6. Focus on Money Laundering

Question 1

Definition of ML

Answer 1

To
Move illegally acquired cash
Through financial systems
so
It appears to be legally acquired

Question 2

Activities relating to ML include:

Answer 2

1) Acquiring, using or posessing criminal property
2) Handling the proceeds of crime (such as theft, fraud)
3) Being knowingly involved in any way with criminal or terrorist property
4) Entering into arrangements to facilitate laundering criminal or terrorist property.
5) Investing the proceeds of crime into the acquisition of property/assets
6) Transferring criminal property

Question 3

Money Laundering Rules

legislation can be found

Answer 3

1) The PROCEEDS OF CRIME ACT 2002 (POCA)
* Sets out principle ML offense and requirement to report suspicious transactions

2) The TERRORISM ACT 2000 (TA)
* Sets out principle terrorist financing offences and reporting terms (similar to POCA)

3) The MONEY LAUNDERING REGULATIONS 2007 (the Regulations)
* These require sole traders and firms to establish procedures to detect & prevent activities relating to ML & TF

4) The MONEY LAUNDERING, TERRORIST FINANCING and TRANSFER OF FUNDS REGULATIONS 2017
* These regs set out further, more detailed rules regarding the risk-based approach that accountants must take to cusomer due diligence.
* They also seek to prevent new means of TF incl through e-money and prepaid cards

Question 4

National Crime Agency (NCA)

Answer 4

Crime fighting law enforcement agency responsible for PRO-ACTIVE operations against SERIOUS and ORGANISED crime.

MONEY LAUNDERING …also…
Class A drugs; ppl smuggling; human trafficking; major gun crime; FRAUD; computer crime

Question 5

Accountant’s duty to report ML

Answer 5

POCA & TA require accountants as individuals in the regulated sector to report any suspicion that a clien, employer or colleague is involved with criminal property to the NCA in a
SUSPICIOUS ACTIVITY REPORT (SAR)

If the org has a MLRO it should be reported in an internal report to them. The MLRO will review the info and decide if it needs reported to the NCA

Once the MLRO decides reasonable grounds they must tell the NCR at the earliest possible opportunity

The MLRO should get consent from NCA to complete the transaction. If not possible to delay the transaction to get consent must inform NCA of this when they send the report.

Question 6

TERRORIST FINANCING

14 years / unlimited fine

Answer 6

The provision or collection of funds
From legitimate or illegitimate sources
With the INTENTION or KNOWLEDGE
that they should be used to carry out terrorism

Question 7

2 circumstances a required disclosure in an internal report or a SAR MUST be made by an accountant

Answer 7

1) Accountant wishes to provide services in relation to property which is known or suspected to relate to ML or TF. MUST ASK FOR AND WAIT FOR CONSENT

2) When the accountany actually knows or suspects, or there are reasonable objective grounds for knowing or suspecting that another person is engaged in ML or TF, regardless of whether wishes to act for that erson.
(Could be client, colleague or third party)

Question 8

SAR report must contain at minimum

Answer 8

1) Identity of suspect (if known) and details.
2) Infomation on which suspicion is based
3) Whereabouts of laundered property (if known)
4) Details of person making report (normally MLRO or sole practitioner)

Question 9

Exceptions to the duty to report

Answer 9

1) Info forming the basis of the knowledge or suspicion was btained ouside the course of the accountant’s business (eg socially)
2) When the info came about in privileged circumstances, that resulted from the accountant being asked to provide legal advice, expert opinion or services in relation to legal proceedings.

Eg. The accountant found out information about possible ML while explaining the clients tax liability.
However a report would have to be made if the advice sought from the accountant was to enable the client to committ a criminal offense or to avoid detection.

3) When there is a reasonable excuse for not reporting straight away. In this case report must be made ASAP. There is currently no case law but anticipated only excuses such as duress and threats to safety would be accepted

Question 10

Authorised disclosure

Answer 10

Disclosure by a person who realises they may have engaged in ML or are about to engage in ML

Question 11

Prejudicing an investigation

Answer 11

person (not just accountant) making a disclosure that is likely to adversly affect an investigation into suspected ML

or falsifying , concealing or destroying documents relating to the investigation, or causing this to happen

The person making disclosure does not have to intend for the offense to apply but there is a defense available if they did not know what they were doing

Question 12

Customer Due Diligence (CDD) is…

Answer 12

The process of
EVALUATING a prospective business decision
by
INVESTIGATING relevant Financial, Legal and other Important information about the other party

Question 13

Customer Due Diligence (CDD) should include

Answer 13

1) VERIFYING CLIENT’s IDENTITY
by looking at documents or data from a reliable source

2) ENSURE understand who BENEFICIAL OWNERS are.
(normall someone who owns 25% or more)

3) CHECK WHAT CLIENT WANTS or PURPOSE of TRANSACTION

Question 14

Customer Due Diligence (CDD) - Outcome

Answer 14

1) If unable to carry out adequate CDD must decline assignment
2) If CDD results in suspicion must submit report to MLRO or NCA

Question 15

Customer Due Diligence (CDD) - Records must keep

The 2017 regs (ML, TF & TF Regs) placed a requirement on accountancy firms to take a RISK-BASED APPROACH to CDD..

Answer 15

Procedures must be followed to analyse the clients potential exposure to ML
AND
Firms must DOCUMENT the PROCESS that has been followed to asses risk of ML
AND
DOCUMENT the actual CDD that has been carried out

Question 16

Customer Due Diligence (CDD) - Situations must carry out CDD

The 2017 regs (ML, TF & TF Regs) sets out situations where an accountant should carry out CDD

Answer 16

1) When accountant establishes a biz replationhip.
2) When an accountant carries out an occasional transaction > 1,000 EUR
3) When an accountant suspects ML or TF even if not certain
4) Where there is doubt about a client’s Identification information (may have been carried out previous but later found to be invalid or inaccurate)
5) When circumstances of a client change or seem to be inconsistent. Eg. change in structure or ownership. Unusual transaction.

6) When regs require Enhanced CDD (ie when risk-based approach identified high risk of ML or TF)
Eg.
* Client provided false or stolen identification documents when a biz relationship is established.
* A biz relationship or occasional transaction with a person established in a High-Risk country
* Where a client is a Politically exposed person (PEP) or a family member or known close associate (PEPs include MPs and heads of state)
* Where the transaction is complex and unusually large, or there is an unusual pattern of transactions