Money laundering Flashcards
What/who is FCA responsible for regulating?
conduct of all firms, including solicitors firms
AND
prudent regulation of those not regulated by Prudent Regulation Authority
AND
regulating consumer credit and second mortgages
3 objectives of FCA
- Protect consumers
- Enhance integrity UK financial system
- Promote competition in market
What and who is PRA responsible for?
Authorising and prudent regulation of firms managing significant financial risks
eg banks, building societies, insurers, credit unions, certain investment firms
aka PRA-authorised or dual-regulated firms
What activities are included under PRA-regulated activities and effect?
Accepting deposits, insurers and investments as principal (using own assets to buy)
Any company carrying out becomes PRA-authorised
Do firms need to obtain authority for authority from FCA for engaging in regulated financial activity (e.g. corporate)?
Not if supervised by a designated professional body
SRA is a DPB
And can meet certain conditions
Two main restrictions under FSMA 2000 on solicitors carrying out financial services?
CANNOT:
- carry out regulated activity unless authorised or exempt (general prohibition)
- make financial promotion
Implications of breaching FSMA restrictions (solicitors)
- criminal offence up to 2 years imprisonment
- unlimited fine
- relevant agreement unenforceable
- breach contract (the contract between sol and client)
Test to determine a regulated activity? (i.e. by FCA)
- in BUSINESS?
(solicitor obvs is) - Specified INVESTMENT
OR advising on financial standing / administering benchmark?
(not land or national savings) - Is there a specified activity?
- Is there an exclusion?
What constitutes ‘information about a person’s financial standing or administering a benchmark’ for purpose of regulated activity?
Effect of doing this?
Financial standing:
Providing or advising on credit reference and credit information services
Benchmark:
Used in markets to set prices / measure value of something etc
Effect = if doing a specified activity which relates to benchmark / financial standing, need an exemption
What counts as specified investment activity?
AAMSA
aid and mais sitting alon
Dealing as agent
○ (buying/selling/subscribing/underwriting clients investments for client and commits them to it)
think of it like an agent to a contract
○ Eg selling shares on divorce order
- Arranging
○ Contact between client and investment company
- Managing
○ Discretion
- Safeguarding
○ Safeguarding/administering investments
○ Mainly trustee PR
- Advising
○ Specific advice
○ Eg in buying in tesco
But not regulated if give generic advice (eg respective merits of diff types of mortgage)
What exclusions may apply to authorise solicitor in a transaction for an otherwise specified regulated activity?
Iz Undstans Archaic And Problematic Bhvour
- Introducing
- Using an authorised ATP
- Acting for an execution-only client
- Acting as a trustee or PR
- Professional/necessary
- Body corporate takeover
(see OneNote)
What exclusions apply to allow solicitor to deal as agent?
- ATP (authorised TP)
- Execution-only
- Professional/necessary
- Corporate body takeover
not trustee/PR
What exclusions allow solicitors to arrange?
(i.e. investments. the contact between client and another - e.g. life policy company)
ALL OF THEM
- Introducing
- ATP
- Execution-only
- Professional/necessary
- Acting as trustee/PR
- Takeover
What exclusions allow solicitors to advise?
(on merits of specific thing)
- Professional/necessary
- Acting as trustee/PR
- Takeover
none of the otehrs would make sense if advising
not ATP because you’re advising on them
What exemption(s) apply re managing as a specified activity?
(discretionary active participation)
Acting as trustee/PR
What exemptions apply re safeguarding as specified activity?
Prof/necessary
Acting trustee/PR
What are the requirements for body corporate exclusion?
Acquiring/disposing shares in company and:
- Shares 50% or more of the voting shares; AND
- between parties each of whom a body corp, partnership, single individual or group of connected individuals
(if haven’t reached 50%, can add together those acquiring to those already owned by group of connected individuals - directors/managers and their families)
When will professional/necessary exclusion apply? Examples.
Can’t provide other services properly unless perform that regulated activity
e.g. IHT / acquisition of company
when can rely on s 327 exclusion?
All below:
- No pecuniary other other than from client unless give to client
(same as code of conduct) - Incidental to services:
- to that client (eg not beneficiary); AND
- not signif part of firm’s service
/ advertised separately / 50%+ of income.
(e.g. IHT compliments acting as trustee)
- comply Scope and COB rules
(sep cards)
(scope includes not pension/ create insurance. notify SRA insurane activities) - not prohibited
by Treasury order or FCA direction - not FCA regulated
What are the two tests for whether a financial regulated service is incidental to its SRA-regulated services?
- Specific
- arise out of or complement service to that client - General
- not major part activities, considering fi:
a) half income
b) high percentage of offered activities
c) impression firm gives of the activities
(e.g. advertised as incidental or not)
Under SRA Scope Rules, examples of what activities are not permitted by SRA?
(part of s327 exemption)
- Can’t carry out activity specified in Treasury order
e.g. recommended to dispose of rights under pension scheme or creating insurance contract - If wish undertake insurance distribution:
- notify SRA
- register with Financial Services Register; and
- appoint insurance distribution officer
when do COB rules apply
s 327 exemption
not exclusion
What are the main COB rules?
way can carry out under s 327 exemption
○ Status disclosure (ie that not authorised by FCA. complaints etc - SRA and LeO.)
○ Best execution (ie interests) - don’t carry out if not in best interests
○ Transactions (keep records of instructions)
○ Commissions (keep records)
○ Execution-only and investment is a retail investment product
(eg life policies/pension schemes)
not execution-only exclusion if drafting contract
- letter confirming client not relying
○ Insurance distribution activitires
§ Clear, fair, not misleading
Nature renumeration re contract provided before conclusion
Under COB rules, what must firm do if acting for execution-only client?
Execution-only client and investment is a retail investment product
(e.g. life policies/stakeholders/pension schemes/unit trusts)
Letter to client confirming not relying on solicitor’s advice
(eg retail investment product is insurance contract - execution only would not apply so would have to rely on exemption - and therefore comply COB rules)
What section exempts professional firms from general prohibition?
s327
Under COB rules, what info must be provided re insurance distribution activities?
Clear, not misleading, fair way
Info re nature of remuneration received re the contract of insurance
What are insurance distribution activities?
preparing or administering insurance contracts
can’t rely execution-only. need to use s 327.
What’s a body corporate?
Another name for a company
What is considered ‘insurance distribution’ for purposes of regulated activity?
Advising on, proposing or carrying out work
relating to preparing, concluding or assisting in
administering or performing contracts of insurance
(baso just drafting or administering insurance contracts - and insurance contracts are anything involving insurance)
the exclusions dont apply, so have to rely on s 327 or seek fca authorisation
Do EXCLUSIONS apply to insurance work?
No, even if just introduce to insurer or insurance claim against insurers
So need to rely on s327 exemption (or seek FCA authorisation)
What is the execution-only exclusion?
Can act as agent (on behalf) or arrange (middle man) as long as not asked to or decline to advise on merits of entering transaction
But not apply for insurance or if get commission from a TP which don’t give to client
(insurance still need to be execution-only and s 327)
What’s a financial promotion?
Invite or induce to engage in INVESTMENT ACTIVITY
When can a solicitor defo offer financial promotion?
Contents approved by authorised person
e.g. FCA regulated accountant says to recommend a mortgage mcontract
What is the test for if something is a financial promotion?
Same as if regulated activity but no exclusion test
- Made in business
- Making invite or inducement
- Is there a specified investment?
- Is there a specified investment activity?
NB no exclusion test applies
What are 2 types of financial promotions for SRA firms?
- Real-time promotions
- in course of personal visit, phone call etc - Non real-time promotions
- letters, emails etc
- includes comms with other side
(so they could also be construed as financial promotion)
What main exemptions apply re financial promotions?
OBIT.
one-off promotions
body corp takeover
introducer
trustees, PRs
When can a solicitor rely on real-time promotions exemption to make a financial promotion?
- Before the communication, client instructed solicitor to act for them;
- Carrying out exempt activity (s 327) OR necessary exclusion applies; AND
- For purpose of or incidental to the services supplying to client
(so if excluded other than cos necessary, can’t financially promote)
When can financial promotion be made non-real time?
(letters etc)
ONLY if carries out exempt regulated activities and promotion contains certain statements
When can a one-off promotion be made?
(financial promotions)
one-off non-real-time or real-time SOLICITED if PERSONAL to client
(remember - real-time: must be necessary exclusion or s 327 / non real-time must be s 327)
OR
One-off UNsolicited real-time - believe on reas grounds:
a) client understands risks; and
b) would expect solicitor to be contacting at that time about that activity
when can u introduce client to another for financial promotion?
Must bbe:
- Real-time
- Not connected (e.g. close relative);
- Not receive from anyone other than client for it; and
- Client not requested (or declined to give) advice on merits of investment
What is not a specified investment? Impact of this if give advice on?
Interest in land
(e.g. residential property)
^ not same as mortgage
^ e.g. looking at buying this lad
Most National Savings products
(inc all National Savings Certificates)
Disciplinary proceedings as breach SRA C of C (but not criminal offence etc)
What counts as specified investment?
- shares
(unless in the share capital of an open-ended investment company or building society incorporated in the UK); - debentures, loan stock and bonds;
- gilts
- unit trusts and OEICs;
- contract of insurance;
- regulated mortgages (most resi);
- home reversion/home purchase plans (where can sell part/whole home to raise money then become tenant);
- deposits.
- credit arrangements
(except some between solicitor and client)
What is a unit trust?
pools investors’ money into a single fund, which is managed by a fund manager
(nb OEICs are v similar)
What is an exempt agreement between solicitor and client under FSMA 2000 in terms of solicitor/client fee arrangement?
What type of regulated activity is it?
Where solicitor allows client to pay their fees in instalments if
- Max 12 repayments;
- Over max 12 months; and
- No interest or other charges
Consumer credit activity.
Since would be exempt agreement, COB rules apply.
(status disclosure etc)
What are the six types of reserved legal services?
(those seen as riskiest)
- Exercise of right to audience
- Conduct of litigation
- Reserved instrument activities
- Preparing probate papers
(ie docs needed to obtain or oppose grant) - Notarial activities
(certify docs) - Admin of oaths
(eg affidavit)
What is dealing as agent exclusion and when does it apply?
Buying, selling, subscribing for or underwriting investments on behalf of client
e.g. selling client’s shares after divorce
Body corporate takeover - which specified activities does it apply to?
3 As
Arranging, advising, agent
What are national savings certificates and are they specified form investment?
Government issues
Safe form investment
Not a specified investment bcos not risky
So CAN advise on
What is consumer credit activity and when can you act for client in related matters?
e.g. debt management/debt collectiont/debt advice/debt administration
Litigation proceedings arising out of consumer credit / hire agreement do not count so can do that
(seems fair !)
otherwise only if authorised by FCA or s 327
All exclusions to allow solicitors to make financial promotions?
None !
But can use EXEMPTIONS:
- Trustees and PRs
- Body corporate
- One-off promotions
(unsolicited NRT/solicited RT - personal, and unsolicited RT in certain situs)
- Introducers
Explain when trustee/PR exemption applies
Only if acting AS trustee or PR not FOR
- or if one solicitor in firm acting as, and activity by another
Applies all except advice of TP
(makes sense - u should be advising urself)
Lending money on or administering regulated mortgage contract
Limitations to relying on trustee/PR exclusion
Being remunerated extra
Only available for managing and safeguarding if not hold selves out as providing service which comprises of that
And doesn’t apply for insurance obvs
What is money laundering?
Process whereby proceeds of crime are changed so that they appear to come from a legitimate source.
Key risk areas for money laundering for solicitors
- Company work and trust work
- money can be hidden within their structures / layers of ownership
- want solicitors involved in management so looks respectable - Use of client account
- swap illicit money for clean
e.g. says going away and transfers just in case it completes, later changes mind so not proceed purchase, says transfer to a diff account - Real estate
- money has to pass through client account to proceed
- criminal can then sell asset to produce legitimate proceeds
- seller sometimes complicit
(e.g. no mortgage, transfers 500k, seller randomly reduces to 400k, instructs surplus paid to someone else) - Sham litigation
(e.g. judgment in default against overseas company, overseas company pays firm, who pays client)
UK money laundering legislation also covers
terrorist financing
money laundering regulations apply to
all persons acting in course of business carried out in UK
includes independent legal professionals
Effect of failure to comply money laundering regulations?
Criminal offence
Who supervises anti-money laundering regulations for solicitors?
(inc monitoring compliance / approval etc)
SRA
What must firms and sole practitioners do to be approved under money laundering regulations?
Beneficial owners, officers or managers of firm and sole practitioners
Must apply to SRA for approval under the Regulations
SRA must grant unless applicant convicted of a ‘relevant offence’ (e.g. under previous money laundering legislation, terrorism or any offence involving dishonesty/deception)
Effect for acting without approval under money laundering obligations?
Criminal offence which may result in imprisonment, fine or both
As per professional conduct requirements for law firms, what must ensure re money laundering?
(aside from SRA approval etc - just arising from code of conduct)
structures / arrangements etc to ensure compliance
identify, monitor and manage risks
Take action to prevent money laundering
What should a firm’s risk assessment for money laundering entail?
Implications of it?
Firm-wide risk assessment and maintain record of steps taken as a result of it
Considering services offered, type of clients and industries
Must address risks with trusts, company, real estate and client account use
Take into account SRA’s risk assessment
SRA **may ask to see **the firm’s risk assessment and take action if inadequate
What policies must firm establish and maintain re money laundering?
Establish and maintain written anti-money laundering policies, controls and procedures
Proportionate to size / nature of firm
Approved by senior management
Related to risks identified in risk assessment
Under money laundering obligations, what roles must firms appoint?
- money laundering compliance officer (MLCO)
- only need if appropriate considering size/nature firm
- SRA point of contact - nominated officer (MLRO - m l reporting officer)
- receive internal reports re suspected money laundering and consider whether to report to NCA
(can have same individual doing both)
Aside from appointing MLRO and MCLO, what internal controls must firms implement?
how many yrs able to answer to sra for?
-
Screen employees before and during employment
- whose work relevant complying Regs or help identify money laundering - establish independent audit function to examine firm’s policies re regulations
- ensure able to respond to law enforcement enquiries re business relationships with any person over last 5 years
wbhen must do customer due diligence requirements under money laundering regs?
verify client’s ID if:
- agree to form business relationship
- transferring over 1k euros not as part of business relationship
- carrying out occasional transaction over 14k euros
- suspects money laundering / terrorist financing
- doubts docs supplied re their identity
When must ID verification take place if required under money laundering regs?
General rule = first contact
So before business reli established or carrying out transaction.
However can do DURING business reli if:
- little risk of money laundering;
- not necessary interrupt normal course business; and
- verified as soon as practicable
If solicitor cannot complete client due diligence on time, they must:
MUST NOT:
- carry out transaction with or for client through a bank account
(eg buying house) - establish a business relationship or carry out transaction other than via a bank account
MUST:
- consider NCA disclosure
- terminate any existing business relationship
What are the diff types of client due diligence?
- Standard DD
- Simplified DD
- Enhanced DD
How to verify ID under standard DD?
(i.e. for most clients)
interviewing
Individuals:
Ideally originals not copies.
Just request 2 forms. Address and name.
But can ask for
- one gov doc verifying name AND address or name AND DoB
- two gov docs - one verifying name and other verifying name + DoB
independent reliable source
Company/trusts
- reasonable measures to understand ownership / structure
Good practice on proving identity?
A) gov’t doc which verifies name and address or DoB; or
B) gov’t doc which verifies name and a separate doc verifying name and address or DoB
Ideally sight of originals. Copies if justifiable on risks.
Non-limited liability partnerships (inc general partnerships) - standard DD - what is required?
Info on the individuals
If well-established/reputable - enough just to get name, registered or trading address and nature of business
Companies - standard DD ID requirements?
Usual stuff
(name, registration number and address)
LISTED
- check law subject to
- incorp docs
- names of Ds
ALL
- proof of registration
Good practice = if person instructed is authorised
Unless simplified DD applies consider identity beneficial owners
When must solicitor consider beneficial owners under client DD?
Beneficial owner is not the client
Simplified DD not apply
Who will be a beneficial owner in LLP or private company for purposes money laundering regs?
private companies and LLPs:
- controls it
- owns or controls over 25% svoting rights
Do you need to do further client DD if the beneficial owner is a parent company?
Not compulsory - risk-based decision
Often seek identity of beneficial owners of parent company
Beneficial ownership in general partnership
baso same as company
- entitled to or controls over 25% share in capital or profits or voting rights
- otherwise control over management (eg authority to use funds outside of normal management)
Who is beneficial owner of trust for money launder regulations?
EACH of the following
- settlor
- trustees
- beneficiaries
- if beneficiaries not determined, class of persons who have main interest
- anyone with power over trust
Whose ID do you get for a trust client DD?
Identify other beneficial owners
If company beneficial owner, need to identify the beneficial owners of the company
Simplified DD, no need consider beneficial owners
When is simplified DD permitted?
Firm determined through individual risk assessment that business reli or transaction low risk
Considering facts, inc:
- if listed on a regulated market
- where it is listed
- where client does business
(e.g. if UK stock exchange low risk)
NOT about type of work involved
What must solicitor do if considers simplified DD applies and what does simplified DD entail?
Must - obtain evidence that client and transaction eligible for simplified DD
Doesn’t necessarily need to obtain info on beneficial owners
Amount of info need depends on client
e.g. PLC - just obtain confirmation of company’s listing on stock exchange
When is enhanced due diligence required?
Something about arrangement gives high risk of money laundering
Circumstances include:
- situ identified in firm or SRA/Law Soc risk assessment
- high-risk third country
- false or stolen ID
- complex or unusually large
- unusual pattern/purpose
- PEP or known associate
- other (e.g. not met face to face or payments from unknown TPs)
**
What must you do if enhanced client DD applies?
Take reasonable measures to consider
- background and purpose transaction
- whether more ID or info on ownership required
Monitor throughout retainer
What is a PEP and related people?
- head of state/ministers
- MPs
- Judges of higher courts
- boards of banks / members court of auditors
- ambassadors/high ranking army officers
- members of admin/management/supervisory bodies of State-owned enterprises
And spouse, children, parents and children’s spouses
And their close business relationships
Obligations if dealing with PEPs or their associates?
Approval of senior management to act
Taking adequate measures to establish source of wealth and funds used
Conduct ongoing enhanced monitoring
Are solicitors obliged to undertake ongoing monitoring of clients?
Yes - must ensure transactions consistent with knowledge of client
Training requirements under money laundering obligations?
Provide and maintain record of training to employees
Should be made aware of law and related data protection requirements
Should be trained on how to identify potential ML
Doesn’t specify how training take place
Suggest staff manual
No training may give defence to employee
Firm’s record keeping obligations under money laundering regs?
Copy of docs and info obtained to satisfy DD and any relevant supporting records re transaction
Keep for at least 5 years after the relationship or occasional transaction ends
Offence to LAW FIRMS (not individuals) under Criminal Finances Act 2017
When would apply?
Who liable for?
^ THIS IS NOT POCA
Corporate offence of failure to prevent criminal facilitation of tax evasion
(e.g. fraudulent evasion VAT/income tax/cheating public revenue)
Liable for employees and other associated persons
Strict liability - no knowledge or intention of managers etc required
Defence available to firms’ liability under Criminal Finances Act 2017 (tax evasion)?
Had reasonable prevention procedures in place
OR
was reasonable not to have them in place
Already have procedures in place for money laundering - make sure they also comply CFA 2017
e.g. due diligence policy considers risk tax evasion by firm’s own partners/employees/other associated persons e.g. barristers used
Impact is the UK financial sanctions regime on law firms?
Serious restrictions on dealing with ‘designated persons’ on the sanctions list (sanctioned by UK, EU or UN)
Applies to ALL law firms
Must inform Office of Financial Sanctions if reasonably suspect someone to be a designated person
If wish to act for them, must obtain licence for a fee
Does discussing someone’s sanctioned status amount to a tipping off offence?
No - it’s public info
penalties against law firms re UK financial sanctions regime?
EVEN IF no knowledge or reasonable cause to suspect transaction to which they are a party is in breach of sanctions regime
Can still be liable for fines
Do you need to conduct due diligence on client if you have personal knowledge of them?
Yes you do
What are the key offences under Proceeds of Crime Act 2002 applicable to solicitors?
star bcos imp
- Entering or becoming concerned in an arrangement which know or suspect facilitates proceeds of crime
- Acquiring / using proceeds crime
- Concealing, converting or transferring proceeds of crime
- Removing crime proceeds from Eng and Wales 🏴
- Failure to disclose money laundering info to authorities
- Firm’s nominated officer failure to disclose money laundering info to authorities
- Tipping off individual that investigation into money laundering underway
- Prejudicing money laundering investigation
Most relevant offence under Proceeds of Crime Act 2002 for solicitors
Arranging
ie
Becoming involved arrangement which know or suspects facilitates ML
suspect if “more than fanciful” possibility - subjective.
_________________
(ie entering or becoming concerned in arrangement which KNOW OR SUSPECT facilitates acquisition, retention, use or control of CRIMINAL PROPERTY)
Explain the breadth of the ‘arranging’ offence (under Proceeds Crime Act 2002) as applying to solicitors?
Wide - covers any act which assists another to launder money
Doesn’t matter if didn’t pass through solicitor’s hands
e.g. client is buying a company and discover lots of their contracts were obtained by paying bribes
What constitutes ‘know or suspect’ for purposes of proceeds of crime offences?
Threshold is “suspicion”
Subjective test - bar is low:
D must think there is a possibility which is MORE THAN FANCIFUL that relevant facts exist
(ie that there is potential money laundering)
(nb more than vague feeling of unease)
What is criminal property for purposes of Proceeds of Crime Act?
Person’s direct or indirect benefit from criminal conduct
e.g. profits from crime / stolen property
Must know or suspect property benefitted from criminal conduct
Must have been an initial criminal offence committed
in UK or abroad if it would have also been criminal in UK.
What is excluded from ‘arranging’ offence for solicitors under Proceeds of Crime Act?
Taking steps in litigation, provided not sham litigation
Dividing assets in accordance with court judgment (eg divorce)
But could not assist in reinvesting them
Consider whether client would be committing offence by receiving the property
Defences to s 328 (arranging) Proceeds of Crime Act?
Authorised disclosure
Reasonable excuse for not making authorised disclosure
e.g. info public already in domain
Overseas defence
- knew or believed occurred abroad
and lawful in that country
- S of S can override
When will authorised disclosure defence apply for individual solicitors?
(proceeds crime act/arranging)
Include diff stages of when AD made
Make authorised disclosure to constable, HMRC or firm’s nominated officer (MLRO)
(ideally to MLRO)
AND got consent of nominated officer or NCA
If proceed without consent, no defence
A) Soon as practicable prior to transaction
B) If prohibited act is ongoing:
- made whilst ongoing
- when began to act, did not know or suspect
- soon as practicable after first suspect
- make on own initiative
C) AFTER profited act if:
- good reason
- soon as practicable
- own initiative
(nb just bcos consent to money laundering ops, prof conduct etc still relevant)
Responsibilities of nominated officer (MLRO) for defence to arranging to apply under Proceeds of Crime Act?
- responsible reporting ML concerns to NCA
AKA suspicious activity report (SAR) - not obliged raise SAR whenever internal concern raised - discretion
- criminal offence if fail to report when reasonable grounds to suspect ML
- must not give consent to solicitor until:
1. received NCA consent; or
- heard nothing for 7 working days after sending SAR; or
(starts next working day) - consent refused NCA but then granted within 31 days
(starts day of approval)
Penalties for arranging OR acquisition, use or possession under Proceeds Crime Act?
(ie involved arrangement know or suspect facilitates ML)
Max 14 years imprisonment
Explain s 329 - acquisition, use or possession offence - under Proceeds Crime Act / how applies to solicitors?
Acquire, use or possess criminal property
Usually where no involvement in original crime but benefitted
e.g. paid extortionate legal fees and possibly criminal property
Defences to s 329 acquisition, use or possession offence under Proceeds Crime Act?
Overseas defence
Authorised disclosure defence
Adequate consideration defence (main one)
- receive money for legal fees, inc disbursements
- as long as fees reasonable considering value of work
- didn’t know/suspect would help carry out illegal activity
Explain concealing offence and defences under Proceeds of Crime Act?
Offence conceal, disguise, transfer or remove outside of UK (inc Scotland etc)
E.g. resi - converting proceeds into property
Transfer - from client account etc
AD and overseas
Big one for solicitors
Explain the failure to disclose offence under Proceeds Crime Act?
Commit if:
- knew or ought known money laundering
- receive in course of business/regulated sector
- had info which could assist identifying launderer / property
- doesn’t disclose soon as PRACTICABLE
Not necessary for ML to have even occurred
When can you committed of offence under PCA even if did not KNOW or SUSPECT that ML?
Failure to disclose
(nominated officers or normal individuals)
Objective as well as subjective test
Reasonable grounds to know or suspect
NB training defence applies if there were reasonable grounds to suspect but had no proper training
Defences to failure to disclose offence under Proceeds Crime Act?
Reasonable excuse for failing to disclose
(eg public domain)
Training defence
Legal professional privilege
- advice and litigation privilege applies
- EXCEPT cannot rely if purpose of advice is carrying out criminal offence
Overseas defence
Penalties for FAILURE TO DISCLOSE
Max 5 years imprisonment
How does failure to disclose offence apply differently to nominated officers?
What defence?
(Proceeds of Crime Act)
If know/suspect or reas grounds to know or suspect money laundering DUE TO INTERNAL REPORTS
And fail to make disclosure to NCA as soon as practicable
Defence if reasonable excuse for not disclosing
What is the tipping off offence? (Proceeds Crime Act)?
2 offences.
- Disclosing a disclosure
- usually to NCA or MLRO
- to anyone if likely prejudice
(eg house delay because investigating) - Disclosing an investigation
- investigation carried out or contemplated
- and that is likely prejudice
Irrelevant whether intended to alert ML or prejudice investigation
Both - must have received info course business regulated sector
Defences to tipping off?
(Proceeds Crime Act)
Did not know or suspect disclosure would prejudice investigation
(eg maybe if informs client believing they will fully cooperate with authorities)
Or if purpose is to dissuade client from engaging in alleged money laundering - but treat with caution
Penalties for tipping off
Unlimited fine and / or max 2 years prison sentence
When will someone prejudice investigation (and commit offence under PCA)?
(baso same as tipping off but applies non-regulated)
Suspect ML investigation about to commence
And make material disclosure to another
Which is likely prejudice or interferes with relevant material
Will communicating confidential information about clients under Proceeds Crime Act conflict with Code of Conduct SRA?
No
Client confidentiality is unless required or permitted by law
Legislation expressly states disclosure won’t breach this
Still seek advice if unsure
Role of SRA under Proceeds Crime Act?
If direct involvement in money laundering, breach:
- Principle 4 act with honesty and
- Principle 1 duty uphold RoL/admin justice
So likely disciplinary proceedings and significant sanctions
Warning signs of money laundering?
- The client
(e.g. secretive, evasive, avoids personal contact, refuses provide docs, criminal associations) - Funding
(large cash payments, unexplained from TPs, foreign accounts etc) - Transaction
(unusual features eg loss making, unexplained urgency, litigation settled too easily) - Geographical concerns
(eg from far away, unexpected movement between jursdictions, connected with suspect jurisdictions)
What is authorised disclosure a defence to?
Arranging
Acquisition, use or possession
Concealing etc
NOT
- failure to disclose
- tipping off
- prejudicing
^ makes sense if deep it x
