Money Laundering Flashcards
List and briefly explain the three stages of money laundering.
1) Placement - money from criminal activity introduced into financial system;
2) Layering - money stanched from criminal activity by passing it through a number of parties/ transactions ;
3) Integration - money is integrated back into the financial system, with the criminal being in possession of the laundered money.
List the elements of legal work/ services most at risk of money laundering.
1) Company and Trust work;
2) Use of firm’s Clint account;
3) Real Estate Work;
4) Sham Litigation.
Explain how company/ trust work can be used to facilitate money laundering.
- Trusts and companies are often complex legal entities.
- Setting them up can mean money can be hidden behind complex structures and ownership models.
Explain how a client account can be used for money laundering purposes.
- Allows illicit money to be swapped for clean money.
- Eg client sends 500k to solicitors client account for a purchase of a company. A few weeks later they phone solicitor and say they don’t want to go ahead with the purchase, and asks them to send it to a different account (often outside the jurisdiction). This is a classic example of a client account be used to launder money.
Explain how a real estate work can be used to facilitate money laundering.
Client will send money to a client account for property purchase. Once purchase is complete, they will own the asset which they can sell to obtain clean money (in place e of the illicit money first used to purchase the property).
To whom do the money laundering regulations (Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (SI 2017/ 692)) apply?
- They apply to persons acting in the course of business carried out in the UK.
- This includes independent legal professionals, which is defined as:
‘a firm or sole practitioner who by way of business provides legal or notarial services to other persons, when participating in financial or real property transactions’. - Trust or company service providers tax advisers and insolvency practitioners are also bound by the regulations.
Is failure to comply with money laundering regulations a criminal offence?
Yes.
Explain the duty of a firm to conduct a risk assessment for money laundering purposes (and to comply with the anti-money laundering legislation).
- Risk assessment must be undertaken by firms to identify and assess risk of the firm being used for money laundering.
- This includes firm wide assessment, using risk factors such as the suffices offered, nature of client and the industries which those client’s operate in.
- SRA monitors such compliance and they issue general risk factors which the individual firms risk assessment must also consider and account for.
- SRA can ask to see a firm’s risk assessment, and take enforcement action where it is inadequate or has not been done.
Explain the significance of the Government National Risk Assessment 2020.
- Identified legal services most likely to be subject to money laundering.
- These were company and trust work, real estate and client account services.
- Firm’s must take these into account within their risk assessment.
Is a firm required to keep a record of risk assessments?
Yes.
A firm is required to keep an up to date written record of all steps taken in terms of the risk assessments undertaken.
Explain the requirements of an anti-money laundering policy.
- Required to be kept by the firm;
- The policy must be written and approved by senior management;
- It must provide details of how the firm mitigates and manages risks of money laundering and terrorist financing which have been identified in risk assessments.
- The pic will include firm’s risk management practices, how client due diligence is conducted, the firm’s reporting and record keeping systems as well as info on how it intends to deal with complex/unusually large/ unusual patterns of transactions.
- This is required by regulation 19.
What are the MLRO and MLCO within a firm?
- The Money Laundering reporting Officer and the Money Laundering compliance Officer.
- These are often the same person.
What is the role of an MLRO?
- Receives reports from people in the firm re concerns of money laundering/ suspicious transactions.
- Has the role of reporting these to national crime agency if necessary and also leasing with the SRA.
What is the role of the MLCO?
- Nominated officer for money laundering compliance and is in regular contact with the SRA re such issues.
- They are the SRA’s main point of contact for issues/ changes relating to money laundering guidance etc.
Aside from appointment of the MLCO and MLRO, what further two internal controls are firms required to put in place?
1) Screening of relevant employees prior to and during course of employment (assessing skills, knowledge, conduct and integrity). This relates to all employees involved wither with compliance, or have roles in identifying, preventing and detecting money laundering and terrorist financing (eg those who verify client identities etc).
2) Establishing indépendant audit function to examine, evaluate, make recommendations and monitor firm’s policies controls and procedures to comply with regulations.