Professional Conduct (Money Laundering)

Question 1

What are the risks of money laundering as a solicitor?

Answer 1

• Client depositing cash in firm’s client account solely for onward transmission to a third party;
• Client acquiring property, investing in a business, buying an asset using cash which is a proceed of crime;
• Setting up legal or transaction structures to hide the source of funds;
• A client using a firm’s client account to mix clean and dirty cash to disguise audit trail.

Question 2

What are common warning signs of money laundering?

Answer 2

• Seller and buyer with similar names and/or same address;
• Seller and buyer from a jurisdiction outside UK;
• Mistakes of overpayment to client account;
• Monies arriving from a third party who is not a client;
• Client asking you to send monies to an unknown third party;
• Documents with similar signatures for buyer and seller;
• Clients attempting to pay large sums in cash;
• Offshore companies being made parties to a deal;
• Money coming from or to be sent to offshore tax havens.

Question 3

What are some high-risk jurisdictions for money laundering?

Answer 3

• Democratic People’s Republic of Korea
• Iran
• Myanmar
• Yemen
• Iraq
• Syria
• Afghanistan

Question 4

What are the direct involvement offenses under the Proceeds of Crime Act (PoCA) 2002?

Answer 4

• s.237: Concealing, disguising, converting or transferring criminal property or removing from UK
• s.328: Entering into or becoming concerned in an arrangement which you know or suspect facilitates the acquisition, retention, use or control of criminal property;
• s.329: Acquiring, using or possessing criminal property.

Question 5

What are the defenses for direct involvement offenses under PoCA 2002?

Answer 5

• Make an authorised disclosure to nominated officer, before, during, or after;
• Conduct occurred outside the UK but was not unlawful in that jurisdiction

Question 6

What are the non-direct involvement offenses under PoCA 2002?

Answer 6

s.330: Failing to make a disclosure to the firm’s nominated officer (MLRO) or the National Crime Agency if…

1. you know or suspect laundering;
2. receive information in the course of business in the regulated sector; and
3. you can identify the person who is laundering, or the whereabouts of property;

s.334: Offence to tip off clients about any report made, or that an investigation is being contemplated or carried out, if it is likely to prejudice the investigation.

Question 7

What is standard customer due diligence (CDD)?

Answer 7

Identify the client and verify identity using documents, data, info from a reliable source.

Question 8

When is standard CDD required?

Answer 8

• Establish an ongoing (element of duration) business relationship;
• Carrying out an occasional transaction over €1,000;
• Suspect money laundering or terrorist financing;
• Doubt the veracity or adequacy of identification documents.

Question 9

How is standard CDD carried out?

Answer 9

Identify: Being told or coming to know a client’s identifying details (e.g. name and address);

Verify: Obtain evidence that supports the claim of identity such as original documents (passport), electronic verification, or information from regulated persons.

Question 10

What company details must be collected under CDD?

Answer 10

• Name of company
• Company number
• Address of registered office
• Law to which subject
• Constitutional documents
• Names of directors and senior management
• Identify the beneficial owner (person who owns or controls more than 25% of shares or voting rights).

Question 11

What is involved in ongoing monitoring under CDD?

Answer 11

• For repeat clients, with an ongoing relationship, there is no need to repeat CDD each time.
• The firm must scrutinize the client’s transactions to ensure they are consistent with the firm’s knowledge of the client and risk profile
• Keep ID and CDD documents up to date (usually via annual compliance audit).

Question 12

What are indicators for enhanced customer due diligence (CDD)?

Answer 12

• High-risk country
• Politically exposed persons (PEPs)
• False ID
• Unusually complex or large transactions with no apparent legal or economic purpose.

Question 13

What actions are taken under enhanced CDD?

Answer 13

• Examine the background and purpose of the transaction;
• Obtain additional information on the client, source of funds, beneficial owner;
• Increase the degree and nature of monitoring;
• Obtain additional verification from independent sources.

Question 14

What are indicators for simplified customer due diligence (CDD)?

Answer 14

• Customer is a public administration
• Publicly owned enterprise
• Financial or credit institution
• Company listed on a regulated stock market.

Question 15

What actions are taken under simplified CDD?

Answer 15

Adjust the exten, timing, or type of CDD to reflect a lower measure of risk.