Topic 14 Money laundering, data protection and complaints procedures

Question 1

1. List and explain the three principal money laundering offences under the Proceeds of Crime Act 2002.

Answer 1

The three money laundering offences are as follows:

 Concealing criminal property: it is a criminal offence to conceal, disguise, convert or transfer criminal property – clearly money laundering is included in those definitions.

 Arranging: this happens when a person becomes involved in a process that they know or suspect will enable someone else to acquire, retain, use or control criminal property (where that other person also knew or suspected that the property derived from criminal activity).

 Acquiring, using or possessing: it is a criminal offence for a person to acquire, use or possess any property when that person knows or suspects that the property is the proceeds of criminal activity.

Question 2

2. What is the individual transaction level (in euros) above which an organisation must seek evidence of identity from a customer?

Answer 2

Firms must obtain satisfactory evidence of identity for individual transactions (or a series of linked transactions) over €15,000 – the sterling equivalent is set each year.

Question 3

3. What are the two money laundering offences most likely to apply to a financial adviser?

Answer 3

The two offences most likely to apply to a financial adviser are:
 failure to disclose – not reporting suspicions of money laundering to the authorities if they have reasonable grounds for knowing or suspecting that someone is engaged in money laundering;
 tipping off a person who is suspected of money laundering that an investigation is being, or may be, carried out.

Question 4

4. Explain what is meant by the term ‘financial exclusion’ and the implications under the anti money laundering rules.

Answer 4

Financial exclusion refers to a situation in which a customer might be unable to access financial services because they are unable to produce the ‘standard’ evidence of identity that is normally required under anti-money-laundering rules.

Question 5

5. What is the procedure when a member of staff suspects a customer of a money laundering offence?

Answer 5

 All members of staff must make a report to the money laundering reporting officer (MLRO) if they know or suspect that a client is engaged in money laundering.
 The MLRO will then determine whether to report this to the National Crime Agency (NCA), using known information about the financial circumstances of the client and the nature of the business being transacted.

Question 6

6. What are the seven data protection principles set out in the EU’s GDPR regulations?

Answer 6

The GDPR sets out seven data protection principles, which state that:

1. data must be processed fairly, lawfully and in a transparent manner – the data controller is required to tell the individual what information will be processed, why and whether it will be disclosed to any other parties;
2. data can only be collected for specified, explicit and legitimate purposes;
3. data must be adequate and relevant for the purpose, but not excessive;
4. data must be accurate and up to date (where necessary), and reasonable steps must be taken to correct or erase inaccurate data without delay;
5. data must be kept in a form that permits identification of the data subject for no longer than is necessary;
6. data must be processed in a way that ensures appropriate security, including protection against unauthorised or unlawful processing and against accidental loss, destruction or damage;
7. the controller is responsible for, and must be able to demonstrate, compliance with the principles.

Question 7

7. Outline the timescales relevant to handling complaints about the potential mis sale of a life assurance policy.

Answer 7

The complaint handling timescales are as follows.
 The firm must send a written acknowledgement of the complaint promptly after receipt of the complaint.
 Firms are expected to have dealt with almost all complaints by resolution or a final response within eight weeks of receipt. If a final response cannot be given by that time, the complainant must be given the reason for the delay, an indication of when the firm expects to be able to provide a final response, and an explanation that the complainant has the right to refer the matter to the Financial Ombudsman Service if they are dissatisfied with the response.
 Records of complaints must be kept for three years.
 If the complaint is resolved informally within three business days and the complainant accepts the firm’s response, the complaint is not subject to the full requirements. No final resolution letter is required, but the firm must send the complainant a ‘complaint resolution communication’.

Question 8

8. What is the monetary limit on awards by the Financial Ombudsman Service, and what are the rights of each party once a decision has been reached?

Answer 8

 The maximum that can be awarded by the FOS is £160,000 plus reasonable costs and interest for claims made on or after 1 April 2019 that resulted from actions taken before that date,
 £350,000 for claims made on or after 1 April 2019 that resulted from actions taken from that date.
 If the claim was made before 1 April 2019, the limit is £150,000.
 The ombudsman can make a recommendation to the firm that it pay more than the maximum figure but the firm is under no obligation to follow the recommendation. Any ruling by the FOS is binding on the firm. The complainant is still free to pursue the matter through the courts if they wish.

Question 9

9. Tom claims to have lost £100,000 when an investment company became insolvent. What is the maximum compensation he can expect under the Financial Services Compensation Scheme?

Answer 9

 Tom could expect £85,000 compensation.

 The maximum compensation for an investment is 100 per cent of the first £85,000.