Money Laundering Flashcards
Regulatory Framework for ML
Laws
Process of crime act 2002
ML Regulations 2017
Industry best practice
Joint Money Laundering Steering Group
FCA Handbook - SYC
EU Vs UK law
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
Money Laundering process
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
POCA 2002 offences relating to money laundering
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)
Fourth Money Laundering Directive (4MLD)
- Requires risk based approach
- extends definition of PEPs to include domestic politicians
- Requires firms to record beneficial owners
- Includes tax crimes as predicate offences
Fifth Money Laundering Directive (5MLD)
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
Sixth Money Laundering Directive (6MLD)
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
Main MLR 2017 requirements
1) Internal controls, policies and procedures
2) Identification procedures
3) Record Keeping
4) Recognition and reporting suspicious transactions
5) Education & training
1) Internal controls, policies and procedures
Main MLR 2017 requirements
Establishment procedures for identify + reporting
Appointment of MLRO
Co-operate FCA
2) Identification procedures
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
2) Identification procedures - Individuals UK+Non UK
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)
2) Identification procedures - Businesses UK+Non UK
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)
3) Record Keeping
Retention of relevant records (identity checks) five years
Full details transactions and counterparties
Special care with bearer securities
4) Reporting of suspicious transactions
Individual employee - MLRO - NCA
5) Education & Training
- Training appropriate to experience/ responsibility
- aware personal liability
Money Laundering Red Flags
1) Circumstances warranting enquiry
2) Unusual dealing patterns
3) Abnormal transactions
1) Circumstances warranting enquiry
- reluctant/ verification difficult
- difficulty accounts documents for corporates
- no discernible reason fro using firm
- introduced by overseas banker , drug trafficking
2) Unususal dealing patterns
- 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)
3) Abnormal Transactions
- 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
FCA Handbook
- 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
FATF
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
Terrorist Financing
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)
Difference between AML + TF
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
TF Legislation
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
