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Legal Services > Money Laundering > Flashcards

Money Laundering Flashcards

1
Q

Money laundering?

A

exchanging money or assets that were obtained criminally for money or other assets that are clean.

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2
Q

purpose of anti-money laundering regulation?

A

prevent criminals from concealing the proceeds of crime by laundering money.

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3
Q

Criminals launder dirty money through a series of stages to give them the appearance of…

A

clean money.

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4
Q

Tthe first stage of ML is…

A

Placement - the stage at which the proceeds of crime are put into a non-cash asset.

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5
Q

The second stage of ML is…

A

Layering - when criminals use a transaction (passing money through a solicitor’s account before withdrawing it again) to make tracing the transaction as hard as possible.

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6
Q

The third stage of ML is…

A

Integration - the money will be integrated back into the financial system as legal tender.

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7
Q

Why is integration done from legitimate sources?

A

create a plausible explanation for where the money has come from.

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8
Q

A transfer of funds from his solicitor’s account on the direction of a criminal posing as a…

A

genuine client.

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9
Q

The Money Laundering, Terrorist Financing and Transfer of funds (Information on the Payer) Regulations 2017 (SI 2017/92) (as amended) (MLR 2017) apply to?

A

persons acting in the course of business carried out in the UK, which would include independent legal professionals.

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10
Q

Failure to comply with the MLR 2017 is a… offence.

A

criminal

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11
Q

The MLR 2017 is in response to the global increase of money laundering driven by…

A

the cross-border nature of financing.

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12
Q

The Law Society of England and Wales provides guidance on?

A

the circumstances and practise areas in which is solicitor can encounter money laundering

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13
Q

Secretive behaviour by clients?

A

client refusing to answer questions or share information or located in a jurisdiction or location that has no connection with the law firm.

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14
Q

Unusual transactions?

A

the client instructing the firm on a matter that it is uncommon for the firm to act on or with the client to be involved with.

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15
Q

Source of funds?

A

the client has large amounts of cash or sources of private funding that do not match the profile of the client.

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16
Q

Third-party funding?

A

funds provided by a third party and the reasons they are providing funding on behalf of the client.

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17
Q

Sudden changes in instructions?

A

consider if there is a reasonable explanation for the changes to the retainer or termination of the transaction, and if it was a ploy to launder money through the firm’s client account.

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18
Q

High-risk practice area -
(trust and company formation)?

A

trust and companies used in unnecessarily complex structures to hide their beneficial ownership of an asset without a legitimate commercial purpose.

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19
Q

High-risk practice area -
(conveyancing)?

A

high value residential properties in London and Edinburgh are often used to launder money, especially if held using complex trust or company structures that conceal their ownership.

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20
Q

High-risk practice area -
(The operation of client account)?

A

the operation of the client account in the following manner is a warning sign of possible money laundering.

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21
Q

4 signs of possible money laundering by the operation of a client account.

A

Instructions to act as a bank or escrow agent or pay bills unrelated to the matter.
Instructions to return overpayments to a client or a third party.
Instructions to pay out funds at intervals.
Transactions are aborted for no clear reasons.

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22
Q

the MLR 2017, the Proceeds of Crime Act 2002, and the Terrorism Act 2000 -
have a senior member of management appointed as…

A

a Money Laundering Compliance Officer (MLCO) responsible for compliance with the MLR.

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23
Q

the MLR 2017, the Proceeds of Crime Act 2002, and the Terrorism Act 2000 -
have a nominated…

A

nominated Money Laundering Reporting Officer (MLRO).

24
Q

Can the MLCO and MLRO be the same person?

A

yes

25
Q

the MLR 2017, the Proceeds of Crime Act 2002, and the Terrorism Act 2000 -Report suspicious activity that they think can indicate money laundering both internally and to the MLRO and externally to…

A

the National Crime Agency (NCA).

26
Q

the MLR 2017, the Proceeds of Crime Act 2002, and the Terrorism Act 2000 -Have a system clearly setting out the requirements for making a disclosure of suspicious activity under the…

A

Proceeds of Crime Act 2002 and the Terrorism Act 2000.

27
Q

the MLR 2017, the Proceeds of Crime Act 2002, and the Terrorism Act 2000 -Undertake customer due diligence to verify…

A

the identity of clients, source of funds, beneficial owners, and the nature of business transactions.

28
Q

the MLR 2017, the Proceeds of Crime Act 2002, and the Terrorism Act 2000 -Keep records of…

A

customer due diligence undertaken.

29
Q

the MLR 2017, the Proceeds of Crime Act 2002, and the Terrorism Act 2000 -Ensure staff are…

A

properly trained.

30
Q

Which act creates a series of money laundering offences?

A

The Proceeds of Crime Act 2002

31
Q

Principle money laundering offences (apply to everyone) -
s.237?

A

concealing, disguising, converting, transferring or, removing criminal property from England and Wales, Scotland, and Northern Ireland.

32
Q

Principle money laundering offences (apply to everyone) -
s.328?

A

entering into or becoming concerned in an arrangement which you know, or suspect facilitates (by whatever means) the acquisition, retention, use, or control of criminal property by or on behalf of another person.

33
Q

Principle money laundering offences (apply to everyone) -
s.329?

A

acquiring, using, or possessing criminal property.

34
Q

Regulator Sector offences of failure to report and tipping off (apply to businesses in the regulated sector, like law firms) -
s.330?

A

failure to disclose knowledge or suspicion of money laundering to your MLRO.

35
Q

Regulator Sector offences of failure to report and tipping off (apply to businesses in the regulated sector, like law firms) -
s.331?

A

failure by an MLRO to disclose knowledge or suspicion of money laundering to the NCA.

36
Q

Regulator Sector offences of failure to report and tipping off (apply to businesses in the regulated sector, like law firms) -
s.333a?

A

Tipping off the person you know, or suspect is money laundering about a money laundering disclosure or investigation.

37
Q

If a solicitor knows who suspects that the proceeds of crime are involved in a particular matter
they must -
2-step process:

A

Report his concerns to the MLRO who must make a decision on whether to report it to the NCA.
Not mention his concerns or the referral to the NCA to his client to avoid the offence of tipping off.

38
Q

Disclosure before the act taking place - A solicitor does commit an offence under ss.327, 328, 329 if…

A

he makes an authorised disclosure to the firm’s MLRO before the transaction taking place.

39
Q

Disclosure before the act taking place -Once the MLRO files the suspicious activity report to the NCA, the MLRO is unable to give consent for the transaction to proceed unless either:
(3 stages):

A

The MLRO receives the consent of the NCA
OR the MLRO has heard nothing from the NCA for seven working days
OR consent is refused by the NCA, the MLRO cannot give consent to proceed unless consent is granted within 31 days, or a period of 31 days has expired from the date of refusal.

40
Q

Disclosure during the prohibited act - A solicitor does not commit an offence under ss.327, 328, 329 if…

A

he makes an authorised disclosure during the prohibited Act.

41
Q

Disclosure during the prohibited act -When the alleged offender began to do the act, he did not know or suspect…

A

that the property constituted a person’s benefit from criminal conduct,
AND
the disclosure is made as soon as practicable after the alleged offender first knows or suspects the property constitutes a person’s benefit from criminal conduct and the disclosure is made on the alleged offender’s own initiative.

42
Q

Disclosure after the prohibited act - A solicitor does not commit an offence under ss.327, 328, 329 if -

A

he makes an authorised disclosure after the prohibited act.

43
Q

Disclosure after the prohibited act -
The alleged offender has a reasonable excuse for his failure to make the disclosure…

A

before he did the act,
and the disclosure is made on his own initiative and as soon as it is practicable for him to make it.

44
Q

Overseas defence -
A solicitor will not one of the principal money laundering offences where…

A

the criminal conduct occurred outside the UK and the conduct was not unlawful in the country where it happened.

45
Q

A firm must know their clients and the purpose of their business relationship with the firm to avoid…

A

being involved in money laundering.

46
Q

Verifying the identity and address of the client at the outset through due diligence and…

A

production of original documentary evidence (e.g., passports, photocard driving licence or other government documents) is a legal requirements set out in the MLR 2017, including retaining records of the documents used for 5 years.

47
Q

There is an obligation to conduct… …. of a business relationship.

A

ongoing monitoring

48
Q

Regulation 28 MLR 2017 Customer due diligence means the relevant person must:
2-stage test:

A

Identify the customer (unless the customer is known to and has been verified by the relevant person).
Assess and obtain information on the purpose and intended nature of the business relationship or occasional transaction.

49
Q

Regulation 27 MLR 2017?

A

the relevant person must apply customer due diligence measures if they:
Establish a business relationship.

50
Q

Carry out an occasional transaction that amounts to a transfer of funds (by electronic means) exceeding…

A

EUR 1000.

51
Q

Suspect money laundering or?

A

terrorist financing.

52
Q

Doubt the veracity of adequacy of documents or information previously obtained for the purposes of…

A

identification or verification.

53
Q

Where the customer is a body corporate, the relevant person must obtain and verify:
4 elements.

A

The name of the body corporate.
Its company or registration number.
The address of its registered office and its principal place of business.
Records relating to the beneficial ownership and understand the ownership and control structure of corporate customers.

54
Q

If the customer is not a company listed on a regulated market, the following extra measures need to be determined and verified:
3 elements.

A

The law to which the body corporate to subject, and its constitution.
The full names of the board of directors or management body responsible for the operations of the body corporate.
The identity of any beneficial owner. If the beneficial owner is a legal person, trust or company, reasonable measures must be taken to understand the ownership and control structure.

55
Q

Regulation 30 MLR 2017?

A

a relevant person must verify the identity of the customer, any person purporting to act on behalf of the customer and any beneficial owner of the customer before the establishment of a business relationship or the carrying out of the transaction.

56
Q

Regulation 31 MLR 2017 -
a relevant person is unable to apply due diligence measures, they must:
4 elements.

A

Not to carry out any transaction to a bank account with the customer or on behalf of the customer.
Not establish a business relationship or carry out a transaction with the customer otherwise than through a bank account.
Terminate any existing business relationship with the customer.
Consider whether to make a disclosure under the Terrorism Act 2000 or the Proceeds of Crime Act 2002.

57
Q

Regulation 33 MLR 2017?

A

enhanced due diligence and monitoring can be required (in addition to enhanced customer due diligence) where the transaction or arrangement presents a high risk of money laundering or terrorist financing.

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