W0 Flashcards
What are some warning signs that indicate money laundering might be taking place?
Warning signs that money laundering might be taking place include instructions outside your firm’s area of expertise, unusual retainers, use of client accounts, setting up a trust, property purchases with large payments from private funds, and money coming from or being sent to offshore tax havens.
What are some high-risk jurisdictions for money laundering?
High-risk jurisdictions for money laundering include the Democratic People’s Republic of Korea, Iran, Myanmar, Afghanistan, Barbados, Burkina Faso, Cayman Islands, Democratic Republic of the Congo, Haiti, Syria, Uganda, Vanuatu, Yemen, South Sudan, Trinidad and Tobago, Tanzania, Philippines, Nigeria, and Iran.
What are the direct involvement offences under the Proceeds of Crime Act 2002 (PoCA)?
The direct involvement offences under PoCA include concealing, disguising, converting, or transferring criminal property; entering into or becoming concerned in an arrangement that facilitates the acquisition, retention, use, or control of criminal property by another person; and acquiring, using, or possessing criminal property.
What defences are available for the direct involvement offences under PoCA?
Defences for the direct involvement offences under PoCA include making an authorized disclosure, having appropriate consent, having a reasonable excuse for not making a disclosure, or carrying out a function related to the enforcement of any provision of PoCA or other enforcement relating to criminal conduct or benefit from criminal conduct.
What is the offence of failure to disclose under PoCA?
Under PoCA, it is an offence to fail to make a disclosure to the firm’s Money Laundering Reporting Officer (MLRO) or the National Crime Agency (NCA) if you know or suspect that someone is laundering the proceeds of criminal conduct, you receive the information in the course of business in the regulated sector, and you can identify the person who is laundering the proceeds of criminal conduct or the whereabouts of the laundered property.
What is the golden rule when suspecting money laundering?
The golden rule when suspecting money laundering is to report your concern to your MLRO or other nominated official. It is important to disclose any suspicions and not tip off clients about any reports made
What are some activities that fall within the definition of ‘regulated sector’ under PoCA?
Activities that fall within the definition of ‘regulated sector’ under PoCA include participating in financial and real property transactions, managing client money or assets, opening or managing bank, savings, or securities accounts, organizing contributions for the creation and operation of companies, and creating, operating, or managing trusts or similar structures by providing legal or notarial services.
What are the non-direct involvement offences under PoCA?
The non-direct involvement offences under PoCA apply to people working in the regulated sector. These offences include failure to disclose information about money laundering, tipping off clients about reports made, and disclosing information that may prejudice an investigation.
What is the definition of ‘authorised disclosure’ under PoCA?
‘Authorised disclosure’ under PoCA is a disclosure made to a constable, customs officer, or a nominated officer by the alleged offender that property is criminal property. It must satisfy certain conditions outlined in the law.
What is the time frame for taking further action after making a disclosure under PoCA?
If the MLRO decides to make a disclosure by way of a suspicious activity report (SAR) to the NCA, neither the MLRO nor the fee earner should authorize or undertake any prohibited act unless authorized by the NCA or seven working days have passed from the disclosure to the NCA without refusal of authority to proceed.
What is the offence of tipping off under PoCA?
Under PoCA, it is an offence to tip off clients about any report made of information that came to you in the course of business in the regulated sector. It is also an offence to disclose that an investigation is being contemplated or carried out if the disclosure is likely to prejudice the investigation.
What are some defences available for the non-direct involvement offences under PoCA?
Defences for the non-direct involvement offences under PoCA include making an authorized disclosure, having a reasonable excuse for not making a disclosure, or carrying out a function related to the enforcement of any provision of PoCA or other enforcement relating to criminal conduct or benefit from criminal conduct. There are also specific defences under certain sections of PoCA.
What is the regulated sector under PoCA?
The regulated sector under PoCA includes various businesses and activities such as insurance companies, investment services, accountancy services, insolvency practitioners, providing tax advice, participating in financial and real property transactions, and more. It also covers legal work that falls within ‘participating in financial and real property transactions.’
What is the offense of failure to disclose under PoCA?
Under section 330 of PoCA, it is an offense to fail to make a disclosure to the firm’s MLRO or the National Crime Agency (NCA) if you know or suspect that someone is laundering the proceeds of criminal conduct, receive the information in the course of business in the regulated sector, and can identify the person who is laundering the proceeds of criminal conduct or the whereabouts of the laundered property.
What are the requirements for making a disclosure under section 330 of PoCA?
According to section 330(5) of PoCA, a disclosure must contain the identity of the person who is suspected of laundering the proceeds of criminal conduct, the whereabouts of the laundered property if known, and the information on which the knowledge or suspicion is based
What is the waiting period before taking further action after making a disclosure to the MLRO/NCA?
If the MLRO decides to make a disclosure by way of a suspicious activity report (SAR) to the NCA, under section 336 of PoCA, neither the MLRO nor the fee earner should authorize or undertake any prohibited act unless authorized to do so by the NCA or seven working days have passed from the disclosure to the NCA during which time the NCA has not refused authority to proceed.
What is the offense of tipping off under PoCA?
Under section 333A of PoCA, it is an offense to tip off clients about any report made of information that came to you in the course of business in the regulated sector if you know or suspect that an internal or external report has been made and you tell your client or a third party, thereby possibly prejudicing any investigation. It is also an offense to disclose that an investigation is being contemplated or carried out if the disclosure is likely to prejudice the investigation.
What types of legal work fall within the definition of the regulated sector?
Some types of legal work, such as advising on a litigation matter, strictly don’t fall within the definition of the regulated sector. However, most firms have policies requiring their staff to report suspicions to the MLRO and no tipping off, regardless of whether the work falls within the definition of the regulated sector.
What factors indicate a risk of money laundering in the given scenario?
In the given scenario, factors that indicate a risk of money laundering include the purchaser paying a large sum of money in cash without the need for a mortgage, a large overpayment, the use of offshore bank accounts, a change in instructions, the client asking for a quick transaction, receiving a large payment from a tax haven like Bermuda, and making a large payment to another tax haven like the Cayman Islands.
What should you do to avoid committing an offense under PoCA?
To avoid committing an offense under PoCA, you should make an authorized disclosure to your firm’s MLRO or nominated officer under section 338 of PoCA. This will provide you with a defense to both direct and non-direct involvement offenses.
What are the penalties for offenses under PoCA?
The penalties for offenses under PoCA, whether direct or non-direct involvement offenses, include imprisonment, a fine, or both.
What is customer due diligence (CDD) according to MLR?
Customer due diligence (CDD) refers to the measures that regulated businesses must take to identify and verify the identity of their clients and carry out ongoing monitoring.
When should customer due diligence (CDD) be carried out?
According to Regulation 27 of MLR, customer due diligence (CDD) must be carried out when establishing a business relationship, carrying out an occasional transaction, suspecting money laundering or terrorist financing, or having doubts about the veracity or adequacy of the identification documents, data, or information previously provided.
What are the direct involvement offences under PoCA?
The direct involvement offences under PoCA include: concealing, disguising, converting or transferring criminal property (s 327), entering into or becoming concerned in an arrangement which facilitates the acquisition, retention, use or control of criminal property (s 328), and acquiring, using or possessing criminal property (s 329).
What are the non-direct involvement offences under PoCA?
The non-direct involvement offences under PoCA apply to those working in the regulated sector. They include: failure to disclose suspicions to a nominated officer/MLRO (s 330) and tipping off (s 333A). A defence to both direct and non-direct involvement offences is making an authorised disclosure to a nominated officer under s 338 of PoCA.
What is Customer Due Diligence (CDD) and when should it be carried out?
Customer Due Diligence (CDD) is the process of identifying and verifying the identity of clients and carrying out ongoing monitoring. CDD should be carried out when establishing a business relationship, carrying out an occasional transaction, suspecting money laundering or terrorist financing, or having doubts about the veracity or adequacy of the identification documents, data, or information previously provided.
What is the purpose of ongoing monitoring in Customer Due Diligence (CDD)?
The purpose of ongoing monitoring in CDD is to scrutinize transactions throughout the course of the business relationship, ensure transactions are consistent with the law firm’s knowledge of the customer and their risk profile, review existing records, and keep documentation and information up-to-date
When does the verification of a client’s identity have to take place?
Generally, the verification of a client’s identity must take place before the establishment of the relationship or the carrying out of the transaction. However, if a business relationship is being established, the verification can be completed during the establishment of the business relationship if it does not interrupt the normal conduct of business and there is little risk of money laundering or terrorist financing occurring.
What is the meaning of ‘beneficial owner’ in relation to Customer Due Diligence (CDD)?
The ‘beneficial owner’ refers to the person who owns or controls the customer on whose behalf the work is being undertaken. For example, if the client is a private limited company, the solicitor would have to identify any individual who owns or controls more than 25% of the voting rights in the company and verify their identity.
What are the risk factors for simplified Customer Due Diligence (CDD)?
The risk factors for simplified CDD include customer risk factors (e.g., public administration, publicly owned enterprise, financial or credit institution, company listed on a regulated market, individual resident in a geographical area of low risk) and product, service, transaction, or delivery channel risk factors (e.g., life insurance policy with a low premium, pension scheme meeting prescribed conditions, child trust fund, junior ISA).
What is customer due diligence (CDD) and why is it important?
Customer due diligence (CDD) is the process of identifying and verifying the identity of clients. It is important because it helps regulated businesses comply with anti-money laundering regulations and reduces the risk of money laundering.
What information should be obtained when conducting CDD for a company client?
When conducting CDD for a company client, you should identify its name, company number, registered office, constitutional documents, and the names of the directors. Additionally, you should also identify the beneficial owner, which is the owner of more than 25% of the shares or voting rights in the entity.
What is enhanced customer due diligence (CDD) and when should it be carried out?
Enhanced customer due diligence (CDD) is a higher level of scrutiny and additional measures that need to be taken when there is a higher risk of money laundering. It should be carried out when you need to satisfy yourself of the background and financial situation of the client and ensure that the transaction is legitimate.
What is simplified customer due diligence (CDD) and when can it be conducted?
Simplified customer due diligence (CDD) involves adjusting the type of CDD measures conducted when the risk of money laundering is low. It can be conducted when the relationship with the client is established, an occasional transaction is carried out, or there is doubt about the veracity or adequacy of the identification documents.
What are the consequences of relying on another person’s due diligence for anti-money laundering purposes?
If you rely on another person’s due diligence for anti-money laundering purposes, you remain liable for the client not being properly checked. It is important to ensure that the due diligence conducted by the third party is compliant with the Money Laundering Regulations (MLR).
Why do most law firms prefer to undertake their own customer due diligence (CDD)?
Most law firms prefer to undertake their own customer due diligence (CDD) because it allows them to have control over the process and ensure compliance with anti-money laundering regulations. Additionally, larger law firms are often uncomfortable relying on a third party’s assessment of risk.
What is the role of the Financial Services and Markets Act 2000 (FSMA) in regulating financial services?
The Financial Services and Markets Act 2000 (FSMA) is the key statute governing the provision of financial services in the UK. It establishes the activities to be regulated by FSMA and sets out the regulatory framework for financial services, including the roles of the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA).
What is the role of the Financial Conduct Authority (FCA) in regulating financial services?
The Financial Conduct Authority (FCA) is one of the regulators responsible for regulating financial services in the UK. It focuses on the conduct of business and regulates activities such as advising on investment products, dealing in investment products, and arranging investment products on behalf of clients. However, few law firms obtain direct FCA authorization due to the stringent level of regulation and cost efficiency considerations.
What is the general prohibition under the Financial Services and Markets Act 2000 (FSMA)?
The general prohibition under the Financial Services and Markets Act 2000 (FSMA) states that no person may carry on a regulated activity in the United Kingdom unless they are an authorized person or an exempt person. Breaching this prohibition is a criminal offense.
What are the conditions for an activity to be considered a regulated activity under FSMA?
According to FSMA, an activity is considered a regulated activity if it is an activity of a specified kind carried on by way of business and relates to an investment of a specified kind. The specific conditions are outlined in Section 22(1) of FSMA.
What are the steps to consider when determining if an activity is regulated under FSMA?
The steps to consider when determining if an activity is regulated under FSMA are: 1) Is the investment specified under FSMA? 2) Is the activity a specified activity under FSMA? 3) Is the activity excluded under FSMA? 4) Does the activity fulfill the basic conditions specified by Section 327 of FSMA and the SRA Scope Rule 2?
What are the specified investments that fall under FSMA?
The specified investments that fall under FSMA include shares, instruments creating or acknowledging indebtedness (such as bonds), and regulated mortgage contracts. These are outlined in Part III of the Regulated Activities Order (RAO).
