WS3 - Money Laundering Flashcards
1
Q
What are the three phases of money laundering?
A
- Placement
- Layering
- Integration
2
Q
What are areas where solicitors are most at risk when it comes to money laundering?
A
- Company and trust work
- Use of client account ‘swapping illicit money’ for clean money
- Real estate - acting for client in a purchase of a property
3
Q
Can passive possession of criminal property be money laundering?
A
Yes
4
Q
What happens during placement?
A
Cash generated from crime is placed in the financial system
5
Q
What does layering involve?
A
Distancing the real origins of the proceeds of crime by passing them through a number of parties or complex transactions
6
Q
What is integration and what are some examples of how it can be achieved?
A
Money is integrated back into the financial system and the criminal is now in possession of laundered money
7
Q
At what stages is a solicitor most likely to become involved in money laundering?
A
Layering or integration stages
8
Q
PCA
To whom does the Proceeds of Crime Act generally apply?
A
Everyone
9
Q
What role does the SRA have in respect of anti-money laundering?
A
- Supervisory role
- Beneficial owners, officers and managers of the firm / sole practioner’s to apply to the SRA for approval under the regulations
- Acting without approval is a criminal offence
- SRA maky seek to see firms risk assesment
10
Q
As a matter of professional conduct, what should firms have to prevent money laundering?
A
- Training, arrangment, systems and controls to ensure compliance with regulatory and legislative requirements.
11
Q
What is the risk assesment?
A
Firm is required to
1) Take appropriate steps to identify, assess risk of firm
2) Firm wide risk assesment to include risk factors relating to services offered by firm / nature of firms clients
3) Required to keep up to date record of all steps it has taken in terms of the risk assessment
12
Q
What are the policies and controls in place at law firms?
A
- Need to maintain written anti-money laundering policies (proportionate to its size and nature) to mitigate risks of money laundering and terrorist financing
- E.g. how firm conducts DD, policies in place, new technology is adopted in relation to transactions
- Need to be approved by senior management
13
Q
What are the firms internal controls regarding money laundering?
A
1) Must appoint a money laundering reporting officer (MLRO) to receive any reports regarding money laundering risks and to liaise with the National Crime Agency, if necessary
2) Screen relevant employees
3) Independent audit function
14
Q
To whom are certain offences, e.g. failure to report and tipping off under POCA reserved for?
A
Persons engaged in activities in the regulated sector
15
Q
What is the presumption of a predicate offence in the context of money laundering?
A
Money laundering offences presume that a criminal offence has occured in order to generate the criminal property being laundered
16
Q
Is a conviction of a predicate offence required for a prosecution for a money laundering offence?
A
No
17
Q
Are there inchoate offences related to money laundering offences?
A
Yes. It is an offence to conspire or attempt to launder, and to counsel, aid, abet, or procure money laundering.
18
Q
What is the maximum penalty for the principal money laundering offences?
A
14 years in prison and/or unlimited fine
19
Q
What are the three direct money laundering offences?
A
- Concealing (s327)
- Arrangement (s328)
- Acquisition, use or possession (s329)
20
Q
When does a person commit the offence of concealing?
A
When they conceal, disguise, convert or transfer criminal property or remove it from the UK.
21
Q
What is criminal property?
A
- Any property derived from criminal conduct including money, real and personal property and intangiable property whether in the UK or not.
- Must be due to a criminal offence in the UK or if international offence, which would be criminal had it been in the UK
- Indirect (profits from stolen property)
- Direct (stolen property)
22
Q
What is the extent to which concealing or disguising applies?
A
Concealing or disguising the property’s nature, but also its source, location or ownership
23
Q
What is the mental state required to commit the offence of concealing (and arrangement and acquisition)?
A
- Subjectively know or suspect that the property represents a benefit from criminal conduct.
If you have a suspicion that this money is coming from a criminal offence - subjective test is satisfied as ‘more than a fanciful possiblity of suspicion is satisfied.
24
Q
What is an authorised disclosure defence under s338?
A
- Disclosure must be made by the person, who, but for the disclosure would be committing an offence
- It is authorised if it is made to the relevant MLO
25
What are the three timings which determine the **authorised disclosure** **defence** available to a charge of concealing (and arrangement and acquisition)?
1. Before concealing
2. During concealing
3. After concealing
26
What is the authorised disclosure defence if disclosure is made **before** concealing?
It is a full defence if a person makes an authorised disclosure of the act to police, customs officer or other nominated officer within the organisation, **before** the act takes place
27
What is the authorised disclosure defence if disclosure is made **during** concealing?
It is a full defence if during the act:
1. Person had **no relevant knowledge** or supsicion when the act started
2. Disclosure was made **as soon as practicable** after knowledge or suspicion and
3. Disclosure was made on the person's own **initiative** (not prompted by imminent discovery / encouragment of another)
28
What is required to avail of the authorised disclosure defence if disclosure is made **after** concealing?
There must have been **good reason** why a disclosure was not made
29
Which way is the **conflict between disclosure** as a defence to concealing and the duty of confidentiality resolved?
Disclosure is an exception to the general duty of confidentiality
30
In what instance can a solicitor be excused from disclosing in the context of concealing?
Where **legal professional privilege** applies
31
In what situation could a solicitor not rely on legal professional privilege in the context of concealing?
Where the solicitor **knows** the transaction they are working on is a money laundering offence, or they suspect it and their suspicions are true.
Therefore, the offence can be committed by suspecting **or** knowing, but where legal professional privilege applies, the solicitor must **know** in order to lose the privilege, or suspect it and be **right** in the facts.
32
In the context of concealing, what if a solicitor merely suspects the transaction they are working on is a money laundering offence?
Although suspecting is enough to satisfy the mens rea, the ability to rely on the privilege as a defence is only lost when they **know**, or their suspicions are found to be true
33
# s328
When does a person commit the offence of **arrangement**?
When they **know or suspect** what they are doing facilitates the
* acquisition, retention, use, or control of criminal property by or on behalf of another person
34
# s328
What kind of conduct is exempt from the offence of **arrangement**?
The offence does not cover or affect the ordinary conduct of litigation, from issue to disposal of final judgment
Unless litigation sham applies
35
What is one exception to the litigation exemption to arrangement?
Sham litigation for the purpose of money laundering would be an offence
## Footnote
Sham litigation - when a claim is issued against a foreign company and the company doesn't defend the cliam. Judgement is entered by default - foreign company immediately pays sum due to Franks firm - and the claimant gets money
36
What are the defences to arrangement?
The same ** authorised disclosure defence** under s328 as concealing
37
When does a person commit the offence of **acquisition**?
When they acquire, use, or possess criminal property
38
In the context of acquisition, what is possession?
E.g. Solicitor receives money for costs for work carried out for a client charged with criminal offence and there is a possibility that money is criminal property
39
What are the defences to acquisition?
The same **disclosure defence** as concealing and arrangement, plus one additional defence
40
What is the additional defence to acquisition?
If the criminal property was acquired, used, or possessed for **adequate consideration**, and they did not know or suspect it was criminal property and that the services might help to carry out criminal conduct.
Examples
* Solicitors receive money account
* Fees must be reasonable and defence not available if the value of the work is significantly less than the money received
41
When does the adequate consideration defence to acquisition would not apply?
* When the accused **knows or suspects** that the consideration may help another to carry out criminal conduct or has **reasonable grounds to know**
* Information comes during the course of business in regulated sector and
* Does not make a full disclosure
Subjective and objective element - e.g. a reasonable lawyer in your shoes knew
42
What are the three **indirect** money laundering offences?
1. Failure to report
2. Tipping off
3. Prejudicing an investigation
43
When does a person commit the offence of failure to report?
When they suspect, know about, or should have suspected or known about money laundering and/or terrorist financing and do not make a suspicious activity report
44
What activities would be a flag for money laundering?
1. Depositing money with solicitor and then requesting return of funds
2. Transfer between bank accounts, in multiple names, multiple banks and multiple countries
3. Overpayment of tax
45
What is the scope of information which must be reported?
Anything coming the the solicitor in the course of business, and not just relating to their clients/matters
46
Who are some of the parties that could give rise to the requirement to file a suspicious activity report?
1. Potential clients
2. Associates
3. Counterparties of clients
4. Acquisition targets
5. Employees of businesses solicitor is dealing with
47
Within what timescale must the solicitor make their report, and what is one acceptable reason for delaying?
As soon as practicable. Delay may be excused if the reason is legal advice is being sought, provided action is still prompt.
48
What are some available defences to failure to report?
1. The information falls within a privilge not excluded by AML laws
2. Information came to solicitor from a client (a) in connection with giving legal advice to the client or (b) seeking legal advice
49
# s330
What is the lack of training defence to failure to report/disclose?
Employees in firms who have no knowledge or suspicion of money laundering, even though they should, have a defence if they have not **received training**
50
Who is liable for failure to train staff?
The firm’s partners are liable for breach of the Regulations
51
What offence is lack of training **not** a defence to?
Failing to report activity related to **terrorist** financing
52
What are the two ways the offence of **tipping off** can be committed?
1. Disclosing to a third person that a **suspicious activity report** has been made if that disclosure might prejudice any investigations
2. Disclosing an investigation to a third person
53
Does tipping off have to be in writing and direct?
Tipping off can be in writing, oral or conduct (e.g. waiting too long or wanting to delay and making person suspicious) and it can be direct or indirect
54
What standard practice will not amount to tipping off?
Including a paragraph about obligations under money laundering legislation in standard terms of engagement
55
What are the four defences to tipping off?
1. Disclosures within an undertaking or group
2. Disclosures between lawyers
3. Disclosures to supervisory bodies
4. Disclosure by professional advisors to be the suspect client for offence abatement
56
What is the defence of disclosure within an undertaking or group?
It is not tipping off to disclose to an employee, colleague, officer or partner in the same undertaking / group that SAR has made
57
What two criteria must be satisfied for disclosure to a different undertaking/group to not be tipping off?
1. Entities share common owners, management or control **and**
2. Carry on business in EEA or country with money laundering law equivalent to the EU
58
What four elements must be satisfied for disclosure between lawyers to not be tipping off?
1. Disclosure made to legal professional EEA or country with money laundering laundering law equivalent to the EU
2. Disclosure relates to client / former or both parties, or a transaction or provision of services involving both
3. Disclosure is made for purposes of preventing a money laundering offence **and**
4. Both parties have equivalent professional duties of confidentiality and protection of personal data
59
When is disclosure to a supervisory body not tipping off?
When the disclosure is for the purpose of prevention, investigation, or prosecution of a criminal offence, an investigation under POCA, or enforcement of any court order under POCA
60
What is disclosure for offence abatement defence to tipping off?
When the disclosure to the client is for the purpose of dissuading the client from engaging in conduct amounting to an offence
61
What are the two ways in which a person can commit the offence of prejudicing an investigation?
Know or suspect that a money laundering, confiscation, or civil recovery investigation is being or is about to be conducted **and** either
1. Make a disclosure to any person that is likely to prejudice the investigation, **or**
2. Falsifies, conceals, or destroys documents relevant to the investigation, or causes that to happen
62
For the purposes of prejudicing an investigation, what are three elements that can negate the offence for the defendant?
1. Did not know/suspect the disclosure would be prejudicial
2. Did not know/suspect the documents were relevant
3. Did not intend to conceal facts from person carrying out investigation
63
What is the in connection with legal proceedings defence to prejudicing an investigation?
It is a defence that disclosure was made by a professional advisor **in connection with legal proceedings** or contemplated legal proceedings, provided disclosure is not made to further a criminal purpose
64
Who is exempt from having an MLRO?
An individual who provides regulated services but does not employ any people or act in association with anyone else
65
What level of seniority must an MLRO be?
Sufficient seniority to make decisions on reporting which can impact a business’s relations with its clients and its exposure to sanctions, and to have access to all the business’s client files
66
What information must the MLRO report?
Information or other matters leading to knowledge or suspicion (including reasonable grounds for such) must be disclosed
67
Must the MLRO have sole discretion to report?
Yes, this must not be subject to the consent of anyone else
68
Who has the responsibility of reporting to the MLRO?
The individual, always
69
What is best practice when a MLRO is away and there is no replacement during their absence?
To self report any suspicions directly to the NCA as harm might arise from the delay
70
After a SAR is submitted, what time scale does NCA have to review?
7 days
71
What is the situation if NCA has not responded after 7 days?
Deemed consent is given
72
During the 7 day notice period, must all work on the matter cease?
No, other activities such as searches or writing correspondence can take place, but the main act subject to the SAR must not
73
What happens if NCA refuses consent within the 7 day window?
If initial refusal was given but NCA does not follow-up after **31 business days** have elapsed, then solicitor can **proceed** with the transaction.
74
What happens after 31 days?
The MLRO can then give consent for the act
75
When events would trigger a requirement to carry out customer due diligence?
1. Establish a business relationship
2. Carry out an occaisonal transaction
3. Suspect money laundering / terrorist financing
4. Doubt the veracity or adequacy or documents or information previously obtained
76
When is a solicitor-client relationship considered to be a business relationship?
When, at the time it is established, it is expected to have an element of duration
77
What is an occasional transaction?
Transaction worth €15,000 or more, carried out other than as part of a business relationship
78
What must a solicitor do if customer due diligence cannot be completed?
1. Refrain from any of the activities triggering the requirement
2. Terminate any existing business relationship
3. Consider making a disclosure to NCA
79
What is the as soon as practicable exception to the immediacy of the customer due diligence requirement?
Verification need not be completed right away and may be completed as soon as practicable if:
1. It is necessary not to interrupt the normal conduct of business
2. There is little risk of money laundering / terrorist financing
80
In what situation does the as soon as practicable exception not apply?
If it is an occasional transaction
81
What are a solicitor’s customer due diligence obligations when dealing with a trust?
They must verify the identity of any beneficiaries before a payment to them or before they exercise their vested rights
82
They must verify the identity of any beneficiaries before a payment to them or before they exercise their vested rights
1. Undertake substantive work
2. Permit funds to be deposited in the firm's client account
3. Permit property to be transffered
4. Permit final agreement to be signed
83
What is the requirement for training under money laundering/terrorist financing laws?
Relevant employees are required to be made aware of law related to money laundering /terrorist financing
