Money Laundering

Question 1

Stages of Money Laundering

Answer 1

(1) PLACEMENT of criminally-acquired cash in financial system

(2) LAYERING (Obscuring) the source of the money by passing it through complex transactions

(3) INTEGRATION: Providing legitimacy to the funds (e.g., by buying properties and claiming any further money to be rental income)

Question 2

What are the principal money laundering offences under POCA

Answer 2

Concealing
Arranging
Acquiring/Using/Possessing

Question 3

What is the “predicate offense” in a money laundering charge?

Answer 3

A ML offense assumes that a criminal offense has occurred in order to generate the criminal property being laundered.

No conviction for the predicate offense is necessary for someone to be prosecuted for money laundering.

Question 4

Which crimes constitute predicate offenses

Answer 4

ANY CRIMES. Laundering the proceeds of any crime is an offense

Question 5

What is the maximum punishment for a money laundering offense?

Answer 5

14 years in prison, unlimited fine.

Question 6

Concealing under POCA

Answer 6

Offense to conceal, disguise, convert, or transfer criminal property, or remove criminal property from the UK.

Question 7

Required mental state for CONCEALING under POCA

Answer 7

The offender must subjectively KNOW or SUSPECT that the property is criminal.

Question 8

Defenses to Arranging and Concealing under POCA

Answer 8

Authorized disclosure to the relevant authority

Legal Professional Privilege

Question 9

When is an authorized disclosure to the relevant authorities a defense to concealing?

Answer 9

(1) If made before any prohibited acts

(2) If made during a prohibited act, only if:
- the person had no knowledge or suspicion of the concealment when the act started
- disclosure was made as soon as was practicable
- disclosure was made on the person’s own initiative

(3) If made after the prohibited act, must have a good reason.

Question 10

Arranging under POCA

Answer 10

Prohibits arrangements that the defendant KNEW or SUSPECTED were facilitating the acquisition, retention, use, or control of criminal property.

Question 11

Required mental state for ARRANGING under POCA

Answer 11

(1) The offender intentionally or recklessly entered an arrangement that facilitated the acquisition of criminal property, and

(2) The offender knew or suspected that the arrangement would have that effect.

Question 12

Acquisition, Use, or Possession under POCA

Answer 12

It is an offense if a person acquires, uses, or possesses criminal property

Question 13

Mental state for Acquisition, Use, or Possession under POCA

Answer 13

Known or suspected

Question 14

Defenses to Acquisition, Use, or Possession

Answer 14

Authorized disclosure to the relevant authority

Legal Professional Privilege

Adequate consideration is paid, without knowledge or suspicion

Question 15

How do you report suspicions of money laundering

Answer 15

By submitting a Suspicious Activity Report. Failure to do so is an offense

Question 15

Mental state required for failure to report

Answer 15

Objective test: Offense if the person SHOULD HAVE KNOWN OR BEEN SUSPICIOUS of the activity

Question 16

Defenses to failure to report

Answer 16

Privilege
Lack of training (not for terrorism funding though)

Question 17

What are Tipping Off offenses under POCA

Answer 17

Disclosing to a third person that a SAR has been made, if that disclosure might prejudice any investigations.

Disclosing an investigation to a third person

NOTE: Can only be done by someone in a regulated sector (solicitors, accountant, bankers etc.)

Question 18

When must you report knowledge or suspicion of money laundering to the authorities?

Answer 18

As soon as is practicable, but a delay may be acceptable if the solicitor is taking prompt legal advice

Question 19

Exceptions to the Tipping Off offense

Answer 19

Normal inquiries from solicitor about instructions/retainer

Including standard terms/language about AML laws

Question 20

Defenses to Tipping Off

Answer 20

Disclosing to someone within the same company who is involved in the same undertaking

Disclosure between legal professionals who are involved in different undertakings, so long as those undertakings share common ownership, and are done in the UK, EEA, or country with equivalent AML

Disclosure between legal professionals about a current or former client for the purposes of preventing ML. Both parties must be from UK, EEA, or similar AML jxd, and have equivalent confidentiality obligations

Question 21

Elements of Prejudicing an Investigation

Answer 21

(1) Person knows or suspects that a ML investigation has begun (or is about to begin)

(2) Tells any other person that is likely to prejudice the investigation

(3) Tampers with documents relevant to the investigation, or causes that to happen

Question 22

Compare Tipping Off to Prejudicing an Investigation

Answer 22

Similar: Person making the disclosure does not need to intend to do either for the offense to apply

Different: Prejudicing an investigation can apply to those outside a regulated sector

Question 23

Defenses to Prejudicing an Investigation

Answer 23

Person making the disclosure didn’t know or suspect that it would be prejudicial

Disclosures made to a client in connection with giving legal advice (so long as not furthering criminal purpose)

Disclosures made to any person in connection with legal proceedings (so long as not furthering criminal purpose)

Question 24

What are the Indirect ML Offenses?

Answer 24

Failure to Report
Tipping Off
Prejudicing an Investigation

Question 25

What activities are covered by the ML Regulations 2017?

Answer 25

Activities where there is a risk of ML occurring:
- Buying/selling real property or businesses
- Managing client money or securities
- Organizing contributions to companies
- Managing trusts

Question 26

What activities are NOT covered by the ML Regulations 2017?

Answer 26

• Paying a bill for legal services
• Providing legal advice
• Participating in litigation or ADR
• Will-writing

Question 27

Main requirements for regulated businesses under the ML Regulations 2017

Answer 27

(1) Internal policies and procedures to deter criminals from using their facilities for ML

(2) Obtain sufficient evidence of identity from clients

(3) Record keeping (5 years)

(4) Appointing nominated officer to investigate reports

(5) Nominated officer must train all relevant staff on ML rules and the firm’s policies and procedures.