Unit 2 Topic 23 - Anti-money-laundering

Question 1

What are the three principal money laundering offences?

Answer 1

• Concealing criminal property
• Arranging
• Acquiring, using or possessing

Question 2

Outline Concealing criminal property in relation to money laundering.

Answer 2

• Criminal property is property that a person knows, or suspects to be the proceeds of any criminal activity.
• It is a criminal offence to conceal, disguise, convert or transfer criminal property.

Question 3

Outline Arranging in relation to money laundering.

Answer 3

Arranging occurs 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).

Question 4

Outline Acquiring, using or possessing in relation to money laundering.

Answer 4

It is a criminal offence for a person to acquire, use or posses any property when that person knows or suspects that the property is the proceeds of criminal activity.

Question 5

How does the Terrorism Act 2000 define ‘Terrorist property’?

Answer 5

• Money or other property that is likely to be used for terrorism purposes.
• Proceeds of the commission of acts of terrorism.
• Proceeds of acts carried out for the purposes of terrorism.

Question 6

How does The EU’s Third Money Laundering Directive (2005) define property?

Answer 6

Assets of every kind, tangible or intangible, movable or immovable, as well as legal documents giving title to such assets.

Question 7

How does The EU’s Third Money Laundering Directive (2005) define criminal activity?

Answer 7

A crime as specified in the Vienna Convention (the United Nations Convention Against Illicit Traffic in Narcotic Drugs) and any other criminal activity designated as such by each member state.

Question 8

How does The EU’s Third Money Laundering Directive (2005) define criminal property?

Answer 8

Property that consists, directly or indirectly, wholly or in part, of a benefit from criminal conduct, where the alleged offender knows or suspects that it constitutes a benefit.

Question 9

Outline the adoption of a risk based approach in the Fourth Money Laundering Directive.

Answer 9

A requirement to adopt a risk-approach to the implementation of AML measures such as customer due diligence.

A relevant person must produce a written AML risk report and translate its findings into written policies to be approved by the firms’s senior management.

Question 10

Outline the changes to ‘politically exposed persons’ in the Fourth Money Laundering Directive.

Answer 10

A widened definition of PEP, including those holding prominent positions in their home country. Politically exposed people are those individuals who, because of their position, are considered to be more vulnerable to corruption.

Question 11

Outline the new criminal offence introduced by the Fourth Money Laundering Directive.

Answer 11

The introduction of a new criminal offence. An individual found guilty of recklessly making a statement in the context of money laundering that is false or misleading may face a find and/or a maximum two-year jail sentence.

Question 12

What changes to ‘tax crimes’ did the Fourth Money Laundering Directive bring about?

Answer 12

Tax crimes are included within EU legislation for the first time.

Question 13

What changes between member states did the Fourth Money Laundering Directive bring about?

Answer 13

Strengthens co-operation between member states.

Question 14

What changes to beneficial ownership of legal entities did the Fourth Money Laundering Directive bring about?

Answer 14

Increases transparency around the beneficial owners of legal entities (beneficial owners are those who own or control 25% of a legal entity).

Question 15

What are the three main areas of work of the Financial Action Task Force (FATF)?

Answer 15

• Setting appropriate standards for national anti-money-laundering programmes.
• Evaluating the extent to which individual countries have implemented these standards.
• Identifying trends in money-laundering methods.

Question 16

What are the circumstances requiring identification procedures to be carried out as mandated by customer due diligence.

Answer 16

• New business relationshop
• Occasional transaction exceeding EUR15,000.
• Life assurance policies.
• Suspicion.
• Doubts.
• Change of circumstances.

Question 17

What are acceptable forms of identification?

Answer 17

• Current passport
• Recent utility bill or council tax bill
• National identity card with photograph
• Entry on electoral roll
• Driving licence with photograph

Question 18

How does the FCA prevent financial exclusion for those unable to provide acceptable documents for proof of ID?

Answer 18

The FCA considers that a firm may accept, as evidence of the customer’s identification, a letter or statement from a person in a position of responsibility (such as a solicitor, doctor or minister of religion) who knows the client.

Question 19

What are the record keeping requirements in respect of customer due diligence for money laundering?

Answer 19

• Evidence of identification must be retained until at least five years after the relationship with the customer has ended
• Supporting evidence of transactions (in the form of originals or copies admissible in court proceedings) must be retained until at least five years after the transaction was executed.

Question 20

Who does the FCA require authorised firms to give responsibility for anti-money-laundering systems and controls to?

Answer 20

A senior manager.

Question 21

Who must be appointed by FCA authorised firms in relation to money laundering?

Answer 21

Money laundering reporting officer.

Question 22

How often must an authorised firm by FCA requisition a report in relation to money laundering?

Answer 22

Requisition a report at least once in each calendar year from the MLRO.

Question 23

What does the FCA require firms to have procedures to verify in relation to individuals working within the firm?

Answer 23

• Report suspicious circumstances by completing ‘suspicious activity reports’ (SARs).
• Refrain from altering persons being investigated.

Question 24

When assessing a firm’s compliance with its money-laundering requirements what documents will the FCA confirm whether the firm has followed?

Answer 24

• Joint Money Laundering Steering Group’s guidance notes.
• Publications of the FATF
• FCA’s own guidance on financial exclusion.

Question 25

What must the yearly report that management requisitions from the MLRO achieve?

Answer 25

• Assess the firm’s compliance with the Joint Money Laundering Steering Group guidance notes.
• Indicate how Financial Action Task Force findings have been used during the year.
• Provide information about reports of suspected money-laundering incidents submitted by staff during the year.

Question 26

Define Improper performance.

Answer 26

Performance that amounts to a breach of an expectation that a person will act in good faith, impartially or in accordance with a position of trust.

The test used is what a reasonable person in the UK would expect of a person performing the relevant function of activity.

Question 27

If a money laundering reporting officer (MLRO) suspects a case of attempted money laundering, to whom must this be reported?

Answer 27

The National Crime Agency.