money laundering

Question 1

What is the requirement for firms regarding risk assessments

Answer 1

A firm must assess and identify the risk of being used for money laundering. This includes conducting a firm-wide risk assessment that considers risk factors such as:
- the services offered
- how they are delivered,
- nature of the firm’s clients, and the industries in which they operate.

Question 2

What role does the SRA play in the firm’s risk assessment process?

Answer 2

SRA monitors compliance and carries out a risk assessment across the legal services sector. The SRA may request to see a firm’s risk assessment and enforce actions if it is inadequate or non-existent.

Question 3

What is the requirement for firms regarding the record-keeping of their risk assessments?

Answer 3

A firm is required to keep an up-to-date written record of all the steps it has taken in terms of the risk assessment.

Question 4

What is required for anti-money laundering under regulation 19?

Answer 4

A firm must establish and maintain written anti-money laundering policies, controls, and procedures, approved by senior management.

Question 5

What should the anti-money laundering policies address?

Answer 5

The policies must address risk management, client due diligence, reporting, record-keeping, and new technology adoption, proportionate to the firm’s size and nature.

Question 6

Who must a firm appoint for anti-money laundering compliance?

Answer 6

A firm must appoint a “nominated officer” (MLRO = Money Laundering
Reporting Officer) to receive reports on suspected money laundering and liaise with the NCA, and must also appoint a Money Laundering Compliance Officer (MLCO), who is often the SRA’s main point of contact.

Question 7

Can the roles of MLCO (Money Laundering Compliance Officer) and nominated officer be fulfilled by the same individual?

Answer 7

Yes, the roles of MLCO and nominated officer can be fulfilled by the same individual.

Question 8

What are the two additional internal controls a firm must adopt?

Answer 8

1. The screening of relevant employees prior to and during the course of their employment
   to assess their skills, knowledge, conduct and integrity.
2. Establishing an independent audit function to examine, evaluate, make recommendations
   and monitor the firm’s policies, controls and procedures adopted to comply with the
   Regulations

Question 9

When must a firm verify a client’s identity?

Answer 9

A firm must verify a client’s identity when:

1. where client and sol agree to form a business relationship.
2. Carrying out an occasional transaction over €1,000.
3. A transaction of €15,000 or more is carried out and transactions appeared to be linked.
4. There is suspicion of money laundering or terrorist financing.
5. There are doubts about the adequacy of identity verification documents.

Question 10

What is the general rule regarding the timing of identity verification?

Answer 10

Verification must occur as soon as possible after first contact and before establishing a business relationship or conducting a transaction.

Question 11

When can a solicitor verify a client’s identity DURING the establishment of a business relationship?

Answer 11

1. There is little risk of money laundering or terrorist financing.
2. It is necessary not to disrupt normal business operations.
3. The verification is completed as soon as practicable after contact

Question 12

What can a solicitor NOT do if unable to complete client due diligence in time?

Answer 12

the solicitor cannot:
(a) carry out a transaction with or for the client through a bank account; or
(b) establish a business relationship or carry out a transaction otherwise than through a bank
account.
=> The solicitor must also terminate the business relationship and consider making a disclosure to the NCA.

Question 13

What is required for standard due diligence on natural persons?

Answer 13

For natural persons, verification should be based on government documents: passports or photocard driving licenses.

Good practice includes:
One government document verifying name and address or name and date of birth.

One government document verifying full name + another document verifying name and either address or date of birth.

Question 14

What information must be obtained for non-limited liability partnerships?

Answer 14

For non-limited liability partnerships, obtain information on the constituent individuals. For well-known, reputable partnerships, it’s sufficient to obtain:

1. Name
2. Registered or trading address
3. Nature of business

Question 15

What must be verified for companies during due diligence?

Answer 15

For companies, verify:

1. Company name
2. Company number or registration
3. Registered office address and principal place of business (if different)

Question 16

What must be verified for a company unless it is listed on a regulated market?

Answer 16

For a company (unless listed on a regulated market), reasonable measures must be taken to verify:

1. The law to which it is subject.
2. Its constitution or other governing documents
3. The names of the board of directors or other senior persons responsible for its operations.

Question 17

What is the definition of a “beneficial owner” for companies?

Answer 17

A beneficial owner of a company is:

1. An individual with ultimate control over the management.
2. An individual who owns or controls more than 25% of shares/voting rights.
3. An individual who controls the company.
   (This does not apply to companies listed on a regulated market.)

Question 18

What is the definition of a “beneficial owner” for partnerships?

Answer 18

beneficial owner who: ultimately is entitled to or controls
1. more than a 25% share of the capital or profits of the partnership, or
2. more than 25% of
the voting rights in the partnership.

Question 19

What is the definition of a “beneficial owner” for trusts?

Answer 19

For trusts, the beneficial owner includes:
1. The settlor
2. The trustees
3. The beneficiaries
4. The class of persons benefiting from the trust
5. Any individual with control over the trust

Question 20

When is simplified due diligence permitted?

Answer 20

Simplified due diligence is permitted when a firm determines, through an individual risk assessment, that the business relationship or transaction presents a low risk of money laundering or terrorist financing.

Question 21

For a well-known UK-listed plc, what verification must a solicitor obtain for simplified due diligence?

Answer 21

For a well-known UK-listed plc, the solicitor must obtain confirmation of the company’s listing on the Stock Exchange.

Question 22

What factors should be considered when determining if a client or transaction presents a low risk?

Answer 22

Factors to consider include:

1. Whether the client is a company listed on a regulated market
2. The location of the regulated market
3. Where the client is established and does business

Question 23

Must a solicitor obtain anything to confirm eligibility for simplified due diligence?

Answer 23

YES - the solicitor must obtain evidence that the transaction and the client are eligible for simplified due diligence.

Question 24

When is enhanced due diligence required?

Answer 24

Enhanced due diligence is required where there is something about the arrangement or
transaction which creates a high risk of money laundering

Question 25

What are some circumstances that require enhanced due diligence?

Answer 25

Enhanced due diligence is required if: - The client or transaction is identified as high risk in the firm’s risk assessment - The client is from a high-risk third country - False or stolen identification has been used - The client is a Politically Exposed Person (PEP) or associated with one - The transaction is unusually complex or large, or has no apparent purpose

Question 26

Who qualifies as a PEP?

Answer 26

- Heads of State, government, ministers - Members of parliament and high-level judicial bodies -Members of courts of auditors or central banks - Ambassadors, high-ranking military officers - Members of management bodies in state-owned enterprises

Question 27

What are the family members and close associates of a PEP?

Answer 27

Family members: spouse, civil partner, children, parents, their spouses/civil partners Close associates: individuals with close business relationships to the PEP

Question 28

What additional obligations apply when dealing with a PEP or their associates?

Answer 28

- Senior management approval to act for the client - Establishing the source of wealth and funds - Enhanced ongoing monitoring of the business relationship

Question 29

What is the obligation regarding ongoing monitoring for a solicitor?

Answer 29

The solicitor must undertake ongoing monitoring of business relationships to ensure transactions are consistent with their knowledge of the client.

Question 30

What training are firms obliged to provide to employees regarding money laundering?

Answer 30

Firms must provide training on money laundering, terrorist financing, and data protection, ensuring employees understand the laws and requirements.

Question 31

What records must a firm keep for money laundering compliance? and how long for?

Answer 31

A firm must keep copies of documents and information obtained to satisfy due diligence requirements and supporting records for transactions subject to due diligence or ongoing monitoring. => firm must keep these records for 5 YEARS from when business relationship ends.

Question 32

What is the defence available for a firm accused of failing to prevent tax evasion under the Criminal Finances Act?

Answer 32

The firm’s defence is that it had reasonable prevention procedures in place, or that it was reasonable not to have had such procedures.

Question 33

What does the UK financial sanctions regime impose on law firms?

Answer 33

It places serious and extensive restrictions on dealing with people or entities on the ‘sanctions list’ (designated persons) due to sanctions by the UK, EU, or United Nations.

Question 34

Which firms are subject to the UK financial sanctions regime?

Answer 34

All law firms, regardless of whether they are subject to the Regulations, must comply with the UK financial sanctions regime.

Question 35

What should a firm do if it suspects a person is a designated person under financial sanctions?

Answer 35

The firm must inform the Office of Financial Sanctions Implementation (OFSI) if it knows or reasonably suspects that a person is a designated person or has committed financial sanctions offences.

Question 36

What must a firm do if it wants to act for a sanctioned person

Answer 36

If the person is not covered by a general OFSI licence, the firm must obtain an individual licence to receive reasonable fees for providing legal advice.