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Legal Services > Money Laundering > Flashcards

Money Laundering Flashcards

1
Q

What is the main source of legislation regarding money laundering?

A

Proceeds of Crime Act 2002

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2
Q

Which agency is responsible for investigating money laundering?

A

National Crime Agency

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3
Q

What are the three stages of money laundering?

A
  1. Placement
  2. Layering
  3. Integration
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4
Q

Does the broader offence of money laundering also include mere possession of criminal property?

A

Yes

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5
Q

What is placement?

A

Placing dirty money into the financial system e.g deposit or bank transfer

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6
Q

What is layering?

A

Obscuring the origin of the proceeds by passing complex layers of financial transactions making the audit trail difficult

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7
Q

What is integration?

A

Using the layered funds to make legitimate transactions, like investment into property, buying businesses etc

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8
Q

At which stages of money laundering are solicitors usually involved?

A

Layering and integration

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9
Q

What is a “predicate offence?

A

The criminal offence that generates dirty cash

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10
Q

Do you need to be involved in the predicate offence itself (like robbing a bank) to be convicted of money laundering?

A

No

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11
Q

Is it an offence to conspire or attempt to launder money or help someone launder money?

A

Yes

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12
Q

What is the maximum penalty for money laundering?

A

14 Years Tronks or unlimited fine

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13
Q

What is the offence of concealing under the Proceeds of Crime Act? (POCA)

A

Concealing, disguising, converting or transferring dirty property, or removing it from the UK

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14
Q

What are three offences under POCA?

A
  1. Concealing
  2. Arranging
  3. Acquiring/using/possessing
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15
Q

Does concealing apply only to concealing of the property’s nature or also its source, location, ownership etc?

A

both

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16
Q

What mental state do you need to be convicted of money laundering?

A

KNOW or SUSPECT that the criminal property was derived from criminal conduct

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17
Q

What are the defenses to money laundering accusations?

A
  1. Authorised disclosure by offender
  2. Privilege excuses not disclosing
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18
Q

What is the defence of “authorised disclosure by the offender”?

A

Disclosure of the prohibited act BEFORE it takes place to: police, NCA, customs officer, Money Laundering Reporting Officer

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19
Q

When is authorised disclosure by the offender a defense when it is made DURING the prohibited act?

A
  1. You had no knowledge or suspicion when the act started
  2. You disclosed as soon as reasonably practicable after you knew or became suspicious
  3. You disclosed on your own initiative (i.e. not because you were about to get caught)
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20
Q

Explain the defence to an accusation of a concealing money laundering offence of “privilege excuses not disclosing”?

A

If legal professional privilege applies, you don’t have to disclose

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21
Q

When does the legal professional privilege defense to a concealing money laundering not apply?

A

If you know that the transaction is an offence

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22
Q

If a solicitor merely suspects that a transaction is a relevant offence, is the legal privilege defence still available to hiM?

A

Yes

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23
Q

What is arranging?

A

Layering/integration stage arrangements which you knew or suspected facilitates the acquisition, retention, use or control of criminal property by or on behalf of another person

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24
Q

Does a solicitor have to know that property is a proceed of crime or do they merely have to suspect?

A

Merely suspect

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25
Q

Is the ordinary conduct of litigation up to the disposal by judgment/ADR or tribunal representation covered as an offence of arranging?

A

No, unless it is sham litigation

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26
Q

What are the defences to an accusation of arranging?

A
  1. You made an authorised disclosure
  2. Legal professional privilege applies
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27
Q

What is the offence of acquisition, use or possession?

A

You cannot use, acquire or possess criminal property. Possession is physical custody

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28
Q

What are the defences to an accusation of use, possession or acquisition of proceeds of crime?

A
  1. Authorised disclosure
  2. Legal professional privilege
  3. Adequate Consideration
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29
Q

Explain the Adequate Consideration defence to the accusation of use, acquisition and possession of criminal property?

A

The criminal property was acquired in good faith for “adequate consideration”

30
Q

When does the adequate consideration defence to use, possession or acquisition of criminal property NOT apply?

A
  1. If you know or suspect that the goods or services provided for the criminal property will be used to help carry out criminal conduct
  2. If you charge far less for the value of the work than is normal
31
Q

Explain the duty you have to make a suspicious activity report under the indirect money laundering offences?

A

Report suspicions of money laundering must be made as soon as practicable (with some time to take legal advice if you need to)

32
Q

On what grounds can you be found guilty of failing to report a transaction?

A

There was something that raised REASONABLE GROUNDS FOR SUSPICION (objective test), including if you should have known or been suspicious

33
Q

What are the defenses to an accusation that you failed to report a suspicion?

A
  1. Privilege and privileged circumstances
  2. Lack of training
34
Q

Explain the defense of privilege and privileged circumstances?

A

Information was legally privileged and not excluded under AML laws or came to you under privileged circumstances

35
Q

What are the circumstances that the defence of privilege applies to a failure to report a suspicion?

A

Legal advice Privilege
Litigation Privilege

  1. Communications with client/agent of client regarding legal advice
  2. Communication with client/agent of client seeking legal advice
  3. Communication from someone in regarding legal proceedings or contemplated legal proceedings
36
Q

Explain the lack of training defence to the crime of failure to report a suspicion?

A

You are an employee and you did not receive training from the firm

37
Q

Does the defence of lack of training apply to insufficient training for terrorist funding charges?

A

Nope

38
Q

Explain the two tipping-off indirect money laundering offence?

A
  1. Disclosing to a third party that a suspicious activity report has been made if disclosure will prejudice investigations
  2. Disclosing an investigation to a third person
39
Q

Can a tipping off offence count if it was indirect?

A

Yes, it can be direct, indirect, written or verbal

40
Q

What are the exceptions to the offence of tipping off?

A
  1. Normal enquiries about instructions and retainer
  2. Language included in standard terms of engagement
41
Q

What are the defenses to the offence of tipping off?

A
  1. Disclosure within an undertaking or group
  2. Disclosures between institutions
  3. Additional permitted disclusures
    - supervisory body
    - purpose of prevention, investigation or prosecution of a criminal offence in UK or elsewhere
    - investigation under POCA
    - to dissuade client from engaging in offence amounting to conduct
42
Q

Explain the defence to tipping off of disclosure within an undertaking or group?

A
  1. Disclosing to a fellow employee/officer/partner of the same undertaking/group that a SAR was made
  2. Legal professional disclosing that a SAR was made to a legal professional in a different undertaking if (a) the undertaking has common ownership/management and control and (b) they carry on business in the UK, EEA or a country that has similar AML rules
43
Q

Explain the defence of a disclosure between institutions to the offence of tipping-off?

A

A lawyer:
1. Discloses to another lawyer in the EEA, UK or similar AML country
2. Relating to a client/former client of both lawyers or a transaction involving them both or provision of service involving them both ; and
3. Disclosure is made to prevent a money laundering offence; and
4. Both parties have equivalent professional duties of confidentiality and protection of personal data

44
Q

Explain the indirect offence of prejudicing an investigation?

A
  1. You know or suspect that a money laundering, confiscation or civil recovery investigation is ongoing/about to start
  2. You disclosre this to any person that is likely to prejudice the investigation ; or
  3. You falsify, conceal or destroy documents relevant to the investigation, or cause this to happen
45
Q

Can you unintentionally prejudice an investigation as a criminal offence?

A

Yes, intent is not necessary

46
Q

What are the defences to the offence of prejudicing an investigation?

A
  1. You made a disclosure but you did not KNOW OR SUSPECT that the disclosure would be prejudicial/documents were relevant
  2. Disclosure was made in connection with legal proceedings
47
Q

What activities must a lawyer do KYC?

A
  1. Real property or business entity buying/selling
  2. Managing client money, securities or other assets
  3. Organising contributions needed for creation, operation or management of companies
  4. Creating , operating or managing trusts, companies, foundations or similar structures
48
Q

What activities are not KYC regulated activities?

A
  1. Payment of costs of a legal professional
  2. Providing legal advice
  3. Participating in litigation or a form of ADR
  4. Will-writing
  5. Work funded by the legal services commission
49
Q

What are a lawyers KYC duties?

A
  1. Establish identity of client
  2. Establish beneficial owners of client
    3.Verify client identity
  3. Appoint a nominated officer/MLRO to whom reports are made
  4. Systems and procedures to prevent money laundering
  5. Training
50
Q

Do people carrying out regulated activities on their own (no employees) need to have a nominated Money Laundering Reporting Officer?

A

No

51
Q

What does the MLRO do?

A

Make disclosures to the NCA

52
Q

Who should be the nominated officer?

A

Sufficiently senior
Sufficient responsibility

53
Q

What is the role of the nominated officer?

A
  1. Reporting to authorities
  2. Assessing internal reports, making further enquiries, filing SAR’s, training etc
54
Q

Explain the duty to report to authorities that a nominated officer has?

A

Ensure that information/other matter leading to knowledge or suspicion of money laundering is properly disclosed to relevant authority

55
Q

When is your duty to notify a money laundering suspicion discharged?

A

When your report reaches the nominated officer

56
Q

What is best practice when a nominated officer is away?

A

To have a second in charge

57
Q

What must you do if the nominated officer and deputy are away and you need to make a report?

A

You report directly to the NCA

58
Q

What happens after filing a SAR with the NCA?

A

7 day review period during which the act must not be carried out but other activities like searches or letters may be

59
Q

What happens if the NCA does not respond after 7 days?

A

The act is cleansed and can go aheadWh

60
Q

What happens if the NCA replies within 7 days?

A

There is a 31 day moratoriam during which you cannot allow the potentially prohibited act to take place

61
Q

When must a solicitor undertake due diligence of a client?

A
  1. When they estbalish a business relationship
  2. When they carry out an occasional transaction

3.When they suspect money laundering or terrorist financing

  1. When they doubt the veracity or adequacy of documents, data or information previously obtained for DD purposes
62
Q

What is a business relationship?

A

When contact is established and it is established that there will be an element of duration

63
Q

What is an occasional transaction?

A

15k euros or more

64
Q

When must a solicitor verify a relationship?

A

Before they establish the business relationship or carry out an occasional transaction

65
Q

What happens if you cannot carry out the DD in time on the customer?

A
  1. You cannot carry out a transaction for the client through a bank account or;
  2. Establish a business relationship or carry out an occasional transaction
66
Q

What else should you do if you cannot do a DD on a client?

A
  1. Terminate any existing business relationship
  2. Consider making a disclosure to the NCA
67
Q

What is the exception to the rule that the client should be verified before the work begins?

A
  1. It is necessary not to interrupt normal conduct of business; and
  2. Little risk of money laundering or terrorist financing

BUT NOT FOR OCCASIONAL TRANSACTIONS

68
Q

What must a solicitor do when applying DD to a trust or any other legal arrangement or entity which is not a Company?

A

Verify identity of beneficiaries before making payment to them

69
Q

What is the exception to the requirement to cease acting and considering making a report to the NCA?

A

When you are advising a client on litigation/ADR but NOT transactional work

70
Q

How long should firms keep records?

A

5 years after end of the relationship

71
Q

What should a firm keep record of?

A
  1. Evidence of verification of identity
  2. Suspicions and disclosures made
72
Q

Who must undergo training for AML?

A

All relevant employees must be made aware of the law and regularly trained

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