Money Laundering

Question 1

What is money laundering?

Answer 1

• Proceeds of criminal activity are disguised as or converted into legitimate assets.

Money Laundering is the concealment of the origins of illegally obtained money, typically by means of transfers involving foreign banks or legitimate businesses.

Question 2

What is the key legislation governing money laundering within the UK?

Answer 2

• Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017.

RICS professional statement - Countering bribery and
corruption, money laundering
and terrorist financing
1st edition, February 2019

Question 3

Why is money laundering wrong?

Answer 3

Money Laundering is the concealment of the origins of illegally obtained money, typically by means of transfers involving foreign banks or legitimate businesses.

• Money laundering involves of criminal activity being converted into or disguised as legitimate assets and so money laundering allows crime to be profitable.
• Money laundering is therefore illegal under the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017.

Money laundering is bad because it undermines financial stability, facilitates other crimes, and harms the economy. It allows criminals to hide their illicit earnings, expand their operations, and potentially disrupt legitimate businesses.

Question 4

What are the key requirements of the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017?

Answer 4

• Firm to produce a written money laundering and terrorist financing risk assessment.
• Firm to implement adequate policies to prevent money laundering and terrorist financing.
• Firm to provide adequate training to all staff.
• Undertake relevant due diligence checks.
• Comply with requirements relating to politically exposed persons.
• Do not accept cash amounts over 10,000 euros.
• Maintain records for at least five years.

Question 5

Outline the different types of due diligence checks?

Answer 5

• Simplified Due Diligence – limited checks which are only appropriate for transactions where there is a low-risk of money laundering or terrorist financing.
• Customer Due Diligence – standard checks to verify clients identity via reliable source such as passports, company number and registered company address. Checks into client’s proposed funding arrangements and purpose of the transaction.
• Enhanced Due Diligence – enhanced checks to verify clients in high-risk countries (such as Iraq, Iran or Turkey) or ‘politically exposed person’. Enhanced checks into proposed funding arrangements and purpose of the transaction.

Question 6

What is a politically exposed person?

Answer 6

• Individual entrusted with prominent public function meaning they are at a higher risk of bribery or corruption by virtue of their position.

Question 7

How do you comply with the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017?

Answer 7

• Raise any concerns to my manager and the company ‘Money Laundering Reporting Officer’.
• Ensure I am aware of the RICS ‘Red Flag Indicators’ such as politically exposed persons or parties within high-risk countries.

If the client:
* is secretive or evasive about who they are, the beneficial owner,
the source of funds, the reason for the transaction, or what the big
picture is

If the transaction has unusual features such as:
* size, nature, frequency or manner of execution
* it is potentially loss making
* no obvious commercial purpose to the transaction

Question 8

What kind of things do you look out for regarding money laundering or terrorist financing?

Answer 8

• I would utilise the RICS ‘Red Flag Indicators’ document.
• ‘Red Flag Indicators’ include:

If the client:
* is secretive or evasive about who they are, the beneficial owner,
the source of funds, the reason for the transaction, or what the big
picture is

If the transaction has unusual features such as:
* size, nature, frequency or manner of execution
* it is potentially loss making
* no obvious commercial purpose to the transaction

o The client is a politically exposed person.
o Parties that reside in high-risk countries such as Iraq, Iran or North Korea.
o Large cash payments.
o Client is willing to pay high fees and is unconcerned or uninterested in the instruction.

Question 9

What do you do if you suspect an individual or firm are money laundering or terrorist financing?

Answer 9

• Report the incident to the company Money Laundering Reporting Officer.
• The Money Laundering Reporting Officer may then submit a Suspicious Activity Report to the National Crime Agency.
• The Money Laundering Reporting Officer may suspend the transaction or instruction if it is practical to do so.