Money Laundering Flashcards
What is money laundering?
A) The legal transfer of funds across jurisdictions
B) The process of making money appear as if it comes from a legitimate source
C) The legal conversion of foreign currency
D) A method used by businesses to track revenue
B) The process of making money appear as if it comes from a legitimate source
How can law firms be exploited for money laundering?
A) Funds enter a clean account and are transferred, making them hard to trace
B) Lawyers directly engage in criminal activities
C) Law firms refuse to handle large transactions
D) Law firms only deal with clients they personally know
A) Funds enter a clean account and are transferred, making them hard to trace
Which of the following is a warning sign of money laundering?
A) Clients using standard payment methods
B) Instructions outside your firm’s area of expertise
C) Transactions being processed through UK-regulated banks
D) Clients providing all required documentation upfront
B) Instructions outside your firm’s area of expertise
Which of the following is a suspicious fact pattern in property transactions?
A) Buyer and seller having similar names or addresses
B) Buyer obtaining a mortgage through a reputable bank
C) Funds coming from a UK-based financial institution
D) Client providing complete and verifiable documentation
A) Buyer and seller having similar names or addresses
Which of these countries is currently on the FATF “Call for Action” list (Feb 2024)?
A) UAE
B) North Korea
C) Panama
D) South Africa
B) North Korea
Which of the following is NOT listed as an EU high-risk jurisdiction (Dec 2023)?
A) Iran
B) Myanmar
C) Canada
D) Philippines
C) Canada
Under PoCA, which section criminalizes concealing, disguising, or transferring criminal property?
A) Section 327
B) Section 328
C) Section 329
D) Section 330
A) Section 327
Which offence applies to legal professionals who fail to disclose money laundering suspicions?
A) Section 327
B) Section 328
C) Section 330
D) Section 333A
C) Section 330
What is the offence covered under Section 328 of PoCA?
A) Possessing criminal property
B) Facilitating someone else’s use of criminal property
C) Tipping off a client about an investigation
D) Failing to report suspicious activity
B) Facilitating someone else’s use of criminal property
What is the maximum penalty for a direct involvement offence under Sections 327-329?
A) 5 years imprisonment
B) 10 years imprisonment
C) 14 years imprisonment
D) A fine only
C) 14 years imprisonment
Under which section is tipping off an offence?
A) Section 327
B) Section 328
C) Section 329
D) Section 333A
D) Section 333A
What is a valid defence to a money laundering offence under PoCA?
A) Claiming ignorance of the law
B) Authorised disclosure to the MLRO before, during, or after the event
C) Transferring funds in small amounts
D) Receiving funds from an offshore entity
B) Authorised disclosure to the MLRO before, during, or after the event
When must a law firm conduct Customer Due Diligence (CDD)?
A) Only when the client requests it
B) When a business relationship is established
C) Only if the transaction exceeds 100,000 euros
D) If a client refuses to provide identification
B) When a business relationship is established
What is the monetary threshold for conducting CDD on an occasional transaction?
A) €500
B) €1,000
C) €5,000
D) €10,000
B) €1,000
Under which regulation is Enhanced Customer Due Diligence (Enhanced CDD) required?
A) Regulation 27
B) Regulation 28
C) Regulation 33
D) Regulation 37
C) Regulation 33
Which of the following is an example of when Enhanced CDD is required?
A) The client is a Politically Exposed Person (PEP)
B) The client is a UK resident purchasing a small property
C) The client provides all necessary documentation on time
D) The transaction involves a publicly traded company
A) The client is a Politically Exposed Person (PEP)
What is a key requirement for Simplified Customer Due Diligence (Simplified CDD)?
A) The transaction must involve over €1,000
B) The client must be from a high-risk jurisdiction
C) The firm must identify a low risk of money laundering
D) The client must be a PEP
C) The firm must identify a low risk of money laundering
A client instructs a law firm to set up a trust with no clear purpose and insists on using large cash deposits. What is the best course of action?
A) Proceed as the client is paying in full
B) Conduct Enhanced Due Diligence (EDD)
C) Ignore it as the funds are within legal limits
D) Transfer the money immediately to avoid delays
B) Conduct Enhanced Due Diligence (EDD)
A law firm receives an overpayment of £500,000 from a third party and is asked to return it to a different offshore account. What should they do?
A) Report to the MLRO under Section 338
B) Process the transaction as requested
C) Contact the client’s bank for verification
D) Accept the overpayment and deduct legal fees
A) Report to the MLRO under Section 338
A client from Iran (a FATF high-risk country) is purchasing UK property using offshore funds from the Cayman Islands. What is the risk level of this transaction?
A) Low Risk
B) Moderate Risk
C) High Risk
D) No Risk
C) High Risk
A solicitor is aware of a suspicious transaction but does not report it. What offence might they have committed?
A) Section 327 - Concealing criminal property
B) Section 330 - Failure to disclose in the regulated sector
C) Section 333A - Tipping off
D) Section 329 - Possessing criminal property
B) Section 330 - Failure to disclose in the regulated sector
Which of the following best describes the “Golden Rule” in Anti-Money Laundering (AML) compliance?
A) Always disclose suspicions to the MLRO
B) Handle suspicious transactions personally
C) Avoid reporting suspicions unless there is strong evidence
D) Never disclose transactions to the MLRO
A) Always disclose suspicions to the MLRO
A client instructs a law firm to make a large payment to an unknown third party with no clear connection to the transaction. The client is unwilling to explain the reason for the payment. What should the firm do?
A) Proceed with the payment to maintain client confidentiality
B) Request additional information about the purpose of the payment
C) Report the transaction to the MLRO under Section 338
D) Ignore the issue, as long as the payment is coming from a reputable bank
C) Report the transaction to the MLRO under Section 338
A client is purchasing a high-value London property but insists on making the payment through an offshore entity registered in the British Virgin Islands. The client is reluctant to disclose the beneficial owner of the offshore entity. What is the appropriate action?
A) Proceed with the transaction since offshore entities are common
B) Conduct Enhanced Due Diligence (EDD) and request beneficial ownership details
C) Accept the transaction but inform the MLRO afterward
D) Decline the transaction immediately without further investigation
B) Conduct Enhanced Due Diligence (EDD) and request beneficial ownership details
