Legal Services - SQE 2 Flashcards
What is the 4-stage test for determining whether something is a regulated activity?
- Are you in a business?
- Is there a specified investment?
- Is there a specified activity?
- Is the activity excluded?
What constitutes a specified activity?
- Dealing
- Arranging
- Managing
- Safeguarding
- Advising
- Lending money on/administering a regulated mortgage contract
What activities are excluded under the FSMA?
- Introducing
- Using an authorised third party
- Acting for an execution-only client
- Acting as trustee/PR
- Professional/necessary exclusion
- Takeover exclusion (must be acquiring 50%+ of shares)
What conditions need to be satisfied for the exemption to apply?
- Must not receive any benefit/advantage from a third party that it does not account to its clients for
- Specified activity must be a minor, incidental part of the professional services
- Must be a member of a profession that is regulated by a professional body
- Person must comply with the rules of their professional body
What is the test for a specified activity being incidental?
Specific test = regulated activity must arise out of/be complementary to some other service being provided by the firm
General test = cannot be a major part of firm’s activities
What is required under standard due diligence?
Verify the identity of the client on ID documents received from an independent source
Verify the beneficial owner and their identity
Verify authorisation
- eg: when someone purports to act on behalf of a client
What factors point towards using simplified due diligence?
- Company is listed on regulated market
- Location of regulated market
- Where the client is established and does business
What factors point towards using enhanced due diligence?
- Client provided false/stolen ID
- Client is a PEP or family member of a PEP
- Complex/unusually large transaction which has not economic or legal purpose
- Client/counter-part to transaction is in a high risk country
If a client on the ‘sanctioned list’, can a firm still act for them?
Yes if they obtain a licence to receive reasonable fees for the provision of legal advice to someone on the sanctioned list
Firms can face liability even where they have no knowledge/reasonable cause to suspect that a transaction is in breach of the sanctions’ regime
Describe the arrangement which one knows/supsect facilitates money laundering offence
An arrangement which know/suspect facilitates the acquisition/retention/use/control of proceeds of crime
Know/suspect is subjective; must amount to ‘suspicion’
Criminal property = the property constitutes or represents benefit from criminal conduct
- If committed abroad, it will come under the definition of criminal conduct if it would have been considered as such in the UK
Define the authorised disclosure defence and the circumstances which enable a solicitor to exercise it?
Making a disclosure, normally to the nominated officer whose responsibility it is to report a suspicious activity report to the NCA
Before the act: once SAR has been sent, officer cannot give consent until:
a) Nominated officer receives consent
b) Nominated officer hears nothing for 7 days
c) Where consent is refused, nominated officer cannot give consent unless subsequently granted within 31 days or if the 31 day period expires
- 31 day period gives authorities time to take action with respect to the money laundering
During the act:
a) When the solicitor began to do the act, they did not know/suspect that property represented a benefit from criminal conduct; and
b) Disclosure is made as soon as practicable and on solicitor’s own initiative
After the act: must have goods reasons for failing to disclose; must be done as soon as practicable and on their own initiative
Define the overseas defence
Knew/believed criminal conduct occurred abroad and conduct was lawful in country where it took place
Secretary of State does have the power to override this provision
Describe the acquiring/possessing/using criminal property offence
Acquiring/using/possessing criminal property
Usually for those who had no involvement in the original crime, but have enjoyed the benefit
Defences:
- Authorised disclosure defence
- Overseas defence; and
- Adequate consideration defence
Describe the concealing money laundering offence
Concealing/disguising/converting/transferring criminal property or removing it from the UK
Authorised disclosure and overseas defence applies
Describe the failing to disclose offence
Max 5 years’ imprisonment
- Know/suspect OR have reasonable grounds to know/suspect (=> objective) person is engaged in money laundering
- Information comes in course of business in regulated sector
- Information may assist in identifying money launderer/location of laundered property; and
- Do not make disclosure as soon as is practicable
Legal professional privilege defence applies, as well as overseas defence
