Legal considerations 1

Question 1

What is the definition of “Money Laundering”?

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

What is “Criminal property”?

Answer 2

Property which was obtained as a result of criminal conduct and the person knows or suspects that it was obtained from such conduct. It may take any form, including money or money’s worth, securities, tangible property and intangible property.

Question 3

What are the three phases to money laundering?

Answer 3

1) Placement - Cash generated from crime is placed in the financial system e.g. paid into a bank. This is the point when proceeds of crime are most apparent and at risk of detection.
2) Layering - Once proceeds of crime are in the financial system, their origins are obscured by passing the money through complex transactions. This often involves different entities like companies and trusts and can take place in multiple jurisdictions.
3) Integration - Once the funds have been obscured, they are invested in legitimate businesses or other forms of investment such as property by the criminal.

Question 4

What is Terrorism?

Answer 4

The use or threat of action designed to influence government, or to intimidate any section of the public, or to advance a political, religious or ideological cause where the action would involve violence, threats to health and safety, damage to property or disruption of electronic systems.

Question 5

What is Terrorist financing?

Answer 5

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 6

What is Terrorist property?

Answer 6

Money or property likely to be used for terrorist purposes or the proceeds of commissioning or carrying out terrorist acts.

Question 7

The UK anti-money laundering legislation (AMLL) consists of…?

Answer 7

1) The Proceeds of Crime Act 2002 (POCA)
2) The Money Laundering Regulations 2017 (MLR)
3) The Terrorism Act 2000 (TA)

Question 8

Additional offences are included in POCA and TA when those offences are committed by…?

Answer 8

Individuals working in the regulated sector.

Question 9

What does ‘de minimis’ mean in relation to money laundering or terrorism offences?

Answer 9

All potential offences must be reported as no amount is too small to be of consequence.

Question 10

What is the statutory (related to law) definition of money laundering?

Answer 10

An act which constitutes an offence under sections 327, 328 and 329 of POCA.

Question 11

What actions should an accountant take when knowing or suspecting, or has reasonable grounds for knowing or suspecting that another person is engaged in money laundering or terrorist financing?

Answer 11

The accountant should submit an internal report to the Money Laundering Reporting Officer (MLRO) when employed at a group practice. If there is no MLRO e.g. when the accountant is a sole practitioner, a Suspicious Activity Report (SAR) should be submitted to the National Crime Agency (NCA).

Question 12

What is the required disclosure that must be included in a SAR?

Answer 12

1) The identity of the suspect (if known)
2) The information or other matter on which the knowledge or suspicion of money laundering (or reasonable grounds for such) is based.
3) The whereabouts of the laundered property (if known) is passed as soon as is practicable to the MLRO.
4) Additional information held by the individual that identifies other parties involved in or connected to the matter should also be given to the MLRO.

Question 13

What are the responsibilities of the MLRO?

Answer 13

Responsible for assessing internal reports, making further inquiries if need be (either within the business or using public domain information), and, if appropriate, filing SARs with NCA.

Question 14

What is the maximum penalty if an individual fails to make a report comprising the required disclosure, or if an MLRO fails to pass on reportable information in internal reports to the NCA?

Answer 14

5 year imprisonment and/or an unlimited fine.

Question 15

What is the difference between a Protected disclosure and an Authorised disclosure?

Answer 15

A protected disclosure is made by any person at work or when carrying out professional activities (compulsory in the regulated sector). An authorised disclosure is made by any person who realises they may have engaged or are about to engage in money laundering.

Question 16

What is “Tipping off”?

Answer 16

The legal term meaning to tell the potential offender of money laundering that the necessary authorities have been informed, or to disclose anything that might prejudice an investigation.

Question 17

What is the maximum penalty for tipping off?

Answer 17

5 year imprisonment or an unlimited fine.

Question 18

When must Customer Due Diligence (CDD) be applied by accountants?

Answer 18

To all clients before services are provided to them.

Question 19

According to Money Laundering Regulations, in what four instances must CDD be applied?

Answer 19

1) When establishing a business relationship
2) When carrying out an occasional transaction (i.e involving €15,000 or the equivalent in sterling or more)
3) Where there is suspicion of money laundering or terrorist financing.
4) Where there are doubts about previously obtained customer identification information.

Question 20

What are the three elements to CDD for new clients?

Answer 20

1) Find out who the client claims to be - name, address and date of birth - and obtain evidence to check that the client is as claimed.
2) Obtain evidence so the accountant is satisfied that he/she knows who any beneficial owners are (generally an individual who owns 25% or more of the client or the transaction property)
3) Obtain information on the purpose and intended nature of the transaction.

Question 21

What actions should be taken if CDD cannot be completed?

Answer 21

The accountant must not act for the client and should consider whether to submit an internal report or SAR as appropriate.

Question 22

What is the definition of “Whistleblowing”?

Answer 22

Disclosing information that a worker believes is evidence of illegality, gross waste, gross mismanagement, abuse of power, or substantial and specific danger to the public health and safety.