Financial Crime

Question 1

What is money laundering?

Answer 1

Process where money illegally obtained is made to appear legally obtained

By various methods, the nature source and ownership of these criminal proceeds are concealed

Question 2

What is criminal conduct?

Answer 2

is a crime that constitutes an offence in the UK or an act abroad which is deemed ilegal in the UK

Question 3

When is property, criminal property?

Answer 3

If it constitutes a persons benefit from criminal conduct and the alleged offender knows or suspects it constitutes that benefit

Question 4

What are the phases of money laundering and how many are there?

Answer 4

3 phases

• placement - when the launderer is able to place illegal funds in an institution with little or no disclosure concerning ownership. This makes it hard, if not impossible to trace its criminal source
• layering - when deposits are passed through a series of complicated transactions involving legitimate and illegitimate enterprises it is again hard to detect origin
• integration - if ownership or origin can’t be established it is virtually impossible to establish they are from criminal activity. this means the funds can be used legally

Question 5

What are the main changes brought about by the Money Laundering Regulations 2007 (MLR 07)

Answer 5

-term ‘occasional transaction’ (defined as less than 15,000 Euros)
is used instead of ‘one-off’
-risk based approach is mandatory for risk management generally and in applying customer due diligence
-detailed coverage of customer due diligence in 07 regulations with guidance on how to meet obligation of identifying customers and mandatory monitoring of customer relationships
-enhanced due diligence on risk-sensitive basis, including politically exposed persons outside the UK
-additional scope for relying on other appropriately qualified regulated firms, although the’relying firm’ retains ultimate responsibility for meeting the obligations under the Regulations

Question 6

To what do MLR 07 relate?

Answer 6

Institutional liability generally. They require internal systems and procedures to be implemented to deter criminals from using certain institutions to launder money. They also aim to enable money laundering to be more easily detected and prosecuted by law enforcement agencies

Question 7

Under MRL 07 what ‘risk-sensitive’ policies and procedures must be established?

Answer 7

• customer due diligence measures and ongoing monitoring
• internal reporting
• record keeping procedures (5-year period)
• internal control
• risk assessment and management
• compliance monitoring, management and comms of policies and procedures
• recognition of suspicious transactions
• reporting procedures, including appoint MLRO
• staff training programmes

Question 8

What happens with regards to failure to implement ‘risk-sensitive policies and procedures’?

Answer 8

• This constitutes a criminal offence
• FCA may institute proceddings for money laundering regulation breaches regardless of whether or not the FCA authorises the party, however it can’t investigate in Scotland

Question 9

How is it determined is a breach of the Money laundering regulations has taken place

Answer 9

It is not dependent on whether actual money laundering has taken place, firms may be sanctioned for not having AML and CTF systems

Question 10

What is the penalty for failing to comply with requirements of the ML Regulations?

Answer 10

maximum of two years in prison and an unlimited fine

Question 11

What are the four main offences?

Answer 11

Assistance
Failure to report
Tipping off
Failure to comply

Question 12

With regards to POCA, what is assistance?

Answer 12

Knowingly helping someone to launder money. This covers
-obtaining
-concealing
-disguising
-transferring
-acquiring
-possessing
-investing
-using the proceeds of crime
Before POCA legislation covered proceeds of serious crime, not covers all crimes such as tax evasion

Question 13

What is the penalty for assisting in money laundering?

Answer 13

14 years in prison and/or unlimited fine

Question 14

With regards to POCA, what is failure to report?

Answer 14

any believe or suspicion of money laundering should be reported to the police of the MLRO asap. failure to do this is a criminal offence

For those in a regulated sector (for an authorised firm) this offence concerns a person having actual suspicions (subjective suspicions) as well when any hypothetical reasonable person would have reasonable grounds for being suspicious. (objective suspicions

Question 15

What is the penalty for failure to report?

Answer 15

up to 5 years in prison and/or an unlimited fine

Question 16

With regards to POCA, what is tipping off?

Answer 16

Even when reporting, parties must try to not alert alleged launderer as this is an offence.
POCA s333a
- a person in a regulated sector disclosing info, which might prejudice an investigation, has been passed to the Police, HMRC, Nominated official (MLRO or NCA)
- an investigation into money laundering is being contemplated or carried out

Question 17

What did the NCA replace?

Answer 17

Serious Organised Crime Agency from 7 october 13

Question 18

What is the penalty for tipping off?

Answer 18

up to 2 years in prison and/or unlimited fine

Question 19

What was the former penalty for tipping off under S333 which was replaced by S333a

Answer 19

5 years instead of 2 years

Question 20

What is prejudicing an investigation and what legislation covers it?

Answer 20

s342 POCA

• for a person outside a regulated sector, prejudicing an investigation relates to tipping off
• in the non regulated sector, it is a person with knowledge or suspicion making a disclosure which is likely to prejudice an investigation
• for all persons, it is falsifying, concealing or destroying documents relevant to the investigation

Question 21

What is the penalty for POCA 342 prejudicing an investigation?

Answer 21

5 years and/or unlimited fine