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SQE1 - Legal Services Bella > WS3 - Money Laundering > Flashcards

WS3 - Money Laundering Flashcards

1
Q

What are the three phases of money laundering?

A
  1. Placement
  2. Layering
  3. Integration
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2
Q

What are areas where solicitors are most at risk when it comes to money laundering?

A
  1. Company and trust work
  2. Use of client account ‘swapping illicit money’ for clean money
  3. Real estate - acting for client in a purchase of a property
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3
Q

Can passive possession of criminal property be money laundering?

A

Yes

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4
Q

What happens during placement?

A

Cash generated from crime is placed in the financial system

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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

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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

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7
Q

At what stages is a solicitor most likely to become involved in money laundering?

A

Layering or integration stages

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8
Q

PCA

To whom does the Proceeds of Crime Act generally apply?

A

Everyone

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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
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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.
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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

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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
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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

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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

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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

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16
Q

Is a conviction of a predicate offence required for a prosecution for a money laundering offence?

A

No

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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.

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18
Q

What is the maximum penalty for the principal money laundering offences?

A

14 years in prison and/or unlimited fine

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19
Q

What are the three direct money laundering offences?

A
  1. Concealing (s327)
  2. Arrangement (s328)
  3. Acquisition, use or possession (s329)
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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.

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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)
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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

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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.

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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
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25
Q

What are the three timings which determine the authorised disclosure defence available to a charge of concealing (and arrangement and acquisition)?

A
  1. Before concealing
  2. During concealing
  3. After concealing
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26
Q

What is the authorised disclosure defence if disclosure is made before concealing?

A

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

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27
Q

What is the authorised disclosure defence if disclosure is made during concealing?

A

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)

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28
Q

What is required to avail of the authorised disclosure defence if disclosure is made after concealing?

A

There must have been good reason why a disclosure was not made

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29
Q

Which way is the conflict between disclosure as a defence to concealing and the duty of confidentiality resolved?

A

Disclosure is an exception to the general duty of confidentiality

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30
Q

In what instance can a solicitor be excused from disclosing in the context of concealing?

A

Where legal professional privilege applies

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31
Q

In what situation could a solicitor not rely on legal professional privilege in the context of concealing?

A

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.

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32
Q

In the context of concealing, what if a solicitor merely suspects the transaction they are working on is a money laundering offence?

A

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

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33
Q

s328

When does a person commit the offence of arrangement?

A

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

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34
Q

s328

What kind of conduct is exempt from the offence of arrangement?

A

The offence does not cover or affect the ordinary conduct of litigation, from issue to disposal of final judgment

Unless litigation sham applies

35
Q

What is one exception to the litigation exemption to arrangement?

A

Sham litigation for the purpose of money laundering would be an offence

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
Q

What are the defences to arrangement?

A

The same ** authorised disclosure defence** under s328 as concealing

37
Q

When does a person commit the offence of acquisition?

A

When they acquire, use, or possess criminal property

38
Q

In the context of acquisition, what is possession?

A

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
Q

What are the defences to acquisition?

A

The same disclosure defence as concealing and arrangement, plus one additional defence

40
Q

What is the additional defence to acquisition?

A

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
Q

When does the adequate consideration defence to acquisition would not apply?

A
  • 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
Q

What are the three indirect money laundering offences?

A
  1. Failure to report
  2. Tipping off
  3. Prejudicing an investigation
43
Q

When does a person commit the offence of failure to report?

A

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
Q

What activities would be a flag for money laundering?

A
  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
Q

What is the scope of information which must be reported?

A

Anything coming the the solicitor in the course of business, and not just relating to their clients/matters

46
Q

Who are some of the parties that could give rise to the requirement to file a suspicious activity report?

A
  1. Potential clients
  2. Associates
  3. Counterparties of clients
  4. Acquisition targets
  5. Employees of businesses solicitor is dealing with
47
Q

Within what timescale must the solicitor make their report, and what is one acceptable reason for delaying?

A

As soon as practicable. Delay may be excused if the reason is legal advice is being sought, provided action is still prompt.

48
Q

What are some available defences to failure to report?

A
  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
Q

s330

What is the lack of training defence to failure to report/disclose?

A

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
Q

Who is liable for failure to train staff?

A

The firm’s partners are liable for breach of the Regulations

51
Q

What offence is lack of training not a defence to?

A

Failing to report activity related to terrorist financing

52
Q

What are the two ways the offence of tipping off can be committed?

A
  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
Q

Does tipping off have to be in writing and direct?

A

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
Q

What standard practice will not amount to tipping off?

A

Including a paragraph about obligations under money laundering legislation in standard terms of engagement

55
Q

What are the four defences to tipping off?

A
  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
Q

What is the defence of disclosure within an undertaking or group?

A

It is not tipping off to disclose to an employee, colleague, officer or partner in the same undertaking / group that SAR has made

57
Q

What two criteria must be satisfied for disclosure to a different undertaking/group to not be tipping off?

A
  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
Q

What four elements must be satisfied for disclosure between lawyers to not be tipping off?

A
  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
Q

When is disclosure to a supervisory body not tipping off?

A

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
Q

What is disclosure for offence abatement defence to tipping off?

A

When the disclosure to the client is for the purpose of dissuading the client from engaging in conduct amounting to an offence

61
Q

What are the two ways in which a person can commit the offence of prejudicing an investigation?

A

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
Q

For the purposes of prejudicing an investigation, what are three elements that can negate the offence for the defendant?

A
  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
Q

What is the in connection with legal proceedings defence to prejudicing an investigation?

A

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
Q

Who is exempt from having an MLRO?

A

An individual who provides regulated services but does not employ any people or act in association with anyone else

65
Q

What level of seniority must an MLRO be?

A

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
Q

What information must the MLRO report?

A

Information or other matters leading to knowledge or suspicion (including reasonable grounds for such) must be disclosed

67
Q

Must the MLRO have sole discretion to report?

A

Yes, this must not be subject to the consent of anyone else

68
Q

Who has the responsibility of reporting to the MLRO?

A

The individual, always

69
Q

What is best practice when a MLRO is away and there is no replacement during their absence?

A

To self report any suspicions directly to the NCA as harm might arise from the delay

70
Q

After a SAR is submitted, what time scale does NCA have to review?

A

7 days

71
Q

What is the situation if NCA has not responded after 7 days?

A

Deemed consent is given

72
Q

During the 7 day notice period, must all work on the matter cease?

A

No, other activities such as searches or writing correspondence can take place, but the main act subject to the SAR must not

73
Q

What happens if NCA refuses consent within the 7 day window?

A

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
Q

What happens after 31 days?

A

The MLRO can then give consent for the act

75
Q

When events would trigger a requirement to carry out customer due diligence?

A
  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
Q

When is a solicitor-client relationship considered to be a business relationship?

A

When, at the time it is established, it is expected to have an element of duration

77
Q

What is an occasional transaction?

A

Transaction worth €15,000 or more, carried out other than as part of a business relationship

78
Q

What must a solicitor do if customer due diligence cannot be completed?

A
  1. Refrain from any of the activities triggering the requirement
  2. Terminate any existing business relationship
  3. Consider making a disclosure to NCA
79
Q

What is the as soon as practicable exception to the immediacy of the customer due diligence requirement?

A

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
Q

In what situation does the as soon as practicable exception not apply?

A

If it is an occasional transaction

81
Q

What are a solicitor’s customer due diligence obligations when dealing with a trust?

A

They must verify the identity of any beneficiaries before a payment to them or before they exercise their vested rights

82
Q

They must verify the identity of any beneficiaries before a payment to them or before they exercise their vested rights

A
  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
Q

What is the requirement for training under money laundering/terrorist financing laws?

A

Relevant employees are required to be made aware of law related to money laundering /terrorist financing

SQE1 - Legal Services Bella (6 decks)

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