Chapter 3 - Legal Considerations: Money Laundering/Terrorist Financing

Question 1

Money Laundering - definition

Answer 1

the process by which criminally obtained money or other assets (criminal property) are exchanged for “clean” money or other assets with no obvious link to their criminal origins. It also covers money, however come by which is used to fund terrorism.

Question 2

Criminal property - definition

Answer 2

property which was obtained as a result of criminal conduct and the person knows or suspects that it was obtained through such conduct.
It may take any form, including money (or money’s worth), securities, tangible property and intangible property. e.g. (copyrights, trademarks or patents)

Question 3

3 phases of money laundering

1. -

Answer 3

PLACEMENT
cash from crime placed in the financial system (e.g. bank account)
Proceeds are most apparent and at risk of detection

Question 4

3 phases of money laundering

2. -

Answer 4

LAYERING
once in the financial system, layering obscures their origins by passing money through complex transactions.
Often involve different entities like companies and trusts, can take place in many jurisdictions

Question 5

3 phases of money laundering

3. -

Answer 5

INTEGRATION
Once origins are obscured, criminal can make funds reappear as legitimate funds or assets.
They will invest such funds in legitimate businesses or other investments such as property.

Question 6

Activities related to Money Laundering

Answer 6

1. Acquiring, using or possessing criminal property
2. Handling proceeds of crimes such as theft, fraud & tax evasion
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 in other financial products
6. Investing the proceeds of crime through the acquisition of assets/property
7. Transferring criminal property

Question 7

Terrorism - definition

Answer 7

the use or threat of action designed to 
- influence government, 
- intimidate any section of the public
- to advance political, religious or ideological causes
where action would involve:
- violence
- threat to safety
- damage to property
- disruption of electronic systems

Question 8

Terrorist Funding - definition

Answer 8

Fund raising, possessing or dealing with property or facilitating someone else to do so, when intending, knowing or suspecting or having reasonable cause to suspect that it is intended for the purposes of terrorism

Question 9

Terrorist Property- definition

Answer 9

Money or property likely to be used for terrorist purposes

Proceeds of commissioning or carrying out terrorist acts

Question 10

Money Laundering & Terrorist Financing Offences

Answer 10

POCA & Terrorism Act include additional offences which can be committed by individuals working in the regulated sector.
I.e. people providing specified professional services such as accountancy)
An accountant will be personally liable for breaching POCA and/or TA if he provides services whilst turning a blind eye to suspect dealings
The MLR imposes duties on “relevant persons” (sole traders and firms (not employees) operating in the regulated sector) to establish and maintain practice, policies and procedures to detect and deter activities relating to money laundering and Terrorist financing .
It is the Sole trader or firm therefore which will be liable for any breach of the MLR

Question 11

MONEY LAUNDERING REGULATIONS

practice, policies and procedures required of accountanct:

Answer 11

• Customer due diligence on clients
• reporting money laundering and terrorist financing
• record keeping
  There is no de minimus exceptions

Question 12

A person commits a money laundering offence if …

Answer 12

Conceal, disguise, converts or transfers criminal property or removes criminal property from England, Scotland, Wales or NI - HIDES OR MOVES

Enters into or becomes concerned in an arrangement which he knows or suspects facilitates the acquisition, retention, use or control of criminal property

Acquires, uses or has possession of criminal property except where adequate consideration was given for the property - WHAT IT IS WORTH

Question 13

MONEY LAUNDERING - Penalty

Answer 13

• punishable up to 14 years imprisonment

- unlimited fine

Question 14

MONEY LAUNDERING REGULATION

Answer 14

• POCA 2002
• MLR 2007
• TA 2000 & 2006

Question 15

EXCEPTIONS TO THE DUTY TO REPORT

Answer 15

• If the accountant obtained the information when not going about his business (eg socially)
• information was obtained in privileged circumstances
• there is a reasonable excuse for not reporting

Question 16

Protected Disclosure

Answer 16

Made by any person forming a money laundering suspicion at work or carrying out professional activities (not necessarily accountancy services to clients) is a protected disclosure.

The person is protected against allegations of breach of confidentiality.

Question 17

Authorised disclosure

Answer 17

Made to the appropriate authority by any person who may realise that they may have or may be about to engage in money laundering.
May provide a defence against charges of money laundering as long as it is made before the act is carried out, and SOCA’s consent is obtained), or as soon as possible on the initiative of that person after the act has been carried out with good reason shown for the delay.

REFUSAL by SOCA - within 7 working days - law enforcement has a further 31 calendar days (MORATORIUM PERIOD) to investigate the matter and take further action (e.g. seize funds/goods). The member may continue with the client relationship or transaction after a further 31 days have passed, starting with the day notice is received. Unless a restraining order is received to prohibit.

No refusal within 7 days - consent is deemed (Not in terrorist financing)