Legal System 6 - Overriding legal obligations Part 2 Flashcards
What is money laundering?
It is a method used by criminals to make it appear as though proceeds of crime derive from a legitimate source
What are proceeds of crime?
Benefits that flow from criminal activity
How many stages are there in money laundering?
3
Placement
Layering
Integration
What are the stages of money laundering?
Placement: money from criminal activity is introduced into the financial system
Layering: the money passes through a number of parties or transactions to distance it from criminal activity
Integration: the money is integrated back into the financial system
What are key duties under the MLRs?
- maintain written risk assessment that identifies and assesses the risk of the firm being used for money laundering
- establish and maintain policies, control and procedures to mitigate and manage ML risks
- firmst must appoint an ML compliance officer (MLCO) and a ML reporting officer (MLRO). Changes in the person must be reported to the SRA
- firms must provide staff with appropriate training and maintain records of the training
- firmst must verify the identify of each of their clients (customer due diligence, CDD)
What is customer due diligence (CDD)?
The measures in place to identify and verify a client so as to reduce the risk of money laundering
When must CDD be carried out?
when
* forming a business relationship
* carrying out an occasional transaction that amounts at at least GBP 15,000
* suspicion of money laundering
* doubts of accuracy / adequacy of docs/information previously provided for CDD purposes
When must CDD take place?
as soon as practicable
In the scope of CDD, when the client is not an individual, the solicitor must take steps to verify the identity of…
any beneficial owner
Where a client is a corporate body, in the course of CDD, solicitors must obtain…
- the name of the corporate body
- its company number
- its address
- the law the body is subject to
When is simplified CDD allowed?
where the business relationship or transaction presents a low risk of money laundering
What is an example of simplified due diligence?
The business relationship or transaction presents a low risk of money laundering.
–> The company is a well-known financial institution or company whose shares are listed on the stock market
When is an ehanced due diligence (EDD) rquired?
- person from high-risk country
- politically exposed person (PEP)
- family member/known associate of a PEP
- any other situation that presents a higher risk of money laundering (e.g. never met the client in person
What does EDD stand for?
Ehanced due diligence
What does an EDD involve?
- examining the background and purpose of the transaction
- increased monitoring of the buiness relationship
–> typically additional seteps to verify a client’s identiy and the business transaction
Solicitors are expected to look out for signs of money laundering
True/false
true
What are typical warning signs of ML?
- client behaviour (e.g. avoids personal contact, refuses to provide info, etc.)
- unusual source of funding (e.g. large cash deposits)
- nusual transactions or instructions (e.g. loss-making transaction)
- unnecessary movement of moneis from/to high-risk countries
What must a solicitor do when there are signs of money laundering?
The solicitor must report his concerns
When does a solicitor have to report his concerns regarding ML?
when he knows or suspects ML activity
Who does a solicitor have to report his suspicion of ML to?
to the firm’s nominated officer/MLRO
What is the process when a solicitor suspects ML activity?
- solicitor reports to nominated officer/MLRO
- nominated officer/MLRO carefully considers report and determines whether he should make a Suspicous Activity Report (SAR)
- nominated officer/MLRO must make a report to the National Crime Agency (NCA) where he knows/suspects ML activity
What do reports on suspicion of ML need to be made?
as soon as is practicable
Solicitors and nomiated officers, who fail to report suspicion or knowledge of money laundering, are likely to…
commit an offence under the Proceeds of Crime Act 2002
What types of offences exist under the Proceeds of Crime Act 2002?
(a) direct offences
(b) indirect offences
What direct offences exist under the Proceeds of Crime Act 2002?
- concealing, disguising, converting or transferring criminal property or removing it from the UK
- entering into/becoming concerned in an arranged which facilitates the acquisition, retention, use or control of criminal property by or on behalf of another
- acquire, use or have possession of criminal property
What non-direct offences exist under the Proceeds of Crime Act 2002?
- failure to disclose information about money laundering (applies to both solicitors and nominated officers/MLROs)
- revealing that internal/external report on suspicion of ML has been made if this might prejudice an ensuing investigation
- revealing that an investigation into MLM is contemplated/carried out if this might prejudice the investigation
What can a solicitor do when he wants to continue with a transaction that would otherwise be prohibited under the Proceeds of Crime Act 2002?
He can request consent.
If such request is granted, the solicitor has a DAML - defense against money laundering
What is a DAML?
Defence against money laundering
A DAML request is made when a person or organization, typically through the MLRO, seeks consent from the National Crime Agency (NCA) to proceed with a transaction or activity that they suspect could involve money laundering.
If the NCA does not respond to a request for consent, what are the consequences?
No response within 7 days = deemed consent
–> solicitor will have a DAML
What is a reasonable excuse defence in the scope of ML?
intention to make an authorised disclosure was there, but “reasonable excuse” for not doing so
What is an adequate consideration defence in the context of AML?
The solicitor received adequate consideration (e.g. payment) for their services
Does not apply where:
* solicitor at least suspected that this facilitates crime
* payment is disproportionately higher than work undertaken
What is a training defence in the context of AML?
Solicitors of firms must receive adequate anti-money laundering training; if they lack knowledge due to insufficient training, they may not be liable for an offence.
Does not apply where there is gross negligence/suspicion
What are privileged circumstances in the context of AML?
Information obtained by a solicitor is protected by legal professional privilege (LPP) if in connection with seeking/giving legal advice.
This does not apply if information is given to the solicitor with the intention of furthering a criminal purpose
What does AML stand for?
anti-money laundering
What does the defence legal overseas conduct in connection with AML refer to?
the criminal conduct was lawful in the country in which it was made and, if made in the UK, would not have been punishable by 12 months’ imprisonment or more
