, or a transaction or provision of services involving both
  3. Disclosure is made for purposes of preventing a money laundering offence, and
  4. Both parties have equivalent professional duties of confidentiality and protection of personal data
52
Q

When is disclosure to a supervisory body not tipping off?

A

When the disclosure is for the purpose of prevention, investigation, or prosecution of a criminal offence, an investigation under POCA, or enforcement of any court order under POCA

53
Q

What is disclosure for offence abatement defence to tipping off?

A

When the disclosure to the client is for the purpose of dissuading the client from engaging in conduct amounting to an offence

54
Q

What are the two ways in which a person can commit the offence of prejudicing an investigation?

A

Know or suspect that a money laundering, confiscation, or civil recovery investigation is being or is about to be conducted and either

  1. Make a disclosure to any person that is likely to prejudice the investigation, or
  2. Falsifies, conceals, or destroys documents relevant to the investigation, or causes that to happen
55
Q

For the purposes of prejudicing an investigation, what are three elements that can negate the offence for the defendant?

A
  1. Did not know/suspect the disclosure would be prejudicial
  2. Did not know/suspect the documents were relevant
  3. Did not intend to conceal facts from person carrying out investigation
56
Q

What is the in connection with legal proceedings defence to prejudicing an investigation?

A

It is a defence that disclosure was made by a professional advisor in connection with legal proceedings or contemplated legal proceedings, provided disclosure is not made to further a criminal purpose

57
Q

Who is exempt from having an MLRO?

A

An individual who provides regulated services but does not employ any people or act in association with anyone else

58
Q

What level of seniority must an MLRO be?

A

Sufficient seniority to make decisions on reporting which can impact a business’s relations with its clients and its exposure to sanctions, and to have access to all the business’s client files

59
Q

What information must the MLRO report?

A

Information or other matters leading to knowledge or suspicion (including reasonable grounds for such) must be disclosed

60
Q

Must the MLRO have sole discretion to report?

A

Yes, this must not be subject to the consent of anyone else

61
Q

Who has the responsibility of reporting to the MLRO?

A

The individual, always

62
Q

What is best practice when a MLRO is away and there is no replacement during their absence?

A

To self report any suspicions directly to the NCA as harm might arise from the delay

63
Q

After a SAR is submitted, what time scale does NCA have to review?

A

7 days

64
Q

What is the situation if NCA has not responded after 7 days?

A

Deemed consent is given

65
Q

During the 7 day notice period, must all work on the matter cease?

A

No, other activities such as searches or writing correspondence can take place, but the main act subject to the SAR must not

66
Q

What happens if NCA refuses consent within the 7 day window?

A

There is a 31 day moratorium during which the act must not take place, but auxiliary activities can just like within the 7 day period

67
Q

What happens after 31 days?

A

The MLRO can then give consent for the act

68
Q

When events would trigger a requirement to carry out customer due diligence?

A
  1. Establish a business relationship
  2. Carry out an occasional transaction
  3. Suspect money laundering/terrorist financing
  4. Doubt the veracity or adequacy or documents or information previously obtained
69
Q

When is a solicitor-client relationship considered to be a business relationship?

A

When, at the time it is established, it is expected to have an element of duration

70
Q

What is an occasional transaction?

A

Transaction worth €15,000 or more, carried out other than as part of a business relationship

71
Q

What must a solicitor do if customer due diligence cannot be completed?

A
  1. Refrain from any of the activities triggering the requirement
  2. Terminate any existing business relationship
  3. Consider making a disclosure to NCA
72
Q

What is the as soon as practicable exception to the immediacy of the customer due diligence requirement?

A

Verification need not be completed right away and may be completed as soon as practicable if:

  1. It is necessary not to interrupt the normal conduct of business, and
  2. There is little risk of money laundering/terrorist financing
73
Q

In what situation does the as soon as practicable exception not apply?

A

If it is an occasional transaction

74
Q

What are a solicitor’s customer due diligence obligations when dealing with a trust?

A

They must verify the identity of any beneficiaries before a payment to them or before they exercise their vested rights

75
Q

What should a solicitor not do until full verification is completed?

A
  1. Undertake substantive work
  2. Permit funds to be deposited in the firm’s client account
  3. Permit property to be transferred
  4. Permit final agreements to be signed
76
Q

What is the requirement for training under money laundering/terrorist financing laws?

A

Relevant employees are required to be made aware of law related to money laundering /terrorist financing

SQE 1 (149 decks)

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