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Legal Services > Money Laundering > Flashcards

Money Laundering Flashcards

1
Q

What does money laundering involve?

A

Financial transactions where proceeds from serious crime (eg drug trafficking, terrorism, theft, tax evasion, fraud, counterfeiting or blackmail) are cleaned so that its source is harder if not impossible to trace

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2
Q

Why should solicitors be alert to money laundering?

A

Because they

  • can legitimise a transaction
  • have access to financial markets
  • advise on property and business deals
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3
Q

Who do the money laundering rules apply to?

A

Much broader than just lawyers and law firms

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4
Q

Who is responsible in a law firm for compliance with the Proceeds of Crime Act 2002 and Money Laundering, Terrorist Financing and Transfer of Funds?

A

Compliance Officer for Legal Practice, Compliance Officer for Finance and Administration and the managers (ie the partners)

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5
Q

What must all firms also have in relation to money laundering?

A
  • a money laundering reporting officer
  • policies and procedures in place obliging anyone in the law firm who knows or suspects money laundering to comply with the reporting obligations set out in PoCA
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6
Q

What must be done to comply with the Money Laundering Risk Assessment?

A

Relevant persons (including law firms) must take appropriate steps to identify and assess the risks of money laundering and terrorist financing to which the business is subject

Law firms and these businesses must keep an up to date anti money laundering AML written record of all the steps they have taken (ie updated AML risk assessment document)

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7
Q

What are the four elements to money laundering?

A
  • the criminal source of the funds is disguised
  • the form of the funds will be converted (often from paper bills to money in a bank account)
  • the trail by which the conversation occurs will be disguised
  • the launderer will retain control of the funds (directly or indirectly)
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8
Q

Why should solicitors be careful as to who they reveal the details of their client account to?

A

Launders could deposit cash into the account without the solicitor knowing, posing a significant money laundering risk

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9
Q

What are the warning signs that money laundering might be about to take place?

A
  • instructions outside your firm’s area of expertise - particularly if the client claims to be an expert
  • unusual retainers eg a dispute which settles too easily might indicate sham litigation
  • use of client accounts - eg a client disposes funds into the client account but then ends the transaction for no apparent reason. Solicitors must not provide a banking service for their clients
  • setting up a trust - consider if purpose of trust is just to launder criminal property. Be alert to any reason 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 a number of payments from a number of individuals or sources
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10
Q

What would amount to suspicious fact patterns?

A
  • seller and buyer with similar names or who give the same address
  • a seller and buyer both from a 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 in cash
  • offshore vehicles being made parties to a deal
  • money coming from or being requested to be sent to offshore tax havens
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11
Q

What are high risk jurisdictions according to the Financial Action Task Force?

A
  • Democratic People’s Republic of Korea
  • Iran
  • Myanmar
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12
Q

What are high risk jurisdictions according to the European Commission?

A
  • Afghanistan
  • Barbados
  • Cambodia
  • Cayman Islands
  • Haiti
  • Syria
  • Uganda
  • Vanuatu
  • Yemen
  • Democratic Republic of the Congo
  • South Sudan
  • Trinidad and Tobago
  • Tanzania
  • Philippines
  • Iran
  • Democratic People’s Republic of Korea
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13
Q

Who do direct involvement offences apply to?

A

Everyone - lawyers and otherwise

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14
Q

Who do indirect involvement offences apply to?

A

People working in the regulated sector

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15
Q

What are the three ‘direct involvement’ offences?

A
  • s 327 - concealing, disguising, converting or transferring criminal property or removing criminal property from the UK
  • s 328 - 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
  • s 329 - acquiring, using or possessing criminal property
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16
Q

What are the authorised disclosure offences under PoCA?

A

Disclosure to a constable, customs officer or a nominate officer by the alleged offender that the property is criminal property and a least one of the further conditions in s 338 is satisfied

17
Q

How can authorised disclosure be made before the breach for a valid defence?

A

All that needs to happen is alleged offender discloses before they do the prohibited act

18
Q

How can authorised disclosure be made during the prohibited for a valid defence?

A
  • requires disclosure to be made during the prohibited Act and alleged offender began to do the act at a time when, because he did not then know or suspect that the property constituted or represented a person’s benefit from criminal conduct, the act was not a prohibited act AND the disclosure is made on his own initiative and as soon as practicable for him to make it.
19
Q

How can authorised disclosure be made after the breach for a valid defence?

A

Must be good reason for solicitor’s failure to make disclosure before the act

AND

Disclosure is made on their own initiative and as soon as practicable to make it

20
Q

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
21
Q

What other defences to direct involvement offences are there?

A
  • making a s 338 disclosure and having appropriate consent or
  • not making a s 338 disclosure but having a reasonable excuse for not doing so or
  • the prohibited act is in carrying out a function the individual has relating to the enforcement of any provision of PoCA or any other enforcement relating to criminal conduct or benefit from criminal conduct
22
Q

What defence is there if the criminal conduct took place overseas?

A

If the conduct was not unlawful in the territory in which it took place in and is not subject to an order by SofS, then no offence

23
Q

What is the golden rule if you suspect that the person you are dealing with is planning to transfer criminal property to your firm or employer’s bank account?

A

Report your concern to your MLRO or other nominated official

24
Q

What is the regulated sector that non-direct involvement offences apply to?

A

Various different businesses and activities.

Most important for law firms is:

  • participating in financial and real property transactions
25
Q

What is caught by the regulated sector activity of participating in financial and real property transactions?

A
  • the buying and selling of real property of 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 of business provides legal or notarial services to other persons

26
Q

When is it a non-direct involvement offence to failure to disclose to the firms’ MLRO or the National Crime Agency?

A

If

  • you know or suspect or have reasonable grounds to know or suspect that someone is laundering the proceedings of any criminal conduct
  • you receive the information in the course of business in the regulated sector and
  • you can identify the person who is laundering the proceeds of criminal conduct OR the whereabouts of the laundered property OR that the information known to you will assist in identifying the person suspected
27
Q

What must the disclosure to the firm’s MLRO or NCA contain to avoid failure to disclose offence?

A
  • the identity of the person who you know/suspect is laundering the proceeds of criminal conduct AND
  • the whereabouts of the laundered property if you know it AND
  • the information on which your knowledge/suspicion is based
28
Q

If the MLRO decides to make a disclosure by way of suspicious activity report (SAR) to NCA, under s 336 PoCA, how long must you wait until you can take further action?

A
  • receive authorisation from NCA
  • after seven working days have passed from disclosure to NCA during which NCA has not refused authority to proceed
  • the NCA refused consent during the notice period, moratorium period of 31 day starting from day consent was refused has expired
29
Q

What is the non-direct involvement offence of tipping-off?

A

Offence to tip-off clients about any report made of information that came to you in the course of business in the regulated sector

Offence to disclose that an investigation into them is being contemplated or is being carried out

30
Q

What are the potential penalties for being found guilty of direct offences?

A

On summary conviction

  • imprisonment for a term not exceeding six months or to a fine not exceeding the statutory maximum or both or
  • on conviction on indictment, to imprisonment for a term not exceeding 14 years or to a fine or to both
31
Q

What are the potential penalties for being found guilty of indirect offences?

A

On summary conviction

  • imprisonment for a term not exceeding six months or to a fine not exceeding the statutory maximum or both or
  • on conviction on indictment, to imprisonment for a term not exceeding 5 years or to a fine or to both
32
Q

Who are independent legal professionals under the MLR?

A

Firm or sole practitioners who by way of business provides legal or notarial services to other persons, when participating in financial or real property transactions concerning:

  • buying and selling or 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 or management of companies or
  • the creation, operation or management of trusts, companies, foundations or similar structures
33
Q

What form of legal work is not caught by the MLR?

A

Employment or litigation.

Beware of sham litigation though.

Legal Services (6 decks)

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