Money Laundering

Question 1

What is money laundering?

Answer 1

When proceeds of crime are disguised and realised as legitimate assets. A series of financial transaction to conceal the illegitimate sources of funds.

Question 2

Why must AML checks be undertaken?

Answer 2

To confirm the identity of the proposed purchaser of a property and check the purchaser’s source of funds by the vendor’s agent before contracts are exchanged

Question 3

What legislation is there on money laundering?

Answer 3

Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017

Question 4

What does Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 cover?

Answer 4

Estate agency work
And ‘relevant financial business work’ inside and outside the UK by a firm

Question 5

What are the offences under Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017?

Answer 5

o Assisting: dealing with a matter for someone you know/suspect to be laundering
o Tipping off: telling someone they are being investigated
o Failing to report: as soon as reasonably practicable (employee to MLRO or MLRO to crime agency)

Question 6

What are the key provisions of the ML & TF & TF regulations?

Answer 6

1. Requirement to have a money laundering and terrorist financing risk assessment
2. Implement systems, policies + controls + procedures to address money laundering + terrorist financing risks + meet the requirements under the regulations
3. Adopt appropriate internal controls
4. Provide staff training
5. Comply with new customer, enhanced + simplified due diligence requirements
6. Comply with the requirements relating to PEPs
7. Ensure appropriate record keeping, policies + procedures
8. AML checks - confirming identity of proposed purchaser + source of funds
9. Additional high-risk factors e.g. assessing the need for enhanced due diligence

Question 7

How many years must you maintain documents under Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017?

Answer 7

5 years

Question 9

Can you list some high-risk third countries?

Answer 9

Iran, Syria, Uganda and Yemen

Question 10

What are CDD checks & who are they undertaken on?

Answer 10

Customer Due-Diligence Checks - they need to be undertaken on vendors, purchasers, landlords + tenants will have to be undertaken on new sales and any letting or reletting

Question 11

What are EDD checks who are they undertaken on?

Answer 11

Enhanced Due Diligence Checks = additional procedures required for any transaction or business relationship involving a client deemed to be high risk:

A client could be classed as high risk for a range of reasons but the main reasons would be:

1. Suspicious activity (such as selling a property very shortly after purchasing or paying cash for a property of high value with no real evidence of source of wealth)
2. Country of residence (for example Nigeria has high levels of corruption so we would automatically complete EDD checks on someone wo lives in Nigeria).
3. If the client is a politically exposed person or PEP family
4. Also, they need to be undertaken if red flags pop up

Question 12

When did the Money Laundering Regulations get amended? And what changes did it make?

Answer 12

10 January 2020
From 10 January 2020, letting agents are added to the definition of relevant persons under the 2017 regulations but to a minimal extent. (the 2017 regulations only applied to estate agents)
It required letting agents to register with HMRC within 12 months of May 2020 if they let individual properties for more than the equivalent of 10,000 euros (£8,500) per month

Question 13

What is the RICS Professional Standard on Bribery, Corruption, Money Laundering and Terrorist Financing?

Answer 13

Countering Bribery And Corruption, Money Laundering And Terrorist Financing, 1st Edition (February 2019)
(This document was reissued in July 2023 as a professional standard, previously been published in February 2019 as a Professional Statement.)

Question 14

What are the legal obligations for Estate Agents?

Answer 14

1. Individuals + businesses need to be approved + remain registered by HMRC in order to trade
2. CDD checks on vendors, purchasers, landlord and tenants
3. EDD checks need to be undertaken if red flags occurs
4. Firms must have policies to identify and scruntinise transactions which are: complex or usually large or contain unusual patterns of transactions, or are without apparent economic or legal purpose
5. Firms must have group-wide procedures to share relevant information, and to train anyone capable of identifying or preventing money laundering or terrorist financing risks

Question 15

What would you do for Customer Due Diligence checks?

Answer 15

1. Identify the client + verify their identity based on a reliable independent source (e.g. passport, driving license or electronic identification)
2. Make reasonable endeavors to identify the beneficial owners of the client (and to verify the identity of the person responsible for managing it if not able to do so in the Persons of Significant Control register at Companies House)
3. For a company, its name, company number and address of the registered office is required
4. The names of the directors are required unless the company is listed on a regulated market (e.g. the London Stock Exchange)
   Obtain information on the purpose + intended nature of the business relationship + proposed funding arrangements as appropriate

Question 16

What would you do for Enhanced Due Diligence Checks?

Answer 16

You would require additional evidence and monitoring for example more detailed examination of the background and the purpose of the transaction and increased monitoring

• Googling the individual to see if they show up in any negative media
• Checking sanctions lists
• Finding source of wealth

Question 17

Why do Politically Exposed Persons (PEPs) present higher risks for bribery and corruption?

Answer 17

A PEP by virtue of their position and the influence that they may hold.

Question 18

Other requirements of the regulations include?

Answer 18

1. There is a limit of 10,000 Euros for the acceptance of cash
2. The on-going business relationship with client should be monitored
3. Detailed record keeping of the procedures undertaken is required
4. A senior member of staff/board member must be appointed to take responsibility for all compliance
5. A nominated person (the Money Laundering Reporting Officer) must be appointed to report any suspicions with a Suspicious Activity Report (SAR) to the National Crime Agency
6. A Firm to maintain records for minimum of 5 years and to report to Companies House any discrepancies between the information the firm holds on their customers compared with the information held in Companies House Register

Question 19

What are the penalties for not complying with Money Laundering Regulations?

Answer 19

1. Maximum 14 years prison sentence and/or unlimited fine for assisting with money laundering
2. Maximum 5 years prison sentence and/or unlimited fine for tipping off a person by informing them that they are under suspicion for money laundering or for failing to report suspicion

Question 20

What Money Laundering Checks for CDD are required for a Public Limited Company?

Answer 20

London Stock Exchange listing

Question 21

What Money Laundering Checks for CDD are required for a Private Limited Company?

Answer 21

Certificate of Incorporation
Full name, registered number, registered office, business address, names of all directors and names of all shareholders with 25% or more holding. Identification of a higher risk client
N.B Report any discrepancies to Companies House

Question 22

What Money Laundering Checks for CDD are required for a Private Individual?

Answer 22

Copy of valid passport or driving licence with photo
Copy of a bank statement, credit card bill, council tax statement or utility bill to show evidence of address, not more than 3 months old

Question 23

What is constantly evolving with regards to Money Laundering?

Answer 23

Law, procedures + guidance

Question 24

What ML directive has the UK implemented?

Answer 24

The UK has implemented the 6th EU Anti-Money Laundering Directive into regulations e.g. for letting agents

Question 25

If asked about the acceptance of any cash, gift or hospitality in your interview, what should you consider?

Answer 25

1. Bribery Act 2010
2. The RICS Professional Standard - Countering Bribery and Corruption, Money Laundering + Terrorist Financing 1st Edition (Feb 19)
3. SAY anti-corruption procedures
4. Professional objectivity, openness + transparency
5. Proportionality
6. Tax implications
7. Sanctions
8. Employment contract details

Question 26

If asked about AML, what should you consider?

Answer 26

1. Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (as amended)
2. The RICS Professional Standard - Countering Bribery And Corruption, Money Laundering And Terrorist Financing 1st Edition (February 2019) - LAW COMES FIRST THOUGH
3. Government guidance for Estate Agents
4. DD procedures
5. Professional objectivity, openness + transparency
6. “Red flags”
7. HM Treasury’s OFSI

Question 27

What is a “red flag”?

Answer 27

• Inability or unwillingness to provide identity documents
• Changes to parties involved in transactions
• Unusual transaction features (eg unexpected urgency or a unusual/loss making transaction)
• Payment of fees, purchase or rental monies in unusual currencies

Question 28

What is included within RICS Countering Bribery and Corruption, Money Laundering and Terrorist Financing

Answer 28

1. Mandatory requirements
2. Guidance for good practice
3. Supplementary guidance

Question 29

What is the RICS guidance on handling client money?

Answer 29

RICS Professional Standard: Client Money Handling, 2019

Question 30

What is the difference between legislation and regulation?

Answer 30

Legislation is the law.
Regulation is a set of guidelines that you would follow for best practice.

Question 31

What are the penalties under Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017?

Answer 31

Maximum 14 years imprisonment or unlimited fine for assisting money laundering
Maximum 5 years or unlimited fine for tipping off

Question 32

What is the Proceeds of Crime Act 2002?

Answer 32

Provides powers for enforcement authorities in the UK to recover in criminal and civil proceedings money and other assets which are deemed to be the proceeds of crime.
Creates a set of criminal offences intended to combat money laundering (AML offences)

Question 33

What are the THREE main offences of Proceeds of Crime Act 2002?

Answer 33

1. Concealing criminal property
2. Arrangements: if a person enters into an arrangement of criminal property
3. Acquisition use and possession: if a person acquires, uses or has possession of criminal property

Question 34

What is a Non-Disclosure Agreement?

Answer 34

A contract by which one or more parties agree not to disclose confidential information that they have shared with each other as a necessary part of doing business together.

Question 35

What happens in breach of a Non-disclosure agreement?

Answer 35

Leaves you open to law suits. A defendant that breaches an NDA can be ordered to pay money damages to compensate for the losses the breach has caused.