Legal Services 3 - Money laundering Flashcards
Stages
Placement - introduced into financial system
Layering - money distanced from criminal activity by passing through number of parties or transactions
Integration - integrated back into financial system, and criminal now in possession of laundered money.
Ways through a solicitor
Company and trust work
Use of client account
Real estate
Sham litigation
Purpose of regulations
Money Laundering, Terrorist Financing and Transfer of Funds Regulations (2017).
Financial Action Task Force -
intergovernmental body
Application
Risk-assessment
Policies -
Firm required to establish and maintain controls and procedures.
Internal controls
MLRO - (Money Laundering Report Officer)
MLCO (Money Laundering Compliance Officer)
Screening of employees
Indépendant audit function
Controls to respond ‘fully and rapidly’
Client due diligence
Need to verify where;
client and solicitor agree to form relationship
carrying out occasional transaction exceeding 1,0000
carrying out occasional transaction. that amounts to £15,000 or more
where solicitor suspects money laundering or terrorist financing
where solicitor doubts veracity or adequacy of documents
May establish later during compared too outset if;
-little risk of money or terrorist
-necessary not to interrupt the normal conduct of business
-identity verified as soon as practicable after contact
SOLICITOR cannot -
-carry out transaction for client
-establish a business relationship or carry out transaction otherwise than through a bank account.
Standard due diligence -
identity, address.
Partnerhips - (non LLP) - obtain information on constituent individuals.
Companies -
name, company number, registered office and principal place of business
Beneficial owners (simplified does not apply) -
-any individual who exercises ultimate control of management over body corporate
-any individual who ultimately owns or controls more than 25%
-individual who controls body corporate
Does not apply to companies listed on regulated market. Applies to LLPs
May have to find parent - if deemed a risk
Partnerships (non LLP) -
ultimately or entitled to or controls more than 25% or more than 25% voting rights.
-otherwise exercises control over management of partnership
Trust -
settler
trustees
beneficiaries
individuals benefiting been determined, class of person n whose main interest set up
any individual who has control over the trust.
Simplified due diligence
Low risk
(listed on regulated market, where they are based and do business)
Must obtain evidence eligible for simplified.
Enhanced due diligence
High risk
Client is in high-risk country
client has provided false or stolen
PEP
complex or unusual large transaction
in any other high risk situation.
Must take measures as far as reasonably possible e.g.
further verification, beneficial owners.
PEP
High-up prominent public functions.
Heads of state
MPs
High-up in courts
courts of auditors or boards of central banks
ambassadors, charges and high-ranking officers
members of administrative management or supervisory bodies of state-owned enterprises.
or family members
spouse, children, their spouses and parents.
Known close associates
Extra measures -
establish source of wealth and source of funds involved.
General measures
Ongoing monitoring
Training - maintain a record of.
Record keeping
Criminal finances act 2017
Makes firm liable for failing to prevent tax evasion.
Strict liability.
UK financial sanctions regime
Placed on people or entities.
Firm must first obtain license to receive reasonable fees for provision of legal advice.
Strict liability
POCA 2002
offence to
-enter into, or become concerned in an arrangement which a person knows or suspects facilities the retention, use or control of proceeds of crime (s328)
-acquires, uses or controls of proceeds of crime (s329)
-conceal, disguise, convert of transfer proceeds of crime or remove proceeds from jurisdiction (s327)
In addition, regulated sector;
-failure to dislocate information about money laundering to appropriate authorities (s330)
-failure on part of firms nominated officer to disclose information about money laundering to the approrpriate authorities (s331)
- tipping off an individual that an investigation is under way (s331)
prejudicing an investigation into money laundering (s342)
S328 Arranging
Must know or suspect.
‘Suspicion’
Criminal property -
persons direct or indirect benefit from criminal conduct.
Litigation and dividing assets from court judgement does not count.
Authorised disclosure defence -
made by person, but for disclosure, would be committing the offence.
If made to MLRO, officer of HMRC or constable.
MLRO reports to NCA.
SAR (suspicious activity report).
Soon as is praticably possible
MLRO unable to give consent if -
no consent from NCA
hears nothing for seven days
consent refused, may not give consent unless consent subsequently granted within 31 days starting on day refusal is given.
During prohibited act -
-made while ongoing
-before solicitor did not know or suspect
-as soon as practicable
After act -
must have good reason for failure to disclose.
Reasonable excuse for non-disclosure -
e..g information already in public domain
Overseas -
abroad where it is lawful
Penalties -
Max 14 years.
S329 Acquisition, use or possession
Enjoyed the benefit.
Authorised disclosure
Overseas
Adequate consideration - adequate consideration for acquiring, using and possessing property.
Max 14 years.
S327 Concealing
Authorised disclosure
Overseas
S330 Failure to disclose
-
Knows, suspects or has reasonable grounds to know or suspect person engaged in money laundering
-
information comes to him in Course of business in regulated sector
-
information may assist in identifying the money laundering or location or laundered money
-
does not make disclosure as soon as practicable
Objective test for knowing
Information must be of some us.
assist in identifying -
money launderer
location of laundered property
Disclosure -
MLRO or NCA as soon as practically possible.
Or has reasonable excuse for not doing so.
Employee not commit if did not know or suspect , but was reasonable grounds to suspect, and employee has proper training.
Legal profession privilege -
common law duty -
Advice privileged - communication acting in capacity if confidential and for purpose of seeking legal advice.
Litigation privilege -
after litigation started, or is reasonably in prospect between solicitor and third party for sole purpose of litigation.
Legal not relied upon where commutation takes place with purpose of carrying out offence.
POCA - not apply where intention of furthering criminal purpose
Overseas defence
Max five years
S331 - MLRO -
if not disclose
Defence -
reasonable excuse for not disclosing information.
S333A tipping off
Disclosing a disclosure -
must have come to person in course of business in regulated sector.
Disclosing investigation -
disclosure made to any person that investigation into allegations has been committed or is being carried out or even contemplated.
Disclosure likely to prejudice investigation
Defences -
Did not think would prejudice
Purpose of dissuading client from engaging in money laundering (approached with caution).
Max unlimited fine or two years
Prejudiced investigation
S342
Know or suspect investigation has or about to be commenced, make material disclosure to any other person which is likely to prejudice or interfere with relevant material.
Confidentiality principle -
Applies unless disclosure necessary.
SRA
May discipline under Principle 4 (HONESTY).
Warning signs
Client
Funding
Transaction
Unusual instructions
Geographical concerns
