Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

SQE2 > 6a. Money laundering and financial services > Flashcards

6a. Money laundering and financial services Flashcards

1
Q

Money laundering

What are the three phases of money laundering?

A
  1. Placement
  2. Layering
  3. Integration
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Money laundering

What happens during:
(1) placement
(2) layering, and
(3) integration?

A
  1. Cash generated from crime is placed in the financial system
  2. Origins of the proceeds of crime are obscured by passing them through complex transactions
  3. Funds are made to appear legitimate, by investing in businesses, etc.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Money laundering

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

Can passive possession of criminal property be money laundering?

A

Layering or integration stages

Yes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Money laundering

Although the Proceeds of Crime Act generally applies to all people, to whom are certain offences, e.g. failure to report and tipping off reserved for?

A

Persons engaged in activities in the regulated sector

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Money laundering

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

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

A

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

No

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Money laundering

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.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Money laundering

What are the three direct money laundering offences?

A
  1. Concealing
  2. Arrangement
  3. Acquisition, use, or possession
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Money laundering

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

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Money laundering

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

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Money laundering

What is the extent to which concealing or disguising applies?

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

A

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

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

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Money laundering

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
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Money laundering

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

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Money laundering

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)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Money laundering

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

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Money laundering

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

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

A

Disclosure is an exception to the general duty of confidentiality

Where legal professional privilege applies

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Money laundering

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.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Money laundering

When does a person commit the offence of arrangement?

What are the defences to 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

The same disclosure defence as concealing

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Money laundering

When does a person commit the offence of acquisition?

A

When they acquire, use, or possess criminal property

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Money laundering

In the context of acquisition, what is possession?

What are the defences to acquisition?

A

Physical custody

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

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Money laundering

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

Deefence not available if the accused knows or suspects that the consideration may help another to carry out criminal conduct

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Money laundering

What are the three indirect money laundering offences?

A
  1. Failure to report
  2. Tipping off
  3. Prejudicing an investigation
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Money laundering

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

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Money laundering

What is the scope of information which must be reported?

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

A

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

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

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Money laundering

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
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
# Money laundering What is the lack of training defence to failure to report? ## Footnote Who is liable for failure to train staff?
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** ## Footnote The firm's partners are liable for breach of the Regulations
26
# Money laundering What are the two ways the offence of **tipping off** can be committed? ## Footnote Does tipping off have to be in writing and direct?
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 ## Footnote 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
27
# Money laundering What are the four defences to tipping off?
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
28
# Money laundering What is the defence of disclosure within an undertaking or group?
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
29
# Money laundering What two criteria must be satisfied for disclosure to a **different** undertaking/group to not be tipping off?
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
30
# Money laundering What four elements must be satisfied for disclosure between lawyers to not be tipping off?
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 of 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
31
# Money laundering When is disclosure to a supervisory body not tipping off?
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
32
# Money laundering What is disclosure for offence abatement defence to tipping off?
When the disclosure to the client is for the purpose of dissuading the client from engaging in conduct amounting to an offence
33
# Money laundering What are the two ways in which a person can commit the offence of prejudicing an investigation?
*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
34
# Money laundering For the purposes of prejudicing an investigation, what are three elements that can negate the offence for the defendant?
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
35
# Money laundering Who is exempt from having an MLRO?
An individual who provides regulated services but does not employ any people or act in association with anyone else
36
# Money laundering What level of seniority must an MLRO be?
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
37
# Money laundering What information must the MLRO report? ## Footnote Must the MLRO have sole discretion to report?
Information or other matters leading to knowledge or suspicion (including reasonable grounds for such) must be disclosed ## Footnote Yes, this must not be subject to the consent of anyone else
38
# Money laundering Who has the responsibility of reporting to the MLRO? ## Footnote What is best practice when a MLRO is away and there is no replacement during their absence?
The individual, always ## Footnote To self report any suspicions directly to the NCA as harm might arise from the delay
39
# Money laundering After a SAR is submitted, what time scale does NCA have to review? ## Footnote What is the situation if NCA has not responded after this time?
7 days ## Footnote Deemed consent is given
40
# Money laundering During the 7 day notice period, must all work on the matter cease?
No, other activities such as searches or writing correspondence can take place, but the main act subject to the SAR must not
41
# Money laundering What happens if NCA refuses consent within the 7 day window?
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 ## Footnote The MLRO can give consent for the act after the 31 days has passed, if the NCA has not responded
42
# Money laundering When events would trigger a requirement to carry out customer due diligence?
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
43
# Money laundering When is a solicitor-client relationship considered to be a business relationship?
When, at the time it is established, it is expected to have an element of duration
44
# Money laundering What is an occasional transaction?
Transaction worth €15,000 or more, carried out other than as part of a business relationship
45
# Money laundering What must a solicitor do if customer due diligence cannot be completed?
1. Refrain from any of the activities triggering the requirement 2. Terminate any existing business relationship 3. Consider making a disclosure to NCA
46
# Money laundering What are a solicitor's customer due diligence obligations when dealing with a trust?
They must verify the identity of any beneficiaries before a payment to them or before they exercise their vested rights
47
# Money laundering What should a solicitor not do until full verification is completed?
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
48
# Financial services What is the **general prohibition** under the Financial Services and Markets Act 2000?
No person may carry on a regulated activity in the UK unless they are **authorised** or **exempt from authorisation**
49
# Financial services What is a **regulated activity**?
A **specified activity** in relation to a **specified investment** carried out **in the course of business** to which **no exclusions** apply ## Footnote Must be in the course of **business**
50
# Financial services What are the **five specified activities** which are regulated?
1. Advising 2. Dealing as Agent 3. Arranging 4. Managing 5. Safeguarding ## Footnote ADAMS
51
# Financial services What is advising?
Giving advice to an investor on the merits of buying, selling, subscribing for, or underwriting a particular investment
52
# Financial services What is dealing as an agent?
Actually buying, selling, subscribing for, or underwriting a particular investment for another person
53
# Financial services What is arranging?
Making arrangements for another person to buy, sell, subscribe for, or underwrite a particular investment
54
# Financial services What is managing?
Managing assets belonging to another person in circumstances which involve the exercise of **discretion**
55
# Financial services What is safeguarding?
Protecting and administering assets belonging to another person
56
# Financial services What are the **six specified investments** most relevant to a solicitor which are regulated? ## Footnote What are two things which are **not** specified investments?
1. Insurance contracts 2. Shares/securities 3. Debentures 4. Mortgage contracts 5. Pension schemes 6. Funeral plans ## Footnote 1. *Interests* in land; 2. National savings products, e.g. Premium Bonds
57
# Financial services What is the difference between an **exemption** and an **exclusion**?
An exemption is from the requirement to be authorised under the general prohibition, so all conduct would be excusable under this. An exclusion goes to whether or not the conduct is a regulated activity and therefore caught by the general prohibition, but is not available in all circumstances.
58
# Financial services What is the Designated Professional Bodies *exemption* which means a regulated activity would not violate the general prohibition at all?
If a solicitor provides a regulated activity **incidentally** to the provision of legal advice and ***does not receive compensation*** for this from anyone else without *accounting to the client* for it, it is exempted
59
# Financial services How is whether an activity is *incidental* determined for the purposes of the Designated Professional Bodies exemption?
By considering whether the activity is incidental: 1. To the work the firm does as a whole, *and* 2. To the client's particular matter
60
# Financial services What are some activities in the SRA Financial Services (Scope) Rules to which the Designated Professional Bodies exemption does not apply?
1. Recommending a client get rid of any rights under a **personal pension scheme** 2. The firm entering into a regulated **credit agreement as lender** (except in relation to the firm's fees)
61
# Financial services In order to provide incidental financial services under the Designated Professional Bodies exemption, what two special rules does the SRA impose on firms?
Firms must: 1. Let clients know at the outset that the firm is regulated by the SRA and not the FCA, and 2. Confirm that the client is coming to the firm for this incidental service and has not sought/relied upon any advice from the firm in relation to the transaction
62
# Financial services What are four **exclusions** that will render a specified activity in a specified investment **not** a regulated activity?
1. Takeover exclusion 2. Acting as trustee, nominee, or personal representative 3. Introducing or acting *through* an authorised person 4. The necessary exclusion
63
# Financial services What is the **takeover** exclusion that will render a specified activity in a specified investment **not** a regulated activity?
A solicitor can deal as agent, arrange, or advise with respect to a client who is buying/selling 50% or more of the voting shares of a company, or when the object of the transaction is *taking control* of the company
64
# Financial services What is the **introducing/acting through** exclusion that will render a specified activity in a specified investment **not** a regulated activity?
A solicitor may arrange/act as an agent with respect to specified investments if the client receives advice from an authorised person and the solicitor is merely assisting the client in acting on this advice
65
# Financial services In what two circumstances is the introducing/acting through exclusion that would render a specified activity in a specified investment not a regulated activity **not available**?
1. Where the specified investment is an **insurance contract** 2. Where the solicitor received **payment/commission** from the authorised person/any source other than the client
66
# Financial services What is the **necessary** exclusion that will render a specified activity in a specified investment **not** a regulated activity?
It is not a violation of the general prohibition to carry on an activity (other than managing) if the activity is reasonably regarded as a necessary part of providing legal services
67
# Financial services In what three circumstances is the necessary exclusion that would render a specified activity in a specified investment not a regulated activity **not available**?
1. Where the activity is **managing** 2. Where the activity relates to **insurance policies** 3. Where the activity is billed separately from the main legal advice
68
# Financial services Even though they are very similar, what is the key advantage of the **Designated Professional Bodies *exemption*** over the **necessary *exclusion***?
The Designated Professional Bodies exemption is available for managing, and for activities related to insurance policies, but the necessary exclusion cannot be used in these circumstances. *DPB will always be a better answer choice, but note the instances when it is not available.*

SQE2 (15 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions