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Regulation & Compliance Chapter 3 & Chapter 6 > Money Laundering > Flashcards

Money Laundering Flashcards

1
Q

Regulatory Framework for ML

A

Laws

Process of crime act 2002
ML Regulations 2017

Industry best practice

Joint Money Laundering Steering Group
FCA Handbook - SYC

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2
Q

EU Vs UK law

A

EU LAW - MLD

UK Law- MLR

UK still amend on 5 + 6 MLD even though not in EU

Secondary legislation- law but is not created in full parliament

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3
Q

Money Laundering process

A

Separating assets from original origin

Placement - money into bank
Layering - from bank to fund manager (covers audit trail)
Integration - returned to criminal in legitimate means

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4
Q

POCA 2002 offences relating to money laundering

A

1) Concealment (max 14 years/unlimited fine)
2) Arrangements (max 14 years/unlimited fine)
3) Acquisition use and possession ( max 14 years/unlimited fine)
4) Prejudice an investigation (max 5 years/unlimited fine)
5) Failure to disclose (max 5 years/ unlimited fine )
6) Tipping off (max 2 years/unlimited fine)

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5
Q

Fourth Money Laundering Directive (4MLD)

A
  • Requires risk based approach
  • extends definition of PEPs to include domestic politicians
  • Requires firms to record beneficial owners
  • Includes tax crimes as predicate offences
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6
Q

Fifth Money Laundering Directive (5MLD)

A

January 2020

  • Adds legal definitions of virtual currencies
  • limits prepayment card usage to 150 without ID, 50 for online transactions
  • High value goods (jewelers) traders require adequate KYC for transactions above 10,000
  • Public lists of beneficial ownership and politically exposed public functions
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7
Q

Sixth Money Laundering Directive (6MLD)

A

UK did not adopt into UK law

  • Predicate offences harmonised, cybercrime & environmental crime added to list
  • Adds offence of aiding and abetting money laundering
  • extends criminal liability to legal persons
  • Increases minimum penalties for those found guilty of ML offences
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8
Q

Main MLR 2017 requirements

A

1) Internal controls, policies and procedures
2) Identification procedures
3) Record Keeping
4) Recognition and reporting suspicious transactions
5) Education & training

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9
Q

1) Internal controls, policies and procedures

A

Main MLR 2017 requirements

Establishment procedures for identify + reporting

Appointment of MLRO

Co-operate FCA

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10
Q

2) Identification procedures

A

Main MLR 2017 requirements

Required;

  • ML known/suspected
  • new business relationship
  • transaction/series > 15,000

Not required;

  • Deal with UK/EU credit financial institution
  • Intro from FATF, J , G, IOM (one-off)
  • Bank transfer/ cheque from personal accounting
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11
Q

2) Identification procedures - Individuals UK+Non UK

A

Individuals

UK Resident -
Face to Face = Personal documents

Not Face to Face = Personal docs + public docs (Credit agency reference search)

NOT UK Resident -
Face to face = Personal documents

Not Face to Face = Local Reference (local bank, lawyer, solicitor)

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12
Q

2) Identification procedures - Businesses UK+Non UK

A

UK Quoted + Known Directors = No special procedures

UK Quoted + Unknown Directors = Audited accounts/ cert incorporation
Check on directors/partners

OverSeas
As above but special care (Russia,Nigeria, Colombia)

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13
Q

3) Record Keeping

A

Retention of relevant records (identity checks) five years

Full details transactions and counterparties

Special care with bearer securities

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14
Q

4) Reporting of suspicious transactions

A

Individual employee - MLRO - NCA

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15
Q

5) Education & Training

A
  • Training appropriate to experience/ responsibility

- aware personal liability

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16
Q

Money Laundering Red Flags

A

1) Circumstances warranting enquiry
2) Unusual dealing patterns
3) Abnormal transactions

17
Q

1) Circumstances warranting enquiry

A
  • reluctant/ verification difficult
  • difficulty accounts documents for corporates
  • no discernible reason fro using firm
  • introduced by overseas banker , drug trafficking
18
Q

2) Unususal dealing patterns

A
  • large number transactions number jurisdictions
  • not in keeping with usual activity
  • buy and sell no discernible purpose (churning )
  • Low grade bought overseas and then sold in uk and high grade securities bough with proceeds
  • bearer securities held outside recognised custodial system (difficult to track)
19
Q

3) Abnormal Transactions

A
  • small transactions in same security (smurfing) then transfer to different account
  • nature/size/frequency appears unusual
  • transfer to unrelated third party
  • practice not in keeping with normal practice in market
  • Disguise audit trail through linked transactions
20
Q

FCA Handbook

A
  • AML/CTF provisions include in SYSC (Senior Management Arrangements, systems & controls)
  • Firm responsibility to decide upon and maintain appropriate systems and controls to meet AML/CTF requirements. JMLSG guidance notes have treasury approval
  • MLRO make annual report on AML/CTF to board
21
Q

FATF

A

Financial Action Task Force
Part of OECD (Organisation for Economic Co-operation and Development)

Create recommendations AML/CTF

Publishes list of “non co-op countries”

Firms take care when dealing with customer in those countries

22
Q

Terrorist Financing

A

violence or fear by organised group against civilians

Compelling aim for government to change

Terrorist Financing - movement money by terrorists to undertake specific ops (short - term )

Terrorist Funding - Collection of funds for terrorist groups (long term)

23
Q

Difference between AML + TF

A

ML - taking dirty money making it clean

TF - taking clean money and making available for dirty purposes

TF involves smaller sums of money than ML

TF legitimate obtained income

24
Q

TF Legislation

A

Terrorism Act 2000 / Anti - Terrorism, Crime and Security Act 2001

Covers use , threat terrorism anywhere in world

Max penalty for non disclosure - 5 years/unlimited fine

Counter Terrorism Act 2008
Extended enforcement powers for HMT
info from firms without court warrant

Criminal Finances Act 2017
Further extended AML & CTF civil recovery and enforcement powers

Regulation & Compliance Chapter 3 & Chapter 6 (9 decks)

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