Money Laundering Flashcards
What are the two key pieces of money laundering legislation?
Proceeds of Crime Act 2022
Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017
What are some money laundering warning signs?
- Instructions outside your firm’s area of expertise: eg taking on work in which the firm has no background, but in which the client claims to be an expert;
- Unusual retainers: eg dispute which settles too easily might indicate sham litigation;
- Use of client accounts; eg a client deposits funds in your account but ends the transaction for no apparent reason. Solicitors must not provide a banking service for their clients - should only use client accounts to hold money for legitimate transactions for clients
- Setting up a trust: should consider if the purpose of the trust could be to launder criminal property - ascertain the purpose of the trust and why any unusual jurisdiction or structure is being used
- Property Purchase: look out for large payments from private funds, especially if the client has a low income; look out for payments from a number of individuals or sources
Money laundering - suspicious fact patterns
- a seller and buyer with similar names or who give the same address
- a seller and buyer both from jurisdiction outside the UK
- ‘mistakes’ regarding an overpayment to your client account
- monies arriving from a third party who is not your client
- your client asking you to send monies to an unknown third party
- documents which appear to show a seller and a buyer with similar signatures
- clients attempting to pay large sums of cash
- offshore vehicles being made parties to a deal
- money coming from or being requested to be sent to offshore tax havens
High Risk jurisdictions:
Financial Action Task Force:
- North Korea
- Iran
- Myanmar
European Commission:
- Afghanistan
- Barbados
- Burkina Faso
- Cayman Islands
- Congo
- Haiti
- Syria
- Uganda
- Vanuata
- Yemen
- South Sudan
- Trinidad and Tobago
- Tanzania
- Philippines
- Iran
- Nigeria
- North Korea
How to stop money laundering
Attributes: high jurisdiction, occupation
Activities: what is the client engaged in/wants you to do
What are the two kinds of offences under the PoCA?
- Direct Involvement Offences: apply to everyone
- Indirect involvement offences: apply to people working in the regulated sector
Money laundering: golden rule
If you suspect that a person you are dealing with is planning to transfer criminal property to your firm or employer’s bank account, the golden rule is:
Report your concern to you MLRO or other nominated officer.
What are the direct involvement offences?
S327: concealing, disguising, converting or transferring criminal property or removing criminal property from the UK
s328: 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 on or behalf of another person
s329: acquiring, using or possessing criminal property
What are the ‘disclosure’ defences to direct involvement offences?
They involve an ‘authorised disclosure’ - a disclosure to a constable, customs officer or a nominated officer by the alleged offender that property is criminal property.
AND
one of 3 conditions are satisfied:
- 338(2): authorised disclosure is before the alleged offender does the prohibited act
- (2A): disclosure is made during the prohibited act AND he began to do the act at a time when the act was not prohibited (because he did not know or suspect that the property constituted criminal conduct) AND the disclosure is made on his own initiative as soon as it is practicable
- (3): disclosure is made after the prohibited act AND there is a good reason for the solicitor’s failure to make the disclosure before he did the act AND the disclosure is made on his own initiative as soon as it is practicable to make it
e.g. threatened with physical harm unless he makes the deposit
What is a disclosure to a nominated officer?
A disclosure which:
- is made to a person nominated by the alleged offender’s employer to receive authorised disclosures, and
- is made in the course of the alleged offender’s employment
In law firms the nominated officer is the MLRO
What are the other defences to direct involvement offences?
- making a disclosure AND having the appropriate consent
- not making a disclosure but having a reasonable excuse for doing so
- the prohibited act is in carrying out a function the individual has relating to the enforcement of any provision or PoCA or any other enforcement relating to criminal conduct or benefit from criminal conduct.
Also no offence committed if the criminal conduct which makes the property in question criminal property took place outside the UK and was not unlawful in the territory in which it took place (and is not the subject of an order made by the Secretary of State)
What is the regulated sector?
Business and activities including insurance companies, investment services, accountancy services, insolvency practitioners and providing tax advice.
Also includes ‘participating in financial and real property transactions’ concerning:
- the buying and selling of real property or business entities
- the managing of client money, securities or other assets
- the opening or management of bank, savings or securities accounts
- the organisation of contributions necessary for the creation, operation and management of companies
- the creation, operation or management of trusts, companies or similar structures
by a firm or sole practitioner who by way or business provides legal or notarial services to other persons.
What are the two non-direct involvement offences?
S330: failure to disclose
S333A: tipping off
What is the offence of failure to disclose?
It is an offence to fail to disclose to the firm’s MLRO or the National Crime Agency if
(a) you know or suspect or have reasonable grounds to know or suspect that someone is laundering the proceeds of any criminal conduct
(b) you receive the information in the course of business in the regulated sector; and
(c) you can identify the person who is laundering the proceeds of criminal conduct OR the whereabouts of the laundered property OR that the information referred to in (b) or may assist in identifying the person in (a)
Disclosure must contain:
- identity of the person suspected of criminal conduct
- the whereabouts of the laundered property if you know it
- the information on which you knowledge/suspicion is based
How long must you wait after disclosing?
If the MLRO makes a disclosure by way of a suspicious activity report (SAR) to NCA neither the MLRO nor fee earner should authorise or undertake any prohibited activity unless:
- authorised to do so by NCA; or
- seven working days (notice period) has passed from disclosure to NCA and the NCA has not refused authority to proceed; or
- NCA refused consent during the notice period and the moratorium period (31 days stating with the day the firm received notice that consent was refused) has expired
Similar disclosure obligations to those in s330 are placed on MLROs in the regulated sector by s331. However, the MLRO has to make a decision whether or not to report the issue to the NCA.
