Legal Services - ALL Flashcards
1
Q
What are the 7 regulators who fall under the umbrella of the LSB?
A
Each regulator sets out their own rules for the different branches of the legal profession. * Solicitors Regulation Authority (solicitors and law firms of England and Wales, non-lawyers who are managers or employees of regulated law firms, registered foreign lawyers (‘RFLs”), and registered European lawyers (‘RELs”))* Bar Standards Board (barristers)* CILEX (legal executives i.e. lawyers who specialise in specific areas)* The Intellectual Property Regulation Board (patent and trademark attorneys) * The Council of Licenced Conveyancers (individuals and firms which specialise in property/probate transactions)* Costs Lawyer Standards Board (lawyers who specialise in the preparation of bills and schedules of costs)* Master of the Faculties (notaries)
2
Q
What six activities are considered reserved legal activities?
A
- Exercising right of audience (right to appear in and address a court, including calling and examining witnesses)2. Conducting litigation (issuing and defending proceedings)3. Reserved instrument activities (preparing transferor charges, applying and lodging documents under the Land Registration Act, or preparing any other instrument relating to real or personal estate, which includes a contract for the sale of land)4. Probate activities (preparing probate papers or court documents relating to probate proceedings)5. Notary activities (preparing, witnessing, and certifying documents, and non-contentious legal work e.g. wills and administration of estates)6. Administration of oaths and taking affidavitsThey can only be undertakien by whose who are authorised by the regulatory bodies unless an exemption applies.
3
Q
When is a person exempt from the requirement to be authorised to carry out reserved legal activities?
A
Nothing can stop an individual acting on their own behalfExample:* writing their own will* they are a party to proceedings and would otherwise have the right to conduct litigation in their capacity as a party (litigant in person)
4
Q
What is the level of professional indemnity insurance which a firm must have?
A
Adequate and appropriate insurance at a minimum level of £3 million per claim (note, the level required can differ from firm to firm). The requirement for adequate and appropriate coverage is ongoing and the firm must reconsider the level if there are any changes to its offering/clients/claims history etc.
5
Q
What factors does a firm need to take into account to determine the level of professional indemnity insurance cover that is adequate and appropriate?
A
- Type of client * Value of matters taken on each year (probable max loss for each type of work)* Transparency of information provided to clients about insurance coverage* Claims history of the firm* Alternative arrangements the parties might make (e.g. if a firm agrees to cover any losses itself up to a certain amount)If the firm can show that it has considered these factors in a reasonable and rational assessment, the SRA is unlikely to intervene.
6
Q
In the exam what will give away the fact that higher levels of insurance might be needed?
A
High value workExample: International firm working on multi-million pound property deals require much more coverage than small high street conveyancing firm
7
Q
What is a freelance solicitor?
A
A solicitor who:* practises on their own (i.e. no employees)* in their own name (i.e. not through a company or trading name)* whose clients engage and pay them directly. Freelance solicitors only need authorisation from the SRA as a sole practitioner firm if they carry outreserved legal activities.
8
Q
Does a freelance solicitor require professional indemnity insurance?
A
- Only if they are carrying out reserved legal activities* This does not need to be on the SRA’s minimum terms but must be adequate and appropriate and clients must be made aware that the cover doesn’t meet the SRA minimum and that alternative arrangements are in place with detail provided if requested.* The SRA must be notified that the solicitor is acting as a freelance solicitor.
9
Q
What conditions must be satisfied for a solicitor to carry on reserved legal activities without being authorised as a sole practitioner firm?
A
- Three years PQE2. Must not hold client money (minor exceptions)3. Adequate and appropriate insurance
10
Q
What must a solicitor carrying out reserved legal activities for a non-commercial body that provides reserved legal activities to the public ensure?
A
That the non-commercial body takes out adequate and appropriate coverage covering not only reserved activities but also any other work done by the solicitor (even though it wouldn’t require insurance but for the reserved activities).This applies for e.g. charities, not-for-profit organisations, independant trade unions, community interest companies.
11
Q
What 2 funding arrangements are available to clients in non-litigation matters?
A
- Private retainer and private funding (fee arrangement forms part of contract)2. Fixed fee financing (fee agreed with client at outset)
12
Q
How does a private retainer work?
A
- The fee arrangement forms part of the retainer* Solicitor will normally ask for a sum up front ‘on account’ of costs (to pay for disbursements and costs of anything needed to support the client’s claim) * Generally, the solicitor will then invoice costs and disbursements on a monthly basis.
13
Q
How does fixed fee financing work?
A
- Solicitor agrees to be paid a fixed fee agreed with the client at the outset. * Fee could be inclusive or exclusive of VAT and may include disbursements e.g. search fees.* Common in domestic conveyancing transactions but are growing in popularity in other areas.
14
Q
What three things are required of a retainer?
A
- In writing2. Contain all relevant terms (including pricing)3. Signed by the client
15
Q
What should a solicitor do before recommending a conditional fee arrangement or a damages based agreement, and why?
A
Ascertain whether the client can afford to pay privately (i.e. just pay the fees) as this may be more cost-effective for a client who can afford it
16
Q
What advice and updates must the solicitor provide on costs?
A
Clear and transparent advice with likely overall cost at the outset, updating the client as the case progresses and keeping note of any relevant discussionsThis would be breached if the solicitor encouraged a client to enter into one method of funding without explaining fully how it works or that there are other methods available which may be more in the client’s interests.
17
Q
What are a client’s funding arrangement options for litigation?
A
- Private funding 2. Conditional fee agreement 3. Damages based agreement 4. Third party funding 5. Before/After the event insurance6. Union cover7. Civil legal aid 8. Criminal legal aid
18
Q
What is a conditional fee agreement?
A
‘no win, no fee agreement’ that should be in writing* If the claim is unsuccessful, the client will not have to pay the solictor any fees (they may have to pay the defendant’s costs and expenses in some cases - this must be made clear to the client). * If the claim is successful, the solicitor is entitled to their normal fee (usually from losing party along with disbursements) and a success fee from their client (usually from proceeds of claim) agreed as a percentage of the solicitor’s normal fee.Note: a win may include damages as part of a negotiated settlement (not just win in court)
19
Q
What is the maximum a success fee under a conditional fee agreement can be?
A
No more than 100% of the normal fees charges, i.e. the total fees recovered can be no more than 2x the normal fees
20
Q
In what categories of proceedings can conditional fee agreements not be used?
A
Family proceedings
21
Q
What must a solicitor inform a client of within the context of conditional fee agreements?
A
If they lose, whilst they won’t have to pay their solicitor anything, they may be liable for the other side’s costs
22
Q
What is a damages based agreement?
A
Sometimes known as a “contingency fee agreement” and should be in writing* If successful, the solictor will be entitled to a specified percentage of the client’s award (note, solicitor’s standard time costs and disbursements can be recovered from the losing party). * If unsuccessful, the solicitor is not entitled to any fee or repayment of disbursements.
23
Q
What 7 elements must be in a damages based agreement?
A
The agreement must specify:* claim to which the proceedings relate* circumstances in which the legal representatives’ costs and expenses are payable* reason for setting the payment at that level. * expected disbursements giving an approximate amount.* definition of success* what happens in the event adverse costs (costs payable to the opponent) are awarded * how the parties can terminate the agreement.
24
Q
What is the maximum % a solicitor can agree in a damages based agreement?
A
- 25% in personal injury2. 50% in all other cases
25
What is the interplay between the solicitor's % recovery in a damages based agreement and the costs paid by the losing side?
The % of the damages is worked out and any costs paid to the solicitor by the losing side are subtracted from the damages % for a net figure payable.Example: * 10% damages based agreement.* £500k is awarded in damages and £10k in costs* Solicitor is entitled to £50k (£10k already received in costs, £40k from the damages award).
26
What is third party funding?
A known as **'litigation funding'** and is only really applicable in high value cases from designated litigation funding companies.* Third party covers the cost of the **legal fees and disbursements**, including barrister's fees, court fees, and 'after the event' insurance but **not the other side's costs. *** Funder usually expects to make a profit from funding (usually between 15% and 45% more than the actual costs). * If **successful**, funder will usually be **paid from awards** made to the party and if **not successful**, the **funder will bear the costs** it has agreed to fund and client pays other party's costs and disbursements.
27
What is before the event insurance?
Insurance which covers:* If **successful**: the solicitor's legal costs* If **unsuccessful**: the solicitors costs, disbursements and other sides costs. Policies often require the insured to use a **designated solicitor** so a solicitor must always check if the client has this insurance before taking the case.Sometimes referred to as **legal expenses insurance**' and often in car insurance policies and sometimes house insurance policies.
28
What is after the event insurance?
Insurance taken out after the event, through which disbursements are paid and usually also cover the risk of having to pay costs to the other side if you are unsuccessfulAfter the event insurance **does not cover solicitor's fees** so often taken alongside conditional fee agreements.
29
What type of fee agreement is after the event insurance often associated with, and why?
Conditional fee agreements, because it **doesn't cover solicitor's costs** but it protects you from the risk of having to pay your own disbursements and the other side's legal costs if you lose
30
Why is union cover relevant to funding of litigation?
If a client is a member of a union, they **may have entitlement to legal expense cover** as part of their union subscription e.g. if they have an accident at work and are part of a trade union.Solicitors therefore have an obligation to ask about this as there may be a union designated solicitor.
31
What is civil legal aid?
* Also known as 'public funding', sometimes available for low-income clients in **housing disputes, family or debt cases** subject to passing **financial need and merits test** for legal costs and disbursements. * Solicitor might not be able to accept the claim if client is eligible because public funding is available **only through Legal Aid Agency contracted firms**. * Even if eligible, the client might still have to make a **partial contribution** toward costs.
32
What two tests must be satisfied to receive legal aid in a civil context?
1. **Financial eligibility** test (based on individual circumstances i.e. income, savings, family circumstances, living costs).2. **Merits** test (good prospect of success)
33
What is required to pass the merits test in a civil context?
It must appear that the claim has a good prospect of success
34
What three situations is civil legal aid available in and what two situations is it not?
**Available:**1. Housing disputes2. Family issues3. Debt issues**Not available:**1. Contract claims2. Tort claims (except for birth defects in children)
35
In what circumstance could legal aid in a civil context be withdrawn?
If there is a **change in the merits** of the case or if the **opponent raises concerns about conduct**.
36
Can a civil legally aided party be forced to pay the other side's costs?
No
37
What is criminal legal aid?
Public funding for costs for defendants in **criminal cases** subject to **eligibility criteria** which must be met (means and merits tests).
38
In a criminal legal aid context, in what two situations is the financial eligibility (means) test automatically satisfied?
Applicant is:1. **Under 18**, or2. In receipt of **certain welfare benefits** (including job seekers and universal credit)
39
In a criminal legal aid context, might an applicant in the Crown Court have to contribute to their fees?
Yes, depending on their income
40
What is considered for the means test for criminal legal aid?
The client's finances (household income, outgoings, savings or capital)
41
What is required to pass the merits test in a criminal context?
Applicant must show that it is in the **interests of justice** for them to receive funding. This depends on whether:* proceedings deal with a substantial question of law* client is likely to lose livelihood or liberty* client would be unable to present their own case.Crown Court proceedings **automatically** satisfy this test.
42
Criminal cases in what court automatically satisfy the merits test?
Crown court
43
What are a solicitor's professional conduct obligations in relation to funding?
**Explore all options** and act in **client's best interests** (e.g. check for insurance)They must:* Clearly explain nature of funding options available * Explain other options available * Refrain from favouring their own interests over the client (e.g. if client can pay privately don't offer damages based agreement)
44
What does the SRA Principle to act in a way that encourages equality, diversity and inclusion require?
* Solicitors must **not unfairly unfairly discriminate** by allowing **personal views** to affect their **professional relationships** and the **way in which they provide their services**. * Solicitors must also comply with the provisions of the **Equality Act 2010** (including providing reasonable adjustments).
45
What is direct discrimination?
Treating person A less favourably than person B because of person A having a **protected characteristic**.Firms cannot act or create policies in a way that directly discriminates (subject to minor exceptions)| Prohibited by the Equality Act 2010
46
What are the 9 protected characteristics under the Equality Act 2010?
* Age* Disability* Gender reassignment* Marriage and civil partnership* Pregnancy and maternity* Race* Religion or belief* Sex* Sexual orientation
47
Can direct discrimination take place if a person does not have a protected characteristic themselves?
**Yes**, e.g. a person can be discriminated against because of their **association** with a person who has a protected characteristic, or because they are **wrongly perceived** to have one, or are **treated** as if they do.
48
What is indirect discrimination?
When a policy or provision is **apparently neutral** but on closer examination puts individuals with a protected characteristic at a disadvantage compared with individuals who do not have that characteristic.Example: Providing gym membership to all full-time solicitors (mostly men) and not part-time solicitors (mostly women)| Prohibited by the Equality Act 2010
49
What are the two protected characteristics for which direct discrimination can be justified?
1. **Age**2. A consequence of someone's **disability**Direct discrimination is not justifiable for the other protected characteristics.
50
Can indirect discrimination be justified?
**Yes**, in relation to **all protected characteristics** provided the discriminator can show the action is a **proportionate** means of achieving a **legitimate aim**.
51
What is the difference between a legitimate aim for direct and indirect discrimination?
**Direct**: there must generally be some kind of **public policy** reason e.g. compulsory retirement age aimed at reducing unemployment in a certain age group**Indirect**: broader than direct, there doesn't have to be a public policy reason, it can just be **something specific to the employer's business** e.g. offering higher pay for night shifts as it is difficult to attract employees to work unsociable hours.
52
What must be shown of measures that directly discriminate on the basis of age or the consequence of someone's disability, or that indirectly discriminate on any ground?
They are a **proportionate means** of achieving a **legitimate aim**
53
When assessing proportionality, what will the courts look at?
Whether there is **another less discriminatory way** of achieving the same aimExample: requiring 10 years PQE on a job description may not be proportionate to achieving a legitimate aim of having a suitably qualified person for a job. A list of required skills and knowledge may be less discriminatory.
54
Does the prohibition against discrimination apply to the provision of services?
**Yes**Firms must not discriminate against a person requesting legal advice by:* **not providing** them with that service* offering the service on **different terms*** subjecting the person to **any other detriment.**Example: refusing to act for a same sex couple/agreeing to act for a BAME client but charging a higher than usual rate.| Prohibition is under the Equality Act 2010
55
What is a firm's legal obligation regarding disabled employees and clients?
They must provide **reasonable adjustments** such that these parties are not at a **substantial disadvantage**, and must **not pass the costs on**Examples: Ensuring that clients can **access the firm's premises** easilyProviding **sign language** servicesProviding **specialist equipment** for employees.| Rule is under the Equality Act 2010
56
Does "reasonable adjustments" means that all requirements must be catered for?
No, only those which are reasonableReasonableness is decided based on the **size** and **resources** of the firm.Example: intercom and temporary ramp might be reasonable for a small firm but a large international firm should have a wheelchair lift or permanant ramp for access.
57
What is money laundering?
Process of **converting the proceeds of crime** (cash or other property) into assets which appear to have a **legitimate** rather than illegal origin.
58
What is the main act and main regulation in relation to money laundering in the UK?
**Proceeds of Crime Act 2002**Regulations (such as the **Money Laundering, Terrorist Financing, and Transfer of Funds (Information on the Payer) Regulations 2017** set out required procedures for certain businesses to prevent the use of professional services for money laundering.
59
Which body enforces the Proceeds of Crime Act 2002?
The NationalCrime Agency
60
What are the three phases of money laundering?
1. Placement2. Layering3. Integration
61
Can passive possession of criminal property be money laundering?
Yes
62
What happens during **placement**?
**Cash generated from crime is placed in the financial system** Example: by setting up a legitimate business dealing primarily in cash to mix dirty funds with cash from legitimate sales.
63
What does **layering** involve?
Obscuring the origins of the proceeds of crime by passing them through **complex transactions**Goal: **lose the audit trail** so authorities cannot trace proceeds often using different entites and multiple jurisdictions.
64
What is integration and what are some examples of how it can be achieved?
Making the funds appear to be legitimate funds or assets.**Investing funds** in legitimate businesses or other forms of investment.Examples: using an independant legal professional to buy property, set up a trust, acquire a company or settle litigation etc.
65
At what stages is a solicitor most likely to become involved in money laundering?
**Layering or integration** stagesSolicitors are most likely to get involved if working on matters with credit institutions, investment service companies, banks, insolvency practices, businesses that participate in buying and sellingproperty, securities, or other assets, casinos etc.
66
To whom does the Proceeds of Crime Act apply?
**Generally** everyoneNote, certain indirect offences such as failure to report and tipping off only apply to persons engaged in activities in the **regulated sector**
67
What are the 3 direct and 3 indirect offences under the Proceeds of Crime Act 2002?
**Direct** (i.e. party is directly involved in the money laundering activity)1. Concealing2. Arranging 3. Acquiring/using/possessing**Indirect** (a failure to fulfil AML obligations)1. Failure to Report2. Tipping off3. Prejudicing in investigation
68
Explain the presumption of a predicate offence in the context of money laundering
Money laundering offences **assume that a criminal offence has occurred** in order to generate the criminal property being laundered. A conviction of a predicate offence **is not** required for prosecution for a money laundering offence. Laundering the proceeds of **any crime** can constitute an offence.
69
Is a conviction of a predicate offence required for a prosecution for a money laundering offence?
No
70
Are there inchoate offences related to money laundering offences?
Yes. It is an offence to *conspire* or *attempt* to launder, and to *counsel*, *aid*, *abet*, or *procure* money laundering.
71
What is the maximum penalty for the principal money laundering offences?
**14 years** in prison and/or **unlimited fine**
72
What are the three **direct** money laundering offences?
1. Concealing2. Arrangement3. Acquisition, use, or possession
73
When does a person commit the offence of **concealing**?
* When they *conceal*, *disguise*, *convert*, or *transfer* **criminal property** or remove it from the UK and **no defence applies**.* Note: Concealing or disguising may be of the property's **nature**, but also its **source**, **location**, or **ownership*** The offender has to subjectively **know or suspect** that the criminal property represents a benefit from criminal conduct.
74
What is **criminal property**?
Any property **derived from criminal conduct**, including money, real and personal property, and intangible property *whether in the UK or not*
75
Can a person unwittingly be guilty of the offence of concealing?
**No**, they must **know or suspect** the property represents a benefit from criminal conduct.
76
What is the mental state required to commit the offence of **concealing**?
Subjectively **know* or **suspect** that the property represents a benefit from criminal conduct
77
What 2 defences apply to the money laundering offences of concealing, arranging and acquisition/use/possession?
1. If an **authorised disclosure** is made by the offender2. If **legal privilege** excuses not disclosing
78
What are the three timings which determine the rules applicable to the **authorised disclosure** defence available to a charge of concealing?
1. Before concealing2. During concealing3. After concealing
79
What is the authorised disclosure defence if disclosure is made **before** concealing?
It is a **full defence** if a person makes an authorised disclosure of the act to police, customs officer, or other nominated officer within the organisation, **before** the actExample: a solicitor is asked to transfer criminal funds into multiple bank accounts by a client, and the solicitor knows the property is the proceeds of crime. The solicitor must report before making any transfers.
80
What is the authorised disclosure defence if disclosure is made **during** concealing?
It is a full defence during the act if:1. Person had **no relevant knowledge** or **suspicion** when the act started2. Disclosure was made **as soon as practicable** after knowledge or suspicion; and3. Disclosure was made on the person's own **initiative** (not prompted by imminent discovery/encouragement of another)
81
What is required to avail of the the authorised disclosure defence if disclosure is made **after** concealing?
There must have been **good reason** why a disclosure was not made before the act was carried out.
82
Which way is the conflict between disclosure as a defence to concealing and the duty of confidentiality resolved?
Disclosure is an exception to the general duty of confidentiality
83
In what situation could a solicitor not rely on legal professional privilege in the context of concealing?
Where the solicitor **knows** the transaction they are working on is a money laundering offence
84
In the context of concealing, what if a solicitor merely suspects the transaction they are working on is a money laundering offence?
The ability to rely of the privilege is only lost when they **know** the transaction is a money laundering transaction, i.e. their suspicions are found to be true.If suspicions are unfounded, communications should remain privileged and are therefore non-disclosable.
85
When does a person commit the offence of **arrangement**?
**Except** in the conduct of ordinary litigation and other dispute resolution, * When they **know** or **suspect** what they are doing **facilitates** (by whatever means) the **acquisition, retention, use, or control** of criminal property by or on behalf of another person* This catches a **wide range of activity**, particularly in relation to assisting, usually at the layering and integration stages.Example: helping a person buy a house or a shelf company to disguise the criminal source of funds
86
Which 4 types of situations should you be particularly careful about in the SQE in relation to the offence of arrangement?
* Misuse/abuse of client **accounts*** Sale/purchase of **real property*** Creation of **trusts, companies, and charities*** Management of **trusts and companies**.If you're told the property involved was **tied to criminal activity**, remember the solicitor did not actually have to know the property was criminal property to have committed the offence of arrangement; it's **enough thatthey merely suspected**.
87
Conduct in what context is exempt from the offence of arrangement?
The offence does not cover or affect the **ordinary conduct of litigation**, from issue to disposal of final judgmentOrdinarily,** settlements, negotiations, ADR, and tribunal representation** are not arrangements.Note: **sham litigation exception.**
88
What is one exception to the litigation exemption to arrangement?
* **Sham litigation** for the purpose of money laundering would be an offence* Can arise if a **whole claim or category of loss is fabricated** to launder the criminal property. * The offence arises upon **execution of the judgment** or **completion** of the settlement.Example: contacted by a client in a different jurisdiction, they send money upfront on account, they then say the matter settled and request the money on account to be refunded. If solicitor suspected it was criminal proceeds, they have committed the offence of arrangement.
89
When does a person commit the offence of **acquisition**?
When they **acquire**, **use**, or **possess** (i.e. have physical custody of) criminal propertyThey must **know** or **suspect** the property is the proceeds of crimeExample: solicitor stays in a client's villa abroad knowing it was bought with the proceeds of crime/buys something at a suspiciously reduced price
90
In the context of acquisition, what is possession?
Physical custody
91
What are the defences to acquisition?
1. If an **authorised disclosure** is made by the offender2. If **legal privilege** excuses not disclosing3. If the property was acquired, used or possessed for **adequate consideration** and there was **no suspicion** that it was criminal property.
92
What is the additional defence to acquisition?
* If the criminal property was acquired, used, or possessed for **adequate consideration**, i.e. they paid a reasonable amount, in good faith, for an item that they did not know or suspect was stolen. * The defence applies when **professional advisers receive money for or on account of costs**, whether from the client or from another person on the client's behalf. **Disbursements** are also covered. The fees charged must be **reasonable**, and the defence is not available if the value of the work is significantly less than the money received.
93
What is an instance in which the *consideration* defence to acquisition would not apply?
When the accused **knows** or **suspects** that the consideration may help another to carry out criminal conduct
94
What are the three **indirect** money laundering offences?
1. Failure to report2. Tipping off3. Prejudicing an investigation
95
What are SARs?
A suspicious activity report is a **disclosure of suspicions of money laundering or terrorist financing** required under the Proceeds of Crime Act 2002 and the Terrorism Act 2000.Solicitors, bankers, jewellers etc. are required to make SARs and failure to do so is an offence.
96
When does a person commit the offence of failure to report?
When they: * **have reasonable grounds for suspicion of** (i.e. should have known or should have been suspicious) money laundering and/or terrorist financing and * **do not make a suspicious activity report** * **as soon as practicable** (slight delay permitted for taking legal advice)* and **no defence** appliesThis includes any information coming to the solicitor **in the course of business** (not just information relating to clients and their affairs) i.e. information about **potential clients, associates,** and **counterparties of clients, acquisition targets**, and even **employees of businesses** the solicitor is dealing with.
97
What activities would be a flag for money laundering?
1. Depositing money with solicitor and then **requesting return of funds**2. **Transfers** between bank accounts, in multiple names, multiple banks, and multiple countries3. **Overpayment** of tax4. Buying **investments** and **cashing them in**.
98
What is the scope of information which must be reported in a SAR?
Anything coming to the solicitor **in the course of business**, and not just relating to their clients/matters
99
Within what timescale must the solicitor make their report, and what is one acceptable reason for delaying?
**As soon as practicable**. Delay may be excused if the reason is legal advice is being sought, provided action is still prompt.
100
What is the required mental state for when conduct would give rise to the requirement to file a suspicious activity report?
If a person **should have known** or been suspicious (objective)**Test**: reasonable grounds for suspicionSolicitors **cannot deliberately ignore an obvious inference** from information known to them that another person was committing or had committed a money laundering offence.
101
What 2 defences are available for the offence of failure to report?
1. The information falls within a **privilege and privileged circumstances** not excluded by AML laws 2. Lack of **training**
102
What are the requirements for the defence of privilege and privileged circumstances for the offence of failure to report?
The information must fall within a **privilege that has not been excluded by the AML laws** or has **come to the solicitor in privileged circumstance**, including information that came to the solicitor: 1. From a client/representative of a client, in connection with the **giving of legal advice** to the client:2. From a client/representative of a client **seeking legal advice** from the professional adviser3. From a **person in connection with legal proceedings** or **contemplated legal proceedings.**Example: * Legal advice privilege: a solicitor advising on the legal aspects of a take-over bid/duties of directors under the Companies Act.* Litigation privilege: a solicitor assisting a client by taking witness statements from the client or from third parties in respect of litigation.
103
What is the lack of training defence to failure to report?
* Employees in firms who have **no knowledge or suspicion** of money laundering, even if there were reasonable grounds for suspicion, have a defence if they have **not received training*** Note, **partners** may be prosecuted instead.* This is **not** a defence to **terrorist** funding charges.
104
Who is liable for failure to train staff?
The firm's partners are liable for breach of the Regulations
105
What offence is lack of training **not** a defence to?
Terrorist funding charges
106
What are the two **tipping off** offences?
1. Disclosing to a third person that a **suspicious activity report** has been made to the police, HMRC, NCA or the MLRO *if that disclosure might prejudice any investigations*2. Disclosing an investigation to a **third person**This may be **in writing** or **verbally** and **direct** or **indirect** (including publishing relevant details) e.g. asking the client for a delay that causes them to be suspicious can amount to tipping off.Note there are **2 exceptions**:* **Normal enquiries** about instructions and retainer* Language included in the **standard terms of engagement**
107
Does tipping off have to be in writing an direct?
Tipping off can be in writing, oral, or by conduct (e.g. waiting too long or wanting to delay and making a person suspicious), and it can be direct or indirect
108
What are the 2 exceptions to the offence of tipping off?
* **Normal Enquiries About Instructions and Retainer** in order to remove, if possible, any concerns and enable them to decide whether to take on or continue the retainer (note: cannot disclose that a SAR has been made or an investigation is contemplated or ongoing)* A paragraph about money laundering obligations included in **Standard Terms of Engagement**
109
What are the four defences to tipping off?
1. Disclosures within an **undertaking or group**2. Disclosures between **institutions** (i.e. lawyers)3. Disclosures to **supervisory bodies**4. Disclosures to **client to dissuade the client from committing an offence**
110
What is the defence to tipping off of disclosure within an undertaking or group?
This applies to lawyers in the **same firm** or working on the **same matter**.* It is not tipping off to disclose to an employee, colleague, officer, or partner in the **same undertaking/group** that a SAR has been made* A legal professional will also not tip off if a disclosure is made to **another legal professional in a different undertaking** (i.e. not an accountant), provided that the undertakings the parties work in:1. Share **common ownership, management, or control**; **and** 2. Carry on business in either the UK, European Economic Area state, or a country that imposes money laundering **requirements equivalent to the EU**.
111
What four elements must be satisfied for the defence of disclosure between institutions (i.e. lawyers) to the offence of tipping off?
1. Disclosure made to **legal professional** (i.e. not an accountant) in EEA or country with **money laundering laws equivalent to the EU**2. Disclosure relates to **client/former client or both parties**, or a transaction or provision of services involving both3. Disclosure is made for purposes of **preventing** a money laundering offence, **and**4. Both parties have **equivalent professional duties** of *confidentiality* and protection of personal data
112
When is disclosure to a supervisory body not tipping off?
When the disclosure is for the purpose of *prevention*, *investigation*, or *prosecution* of a criminal offence, an *investigation under POCA*, or enforcement of any *court order* under POCA
113
What are the two ways in which a person can commit the offence of prejudicing an investigation?
*Know or suspect* that a money laundering, confiscation, or civil recovery investigation is being or is about to be conducted ***and*** either1. **Make a disclosure** to any person that is likely to prejudice the investigation, **or**2. **Falsifies, conceals, or destroys documents** relevant to the investigation, or causes that to happen
114
What are the 4 defences to the offence of prejudicing an investigation?
1. Did not **know/suspect** the **disclosure would be prejudicial**2. Did not **know/suspect** the **documents were relevant**3. Did **not intend to conceal facts** from person carrying out investigation4. Disclosure is in connection with legal proceedings and **not made with the intention of furthering a criminal purpose**.
115
If a solicitor suspects delays arising from the other party to the transaction are due to a SAR having been submitted by the otherparty's legal adviser, can the solicitor tell their own client their suspicions or would they be guilty of the offence of prejudicing an investigation?
If the solicitor is supremely confident in their own client's bona fide purposes, source of funds, andreasons for being a party to the transaction, they would **not commit an offence** since it requires a **knowledge or suspicion that disclosure would be likely to prejudice any investigation** relating to that SAR. They s**hould document their reasons for explaining** the position to their client.
116
What is the *in connection with legal proceedings* defence to prejudicing an investigation?
It is a defence that: * disclosure was made **by a professional advisor** or other relevant professional adviser * **to a client/client's representative**,* in connection with the **giving of legal advice** or to any person in **connection with legal proceedings or contemplated legal proceedings*** provided the disclosure is **not made with the intention of furthering a criminal purpose**.Example: Client seeks litigation advice from a solicitor over suing a previous legal adviser in respect of delays in a matter. The solicitor realises or suspects that the delays were caused by a SAR having been made by a legal adviser to the other party in the original proposed transaction. The solicitor **can advise the client as to the probablecause of the delay**, without committing an offence.
117
What 5 activities are covered by the Money Laundering, Terrorist Financing, and Transfer of Funds (Information on the Payer) Regulations 2017?
Activities of a legal professional when there is a **risk of money laundering occurring**, e.g. when the legal professional participatesin transactions concerning:* Buying and selling **real property or business entities*** Managing **client money, securities, or other assets*** Opening or managing **bank, savings, or securities accounts*** Organising contributions necessary for the **creation, operation, or management of companies*** Creating, operating, or managing **trusts, companies, foundations, or similar structures**.Participating: **assisting in the planning or execution** of the transaction or **otherwise acting** for or on behalf of a client in the transaction
118
What 6 activities are unlikely to be covered by the Money Laundering, Terrorist Financing, and Transfer of Funds (Information on the Payer) Regulations 2017?
* **Opening a general client account** for handing their clients' money* **Payment on account of costs** to a legal professional or payment of a legal professional's **bill*** Provision of **legal advice*** Participation in **litigation** or a form of **alternative dispute resolution*** **Will-writing**, (although a solicitor should consider whether any accompanying taxation advice is covered* Work **funded by the Legal Services Commission**.If a solicitor is uncertain whether the Regulations apply, they should take **legal advice** or **apply the broadest possible approach** to compliance with the Regulations.
119
What are the 5 requirements of businesses regulated by the Money Laundering, Terrorist Financing, and Transfer of Funds (Information on the Payer) Regulations 2017?
1. **Internal controls, policies and procedures** (customer due diligence measures to comply with Regulations and deter criminals)2. **Identification** (obtain sufficient evidence of identity in a timely manner)3. **Recordkeeping** (Minimum of 5 years after the completion of business)4. **Recognising and reporting** (Staff reprots to MLRO, MLRO investigates further and reports to authorities if necessary)5. **Training** (MLRO responsible for training all relevant staff on AML rules and regulations and the firm's internal controls, policies and procedures)
120
Under the Money Laundering and Terrorist Financing Regulations, who must a firm appoint and what is their role?
A **Money Laundering Reporting Officer** (MLRO/Nominated Officer)
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Who is exempt from having an MLRO?
An individual who provides regulated services but **does not employ any people or act in association** with anyone else
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What level of seniority must an MLRO be?
Sufficient seniority * **to make decisions on reporting** which can impact a business's relations with its clients and its exposure to criminal, civil, regulatory and disciplinary, sanctions, and * to have **access to all the business's client files and business information** to enable them to make the required decisions.
123
What are the 8 duties of the MLRO/Nominated Officer?
* Ensuring that, when appropriate, **reports are made** to the relevant authority.* Acts as the **central point of contact** between a firm or business and the NCA and law enforcement. * **Assessing internal reports**, making **further enquiries** if need be, and, if appropriate, **filing SARs with NCA.*** **Determining whether consent is required** to continue with the engagement or any aspect of it * Making decisions on **how business should be conducted pending receipt** of consent (usually) * **Training** within the business * Advising on **how to proceed with work once an internal report and/or SAR has been made** in order to guard against risks of tipping off or prejudicing an investigation* Designing and implementing internal **anti-money laundering systems and procedures**.
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What information must the MLRO report?
Information or other matter leading to **knowledge or suspicion** (including **reasonable grounds** for such) must be disclosed
125
Must the MLRO have sole discretion to report?
**Yes**, this must not be subject to the consent of anyone else
126
Who has the responsibility of reporting to the MLRO?
The **individual**, alwaysA report to a line manager or other colleague is **not sufficient** (but they may discuss the matter with managers/colleagues before making a report to the MLRO.
127
What is best practice when a MLRO is away?
* **Alternative arrangements** e.g. appointing a deputy MLRO should be made and staff informed* If there are **no alternative arrangements**: **self report** any suspicions directly to the NCA as harm might arise from the delay
128
After a SAR is submitted, what time scale does NCA have to review and ask for more information?
**7 days** ("the notice period")During this time, the act which may constitute money laundering **must not be carried out** but other activities on the same file such as searches or writing letters can continue.
129
What is the situation if NCA has not responded to a SAR after 7 days?
**Deemed consent is given** and the act suspected of constituting money laundering can take place
130
During the 7 day notice period after submission of a SAR, must all work on the matter cease?
**No**, other activities such as searches or writing correspondence can take place, but the **main act subject to the SAR must not unless the NCA gives consent** during the notice period.
131
What happens if NCA refuses consent within the 7 day window of submitting a SAR?
There is a **31 day moratorium** during which the **act must not take place**, but **other activities** can just like within the 7 day period
132
What happens after the 31 day moratorium period following refusal of consent after submission of a SAR?
The **MLRO can then give consent** for the actThe 31 days was intended to give the NCA the opportunity to take action. Note, delays caused by SARs may cause problems with clients but solicitors need to be careful that any explanation they give does not amount to a tipping off offence.
133
What is the purpose of customer due diligence?
In order to put the regulated businesses in a better position to **recognise** when a **customer or client** may be **using the business to launder money**.Used to establish that the client:* **is who they say they are*** has been **transparent about the nature of their business**One of the most important elements of the AML regime.
134
What 3 things should customer due diligence measures include?
* **Identifying the client and verifying their identity**, such as name and address, on the basis of **documents, data or information** obtained from a **reliable and independent source** (e.g. passport)* **Identifying** **the beneficial owner** (if this is not the client) and taking adequate measures, on a risk-sensitive basis, to **verify the beneficial owner's identity** (including understanding the ownership and control structure of a legal person, trust, or similar arrangement)* Obtaining information on the **purpose and intended nature** of the business relationship
135
When 4 events would trigger a requirement to carry out customer due diligence?
1. **Establish a business relationship**2. Carry out an **occasional transaction**3. **Suspect money laundering/terrorist financing**4. **Doubt the veracity or adequacy** or documents or information previously obtained
136
When is a solicitor-client relationship considered to be a business relationship?
When, at the time it is established, it is **expected to have an element of duration**
137
What is an occasional transaction?
Transaction (single operation or multiple that appear to be lined) worth **€15,000 or more**, carried out **other than as part of a business relationship**
138
What must a solicitor do if customer due diligence cannot be completed?
1. **Not carry out a transaction** with or for the client through a bank account2. Not **establish a business relationship** or carry out an **occassional transaction**3. **Terminate any existing business relationship**4. **Consider making a disclosure** to NCA
139
What is the *as soon as practicable* exception to the immediacy of the customer due diligence requirement?
Verification need not be completed as soon as contact is first established and may be completed *as soon as practicable* if:1. It is necessary **not to interrupt the normal conduct of business**, and2. There is **little risk** of money laundering/terrorist financingThis exception does not apply to **occasional transactions**.Example: In an urgent insolvency appointment, a practitioner should gather enough information to allow them to at least form a basic assessment and to complete other acceptance formalities such as considering the potentialfor conflicts of interest. However, it may take, for example, a few days to complete the other aspects of the required CDD.
140
In what situation does the *as soon as practicable* exception not apply?
If it is an occasional transaction
141
Do customer due diligence checks need to be completed at any time other than the beginning of a transaction?
Information must be **updated as needed** e.g. when there is a **suspicion** of money laundering or terrorist financing or when there are **doubts about the sufficiency of identification information** alreadyheld. If information held is insufficient, the solicitor should remedy this **as soon as is practicable**.
142
What are a solicitor's customer due diligence obligations when dealing with a trust or other legal arrangement/entity that is not a company involving beneficiaries?
They must verify the identity of any beneficiaries before a payment to them or before they exercise their vested rights
143
What should a solicitor **not** do until full verification of beneficiaries to a trust/other entity that is not a company is completed?
1. Undertake **substantive work**2. Permit **funds to be deposited** in the firm's client account3. Permit **property to be transferred**4. Permit **final agreements to be signed**
144
Does the requirement to cease acting and consider making a report to the NCA when a solicitor cannot complete customer due diligence apply where the solicitor is providing legal advice/preparing for or engaging in litigation or ADR?
**No**
145
What types of records should be kept in relation to customer due diligence material?
* Clients' **identity*** **Supporting evidence** of verification of identity (including the original and any updated records)* **business relationships** with the clients* Details of any **occasional transactions*** Details of the **monitoring of the relationship. **
146
What types of records should be kept in relation to suspicions and disclosures regarding customers?
Comprehensive records of suspicons and disclosures because **authorised disclosure of a suspicious activity is a defence** to criminal proceedings. Notes of:* **Concerns** raised by relevant persons and staff* **Discussions with the MLRO**/nominated officer regarding concerns* **Advice sought and received** regarding concerns* Reasons **why the concerns did not amount to a suspicion** and a disclosure was not made* **Copies of any disclosures** made.
147
What types of records should be kept in relation to customer due diligence broadly?
* Customer due diligence **material** * **Suspicions and disclosures**A business's records system must outline: * **what records** are to be kept* the **form** in which they should be kept* **how long** they should be kept.
148
What is the requirement for training under money laundering/terrorist financing laws?
**Relevant** employees (i.e.all client-facing or at least senior support staff) are required to be:* *made aware* of law related to money laundering /terrorist financing * **in context** business operates* to **identify red flags** and * **deal with transactions** which may be related to money laundering /terrorist financing * at **regular and appropriate intervals** (exact frequence is for business to determine)
149
What are the SRA's 5 recommendations for best practice in complying with the Money Laundering, Terrorist Financing, and Transfer of Funds (Information on the Payer) Regulations 2017??
* When possible, **meet clients in person** and verify their ID using original documentation and take **extra steps for ID verification when not meeting clients** in person* Use a client account to **hold client funds for a legal transaction only*** **Investigate further** if a client asks you to perform **large cash transactions and the source of funds is unclear or involves a high-risk jurisdiction** (high-risk jurisdictions include countries such as Bosnia and Herzegovina, North Korea, Ethiopia, Iran, Iraq, Sri Lanka, Syria, Trinidad and Tobago, Tunisia, Vanuatu and Yemen)* **Take advice from the MLRO**/nominated officer if something does not seem right about a client and/or transaction* **Submit SARs to the MLRO**/nominated officer that are **not vague or inaccurate.**
150
A solicitor is representing a client who is accused of being the head of a criminal organisation involved in human trafficking. The solicitor discovers that the client is the beneficial owner of a number of overseas bank accounts in which large sums of cash have been deposited. Does the solicitor have an obligation to report?
Maintaining client confidentiality trumps the obligation to report suspicion of money laundering in cases in which a solicitor is acting for the client on a bona fide litigation. There is no need to report to the MLRO/nominated officer. If, however, a solicitor was representing the same client in a property sale, the solicitor would need to alert the MLRO/nominated officer.
151
What legislation is relevant to the regulation of financial services?
**Financial Services and Markets Act 2000**, as amended by the **Financial Services Act 2012.** **Goal**: help make sure that banks and other financial institutions have **good management**, so they **don't make bad investments or take too many risks**.
152
Which 2 entities are involved in financial regulation?
1. Bank of England - Prudential Regulation Authority 2. Financial Conduct Authority
153
What is the role of the Financial Conduct Authority in financial regulation?
**Independent body accountable to HM Treasury**, but works very closely with the Prudential Regulation Authority. * **Regulates the conduct** of all financial services firms in the UK. * **Strategic objective**: ensure relevant markets function well by, among other things: **Protecting Consumers** and **Protecting Financial Markets** (i.e. taking measures to safeguard the integrity of the UK financial system) * **Granting approved person' status** to people who will work in certain functions of regulated financial services firms, including some solicitors.
154
What is the role of the Bank of England in financial regulation?
* UK's **central bank*** Responsible for **setting monetary policy*** The Bank's **Prudential Regulation Authority regulates and supervises** financial services firms.
155
What is the **general prohibition** under the Financial Services and Markets Act 2000?
No person may carry on a regulated activity in the UK unless they are **authorised** or **exempt from authorisation**It is a **criminal offence** to carry on a regulated activity without authorisation or exemption.| Under the Financial Services and Markets Act 2000
156
What is a **regulated activity**?
* A *specified* **activity** * in relation to a *specified* **investment** * carried out *in the course of business* * to which *no **exclusions*** apply
157
What are the **five** *specified **activities*** which are regulated?
1. Advising2. Dealing as Agent3. Arranging 4. Managing5. Safeguarding
158
What is advising?
Giving **advice to an investor** (or potential investor) on the **merits** of buying, selling, subscribing for, or underwriting a particular investmentNote, this **does not cover generic advice** e.g. "buying shares is a good investment", it needs to be **specific** e.g. "buying shares in Company A is a good investment"
159
What is dealing as an agent?
**Actually buying, selling, subscribing for, or underwriting** a particular investment **for another person**Example: committing the client to a particular transaction and signing forms of their behalf
160
What is arranging?
**Making arrangements for another person** to buy, sell, subscribe for, or underwrite a particular investmentExample: filling out forms and liaising with stock borkers for a client regarding selling some shares.
161
What is managing?
**Managing assets belonging to another person** in circumstances which involve the **exercise of discretion** (i.e. having a say in the decision making process)Example: solicitor deciding which investments from a portfolio a client should buy.
162
What is safeguarding?
**Protecting and administering** assets belonging to another personExample: making sure any interest earned on an investment is properly credited to the client.
163
What are the **six** *specified **investments*** most relevant to a solicitor which are regulated?
1. **Insurance** contracts e.g. defective title insurance/life assurance policy2. **Shares/securities**3. **Debentures**4. **Mortgage** contracts5. **Pension** schemes6. **Funeral plans**Note, there are **25 in total**.
164
What are two things which are **not** specified investments?
1. *Interests* in land2. National savings products, e.g. Premium Bonds
165
When must the conduct be carried out to breach the general prohibition?
**In the course of business**This generally means the activity is carried out for a client as part of their legal work **not** in their personal capacityExample: * advice at a party is not carried on by way of business (not, to be safe a solicitor should decline to give advice)* Friend comes to the solicitors's office - likely it is in the course of business.
166
What is the Designated Professional Bodies *exemption* which means a regulated activity would not violate the general prohibition at all?
If a solicitor provides a financial service **incidentally** to the provision of legal advice and **does not receive compensation** for this from anyone else without **accounting to the client** for it, it is exempted (subject to certain **limitations**)This exemption applies to certain Designated Professional Bodies including members of the SRA under the Law Society.Example: a solicitor is acting for a client in relation to a dispute and the client receives a settlement and asks for advice on investing it and asks the solicitor to **manage** the investment for them (so necessary exception doesn't apply)| Exemption falls under the Financial Services and Markets Act 2000
167
How is it determined whether an activity is *incidental* for the purposes of the Designated Professional Bodies exemption?
By considering whether the activity is incidental:1. To the **work the firm does as a whole**, *and*2. To the **client's particular matter**Example: exemption could not be relied on if one of the firm's main areas of business was the provision of the regulated activities.
168
What are some limitations of the Designated Professional Bodies exemption?
It does **not apply** to activities contained in the **SRA Financial Services (Scope) Rules**, including: * recommending that a client get rid of any rights under a personal pension scheme* the firm entering into a regulated credit agreement as lender (except for any credit agreement in relation to the firm's fees e.g. paying off bill by installments).
169
What are some activities in the SRA Financial Services (Scope) Rules to which the Designated Professional Bodies exemption does not apply?
1. Recommending a client get rid of any rights under a person pension scheme2. The firm entering into a regulated credit agreement as lender (except in relation to the firm's fees)
170
In order to provide incidental financial services under the Designated Professional Bodies exemption, what special rules does the SRA impose on firms?
Firms must:1. **Let clients know** at the outset that the **firm is regulated by the SRA** and not the FCA, and2. Confirm, if relevant, that the client is coming to the firm for **execution** of this incidental service and has **not sought/relied upon any advice** from the firm in relation to the transaction
171
What are four exclusions that will render a specified activity in a specified investment **not** a regulated activity?
1. **Takeover** exclusion2. Acting as **trustee, nominee, or personal representative**3. Introducing or acting **through an authorised person**4. The **necessary** exclusionNote, these exclusions **do not apply to insurance contracts**.| In Regulated Activities Order
172
What is the *takeover* exclusion that will render a specified activity in a specified investment **not** a regulated activity?
A solicitor can **deal as agent, arrange, or advise** with respect to a client who is **buying/selling 50% or more of the voting shares** of a company, or when the object of the transaction is *taking control* of the company
173
What is the *Acting as Trustee, Nominee or Personal Representative* exclusion that will render a specified activity in a specified investment **not** a regulated activity?
A solicitor can **advise, arrange, manage, and safeguard** investments when acting as a trustee, nominee, or personal representative.
174
What is the *introducing/acting through* exclusion that will render a specified activity in a specified investment **not** a regulated activity?
A solicitor may **introduce a client** to a person authorised by the FCA in order for the client to receive adviceA solicitor may **arrange/act as an agent** with respect to specified investments **if the client receives advice from an authorised person** and the solicitor is **merely assisting the client in acting** on this advice e.g. introducing to a mortgage broker and then dealing with the paperwork for the mortgage.Exceptions: * this does not apply to **insurance contracts*** this does not apply if the solicitor received **payment or commission** from the authorised person or any other source other than the client.
175
In what two circumstances is the *introducing/acting through* exclusion that would render a specified activity in a specified investment not a regulated activity **not available**?
1. Where the specified investment is an insurance contract2. Where the solicitor received payment/commission from the authorised person/any source other than the client
176
What is the *necessary* exclusion that will render a specified activity in a specified investment **not** a regulated activity?
It is not a violation of the general prohibition to **carry on an activity (other than managing)** if the activity is **reasonably regarded** as a **necessary part** of providing legal servicesThis exclusion cannot be used if: * the activity is **billed separately** from the main legal advice * if the activity relates to **insurance policies.**Example: administering an estate (main task) advising and arranging sale of assets to fund IHT (incidental and necessary).
177
In what three circumstances is the *necessary* exclusion that would render a specified activity in a specified investment not a regulated activity **not available**?
1. Where the activity is **managing**2. Where the activity relates to **insurance** policies3. Where the activity is **billed separately** from the main legal advice
178
What is the difference between an exemption and an exclusion in relation to the General Prohibition?
An exemption is from the requirement to be authorised under the general prohibition, so all conduct would be excusable under this. An exclusion goes to whether or not the conduct is a regulated activity and therefore caught by the general prohibition, but is not available in all circumstances.
179
Even though they are very similar, what is the key advantage of the **Designated Professional Bodies *exemption*** over the **necessary *exclusion***?
The Designated Professional Bodies exemption is **available for managing, and for activities related to insurance policies**, but the necessary exclusion cannot be used in these circumstances
180
If a firm wishes to carry out activities in relation to insurance policies, what additional requirements does the SRA impose?
1. **Notify SRA **that the firm is carrying out activities related to insurance policies2. Be put on a **register** of providers3. Appoint an **insurance distribution officer** (responsible for ensuring clients receive comprehensive information about products)Common in firms dealing with conveyancing, probate and litivation matters.
