Ethics and Money Laundering Flashcards
Under which rules are solicitors required not to be involved in money laundering?
The Law Society of Scotland Practice Rules 2011 (regulation B6.23)
Under which acts is money laundering a criminal offence?
- The Money Laundering Act 2007
- The Proceeds of Crime Act (POCA) 2002
and the Terrorism Act 2000
What is money laundering?
There is a complex definition of money laundering in the statutory provisions but a simple explanation would be “the process by which the proceeds from illegal activities such as tax frauds, drug trafficking, terrorism and other forms of crime are legitimatised by being applied to legitimate transactions”
What does the Law society of Scotland require solicitors to abide by to try and prevent them becoming involved in money laundering?
- The Guidance on Money Laundering issued by the Joint Money Laundering Steering Group
Explain Customer Due Diligence (CDD)
- required to undertake CDD whenever commencing to act in a transaction for a new client where total is in excess of €15,000
- requires they before commencing a solicitor must identify and verify the client and any beneficial owner involved in the transaction
- should obtain full names, residential address and DOB of client/beneficial owner
- verify this information by either
a) a government issues doc which has the full name, photograph and either the address or DOB or;
b) gov issued doc (without photo) which has full name - supported by a second document either gov issued or issued by a judicial authority, public sector body, a regulated utility company or another FSA-regulated form in the UK financial services sector which has the full name and photograph and either address or DOB
Who should money laundering/suspicions be reported to?
- to the firms Money Laundering Officer (MLRO)
- they will then decide whether they should report the matter to the National Crime Agency (NCA) using a Suspicious Activity Report (SAR)
What must not the solicitor do whilst an investigation is being carried out by the National Crime Agency by way of a Suspicious Activity Report?
- continue the transaction for a period of 7 working days (from working day after report was submitted)
- disclose to the client, beneficial owner or any other party that they have made a SAR (this is referred to as tipping)
- take any action or do anything which would prejudice an investigation under the Proceeds of Crime Act 2002 or the Terrorism Act 2000
What are the penalties for allowing the firm to be used for money laundering or failing to abide by the reporting duties or breaching disclosure?
- a period of up to 5 years in prison and/or am unlimited fine
- referral by the Law Society to the Scottish Solicitors Discipline Tribunal (SSDT) as a breach of professional standards
SSDT can then
- warning
- fine
- restriction on practicing certificate
- suspension for period of time from practicing or removal from the role of solicitors permanently
Civil Action can also be taken against the firm for recovery of any money which they received which was proceeds of crime.
What duties has Deborah breached? (Regarding Mrs Ross and her parents)
- section 34 of the Solicitors (Scotland) Act 1980 allows the Law Society of Scotland to establish rules regulating the conduct of solicitors
- the most relevant set of rules of the Law Society of Scotland Rules 2011 and in section B1 you find the rules regulating the professional standards of solicitors
- disclosing information of Mrs Ross’ client file/property with your parents and disclosing that you will have their low offer accepted puts you in breach of a number of the rules. The first is the most fundamental of the rules which is that solicitors must be trustworthy and act honestly at all times.
- There will also be a failure to disclose to the client your personal interest and to cease to act.
- There will be failure to act in the interests of the client and there will be breach of client confidentiality
What are the consequences of breaches the solicitor has made in regard to the law society rules
- as this is a breach of professional standards the matter could be referred by way of complaint to the Scottish Legal Complaints Commission - established under the Legal Aid and Legal Profession (Scotland) Act 2007 as an independent body to act as a single gateway for complaints against members of the legal profession.
- they will see this as a conduct complaint I.e where the solicitors acts and omissions have breached the required professional standards laid down by the Law Society of Scotland
- As a conduct complaint it will be referred to the Law Society for investigation and if they believe there is a case to answer they will remit the matter for hearing in front of the Scottish Solicitors Discipline Tribunal (SSDT) who if uphold the complaint can impose - fine, warning, restrictions on practicing certificate, suspension for period of time from practicing or removal from the role of solicitors permanently
What action should a solicitor take when he/she has a personal interest in one of their clients transactions?
- the Law Society of Scotland Practice Rules 2011 in section B1 indicates that where a solicitor has a personal interest in a matter which he/she is handling on behalf of a client then he/she must immediately disclose this to the client and cease to act in that matter.
Other than failure to comply with CDD why else should you be suspicious of vic
1) the client seems to have no established business, describing himself as a ‘professional gambler’ yet wishes to open a tanning salon, taxi office and nail bar
2) the client has no need for funding from traditional sources yet appears to have access to substantial funds
3) he has access to £80,000 (and claims more) in cash which in itself is suspicious and to make matters more suspicious he does not want this kept in an interest baring bank account but in the firms office safe (which is also contrary to the ‘accounts rules’ section of the 2011 practice rules)
