Money laundering - Lesson 8 Flashcards
What is money laundering?
Where illegally obtained money is pushed through financial systems and ‘washed’ so that it appears to be acquired legally.
Stage 1
Placement - where illegally obtained money is converted into assets that seem legitimate. This can be done by depositing the money into bank accounts under an anonymous corporation or ‘middleman’. This is where the criminal is most vulnerable a huge amounts of wealth is being introduced into the financial system.
Stage 2
Layering - where the funds are distanced from the original criminal through a complex web of multiple transactions to other bank accounts or buying assets such as cars or real estate. Can happen at casinos.
Stage 3
Integration - This is where the original criminal BENEFITS. The money re-enters the mainstream economy. They may invest the money into legal businesses or setting up fake charities and giving themselves a big salary.
Which acts set out the money laundering rules?
The Proceeds or Crime Act 2002 - sets out the offence and requires you to report any suspicions.
The Terrorist Act 2000 - sets out the terrorist offences
The ML Refulations and Terrorist Financing Regulations.
Law enforcement Agency responsible to reduce crime
National Crime Agency
Money laundering penalties
Depending on the seriousness can be an unlimited fine and/or up to 14 years in prison.
How should an accountant report Money laundering in practice.
If the practice has a Money laundering officer then the accountant must report their suspicions to them in an INTERNAL REPORT. The MLRO can then decide if it needs to be reported to the National Crime Agency with a Suspicious Activity Report (SAR).
Terrorist Financing
The collection of money from legal or illegal sources with the intention or knowledge that it will be used for any act of terrorism. The penalty is the same for ML so an unlimited fine and/or up to 14 years in prison.
Which two circumstances must an account file an internal or suspicious activity report (SAR)?
1 - when an accountant wants to act for a client in relation to a property which is known or suspected to be involved with money laundering or TF. They cannot act for them until they have consent to do so after sending the report.
2 - When an accountant knows or suspects that money laundering or TF is going on regardless if they want to act for them. This could be a colleague, client or third party.
Basic things a Suspicious Activity Report (SAR) must contain?
The identity of the suspect, name/address
The information about the money laundering
Whereabouts the laundered property is, if known.
The details of the person writing the report usually the MLRO in a practice or a sole trader accountant.
Money laundering procedures
Firms must have strong internal policies and procedures to follow when it comes to Money laundering and staff should be given good training so that they can be aware of how to spot money laundering and have anti-money laundering safeguards in place.
Disclosure by the person that suspects ML. Where any person submits a report of suspicions of money laundering, but is protected against a breach of confidentiality
Protected disclosure
What is authorised disclosure to an authority?
The person who is committing ML. When any person who realises they may have been engaged or have been engaged in money laundering. By disclosing it as soon as possible, it will give them a defence against the charges.
What are the 3 exceptional situations where you do NOT need to report.
1 - When the suspected ML did not happen during the accountants business such as at a social occasion.
2 - when the info came about during privileged circumstances
3 - If there is a reasonable reason for not reporting straight away such as an extreme threat to their safety.
