8. Osborne - Money laundering

Question 1

Money Laundering (CH8)

Define Money Laundering.

Answer 1

Moving illegally acquired cash through financial systems so that it appears to be legally acquired.

Question 2

Money Laundering (CH8)

What is Criminal Property?

Answer 2

Criminal property is property which was knowingly obtained through criminal means. It may take several forms ingluding money, security, tangible or intangible property.

Question 3

Money Laundering (CH8)

What are the 3 Stages of Money Laundering?

Answer 3

1. Placement: Dirty money is introduced into a legitimate financial system (e.g. A Bank account or an Offshore Account).

2. Layering: The money is moved around in lots transactions to conceal the original source and ownership of the funds.

3. Integration: the illegal funds are integrated back into the financial system (i.e. by investing in property and other assets).

Question 4

Money Laundering (CH8)

What are the 3 laws surrounding Money Laundering?

Answer 4

1. The Proceeds of Crime Act 2002 (POCA): this sets out the principal money laundering offence and the requirements to report suspicious transactions.

2. The Terrorism Act 2000 (TA): this sets out the principal terrorist financing offences and reporting obligations in similar terms to POCA.

3. The Money Laundering and Terrorist Financing Regulations 2020 (MLR).

Question 5

Money Laundering (CH8)

What is the punishment for Money Laundering in the UK?

Answer 5

An unlimited fine and/or a prison sentence of up to 14 years.

Question 6

Money Laundering (CH8)

How should Money Laundering be reported?

Answer 6

• The Proceeds of Crime Act 2002 (POCA) and the Terrorism Act 2000, require accountants to report any suspicion of criminal property to the National Crime Agency (NCA) in a Suspicious Activity Report (SAR).
• If the organisation has appointed a Money Laundering Reporting Officer (MLRO), the matter should be reported to the MLRO in an internal report.
• The MLRO will then decide if it needs to be reported to the NCA.
• The nominated officer should get consent from the NCA to complete the transaction.
• If it’s not possible to delay the transaction to get consent, the nominated officer should inform the NCA of this when they send their report.

Question 7

Money Laundering (CH8)

What is Terrorist Financing?

Answer 7

The provision or collection of funds with the intention or in the knowledge that they should be used in order to carry out any act of terrorism, whether or not those funds are in fact used for that purpose.

Question 8

Money Laundering (CH8)

What is the punishment for Terrorist Financing?

Answer 8

Like money laundering the maximum penalty for this offence is an unlimited fine and/or up to 14 years in prison.

Question 9

Money Laundering (CH8)

What should a Suspicious Activity Report (SAR) contain?

Answer 9

• The identity of the suspected person (if known), such as: full name, address, telephone numbers, passport details, date of birth, account details.

• The information on which the suspicion of money laundering is based.

• The whereabouts of the laundered property if it is known.
• The details of the person making the report which will normally be the MLRO or sole practitioner.

Question 10

Money Laundering (CH8)

What is Protected Disclosure?

Answer 10

Protected Disclosure - This is where any person, not just an accountant, submits a report providing a required disclosure of a suspicion of money laundering.

• This means that the person is protected against allegations of breach of confidentiality.

Question 11

Money Laundering (CH8)

What is Authorised Disclosure?

Answer 11

Authorised Disclosure - Any person, not just an accountant, who realises that they may have engaged or are about to engage in money laundering, should make an authorised disclosure to the appropriate authority.

• The disclosure should be made before the act is carried out (and they have obtained consent for the act from NCA, see required disclosure above), or as soon after the act is done with good reason for the delay.

• This may then provide them with a defence against charges of money laundering.

Question 12

Money Laundering (CH8)

When does an accountant NOT have to report Money Laundering?

Answer 12

1. When the information was not obtained in the course of the accountant’s business, for example during a social occasion.
2. When the information 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.
3. When there is a reasonable excuse for not reporting straightaway. In this case the report must be made as soon as reasonable in the circumstances.

Question 13

Money Laundering (CH8)

What are the 3 Money Laundering Offences?

Answer 13

1. Concealing - concealing or disguising criminal property.

2. Arrangement - entering into or becoming concerned with an arrangement relating to criminal property by another person.

3. Acquisition - a person may be guilty of the money laundering offence of acquisition if they acquire, use, or have possession of criminal property.

Question 14

Money Laundering (CH8)

What are the 3 Offences related to Money Laundering under the Proceeds Of Crime Act (POCA)?

Answer 14

1. Failure to disclose:
- Maximum penalty of five years imprisonment and/or a fine.

2. Prejudicing an investigation.
- Making a disclosure which is likely to prejudice the investigation.
- Falsifying, concealing or destroying documents relating to the investigation.

3. Tipping Off:
This is where an accountant who knows, or thinks they know, that a report of money laundering has been made to a MIRO, NCA, HMRC or the police, warns the person(s) suspected.
(Maximum 5-years imprisonment and or a fine).

Question 15

Money Laundering (CH8)

Registration with HMRC

Answer 15

• If Money Laundering Regulations apply to a business, it needs to be monitored by a supervisory authority.
• (e.g. an accountant can be supervised by HMRC, AAT, ACCA etc).

Question 16

Money Laundering (CH8)

What is Due Diligence?

Answer 16

Due diligence is defined as: The process of evaluating a prospective business decision by investigating relevant financial, legal, and other important information about the other party.

Question 17

Money Laundering (CH8)

What should Customer Due Diligence include?

Answer 17

CDD should include:

1. Verifying the client’s identity.
2. If the person who owns the business is the one who runs it. The accountant must ensure they know who the owners are (everyone with over 25% share).
3. What the client wants from the relationship.

• Where the accountant is unable to carry out adequate CDD he/she must decline the assignment.