AML legislation Flashcards
Purpose of AML legislation
Criminalises handling of proceeds of crime to prevent funds entering financial system / ensure detected & confiscated
AML frameworks developed by influential bodies & initiatives / offshore implement similar standards
What does AML legislation involve
1) PRIMARY LEGISLATION
- Proceeds of crime act 2002
- 3 offences of ML
A) concealing offence
*if person disguise, convert, transfer criminal property in & out of UK
- conceal its nature, location, source, ownership or any rights respect to it
- POCA sets property as constitutes benefit from criminal conduct & alleged offence know or suspects property used for purposes
B) arranging offence
*person enters arrangement which know/ suspect involves proceeds / widely drafted - captures provision of services (trustee)
C) acquisition / possession offence
*person acquires or has possession of criminal property
Outline the penalties & defences for primary legislation
Penalties
- UK 14 years prison
- fines / or both
Defences
-make authorised disclosure to nominated officer before carrying out Act / appropriate consent from serious organised crime agency
- intended to disclose but have reasonable excuse not to
- defence against negligence follow policies & procedures
Outline failure to report offence
Failure to report offence / 3 conditions satisfied
1) know/ suspect on reasonable grounds to know someone engaged in ML
2) info which suspicion came during course of business
3) didn’t make disclosure as soon as practical after suspicion
* 5years jail & unlimited fines
Outline the tipping off offence
Person knows SAR made discloses info to another / likely to prejudice investigation conducted
Defence - person didn’t know disclosure would have impact
What are SARs
Direct obligations on employees to make SAR if suspect ML / STR
Details of persons involved & reason for suspicion
MLRO analyses report & decides whether activity does or doesn’t give rise to suspicion
External report to FIU / SOCA give consent to proceed with transaction = provide defence
Outline what AML legislation includes
2) SECONDARY LEGISLATION
- ML Regulations & orders contain procedural requirements to comply with
- applies to relevant persons = legal persons, institutions, SP
* ML Regulations 2007
+CDD
+polices & procedures
+record keeping (CDD hold 5 years after relationship ends)
+training
Polices & procedures maintained must be accurate, appropriate & risk sensitive;
- CDD measures
- ongoing monitoring
- record keeping
- risk assessments
- report knowledge / suspicion systems
- monitor compliance of internal controls
Training;
- measures to ensure employees aware of law
- regular training how to recognise/ deal with activities
Outline what AML legislation includes
3) industry guidance
Senior management systems & controls (SYSC)
Joint ML steering groups (JMLSG)
Regulators issue guidance to assist institutions to interpret regulations & understand obligations
Not required to be followed / failure considered negative perceptions
When offence committed court must consider whether they followed relevant guidance approved by regulator
What is KYC &; CDD
KYC
- simple id requirements
- certified copy of clients passport/ utility bill
- tick box approach
- prevention/ but not adequate measures of ML
CDD
- form client profile to understand business relationship & facilitate monitoring
- understand expectations to recognise suspicious activity & take action
-verify customer identity, obtained from reliable independent source, obtain from outset
Includes;
- source of wealth
- Purpose & nature of rationale
- expected activity (volume & value)
Details how to meet requirements set out in legislation guidance
What is the risked based approach & EDD
FAFT set international standards on approach to CDD
Financial institutions undertake risk assessment of clients to decide level of CDD required / indicates appropriate level of reviewing ongoing basis
Focus on areas of ML/ TF to allow cost effective approach to manage risks
Relationship involving PEP presents high risk / risk sensitive
EDD
- obtain further info
- additional steps to verify
- higher levels of management approval
- more frequent reviews
