3): Anti-Money Laundering Regulations Flashcards
(22 cards)
What is money laundering?
Concealing the origins of criminal funds
Making illegally obtained money appear legitimate
Offence under Proceeds of Crime Act 2002 (POCA)
What are the three main stages of money laundering?
Placement – introducing funds into system
Layering – obscuring the audit trail
Integration – reintroducing laundered money into economy
Which regulations govern anti-money laundering in the UK legal sector?
Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 (as amended)
Proceeds of Crime Act 2002 (POCA)
Terrorism Act 2000
What are the penalties for breaching AML regulations?
Criminal offence
Unlimited fines
Up to 14 years’ imprisonment (for principal offences under POCA)
What types of client behaviour may raise suspicion?
Refusal to provide info / ID
Unusual or inconsistent instructions
Unknown third-party funding
Large or unexplained cash transactions
Changes to instructions with no reason
What legal practice areas are high-risk for money laundering?
Trust and company formation
Conveyancing (high-value property)
Client account operation (third-party transfers or escrow use)
Who must be appointed in a regulated firm for AML compliance?
Money Laundering Compliance Officer (MLCO).
Money Laundering Reporting Officer (MLRO) – may be same as MLCO.
To whom must suspicious activity be reported?
Internally to MLRO.
Externally to the National Crime Agency (NCA
What systems must firms have in place under AML laws?
Internal reporting procedures
Customer Due Diligence (CDD) checks
Ongoing monitoring + record-keeping (5 years)
Staff training on suspicious activity recognition
What are the three main criminal offences under POCA 2002?
s.327: Concealing, disguising, converting, removing criminal property
s.328: Entering into arrangements to facilitate criminal property use
s.329: Acquisition, use, possession of criminal property
What are the disclosure offences under POCA?
s.330: Failing to disclose suspicion (regulated sector)
s.331: MLRO failing to report to NCA
s.333A: Tipping off a suspect – criminal offence
Solicitor’s Duties if Suspicion of money laundering Arises:
Report suspicion to the MLRO
Do not tip off the client
MLRO decides whether to file a Suspicious Activity Report (SAR)
What is the £1000 threshold rule under POCA?
Transactions <£1000 may proceed without triggering ss.327–329
Only if CDD has been completed and compliant
What are the defences to money laundering offences?
Pre-transaction disclosure: Reported to MLRO before act
During transaction: Disclosure made ASAP after knowledge
Post-transaction: Must show reasonable excuse
Overseas defence: Act was lawful in the country where done
What is the general purpose of due diligence under the MLR 2017?
Identify the client and purpose of relationship
Prevent involvement in laundering
Enable ongoing monitoring of transactions
What must be verified when establishing a client relationship?
Client’s identity and address
Original documentation (e.g. passport, driving licence)
Records must be retained for 5 years
When must customer due diligence be applied under Reg 27 MLR 2017?
Before starting a business relationship
Occasional transactions >€1,000
If ML is suspected
If previous ID info is doubtful
What are the due diligence steps under Reg 28 MLR 2017?
Identify & verify customer identity
Understand business relationship purpose
Ongoing due diligence
What extra checks apply to corporate or trust customers?
Corporate: name, registration number, principal office, ownership/control
Trusts: identify beneficial owners and control structure
Listed entities: exempt from some checks
Unlisted entities: obtain constitution, directors, and BO identity
What is required before a person can act for a customer (Reg 30)?
Verify the identity of the person acting on behalf of the customer
Confirm authority to act for the customer
What must be done if due diligence cannot be completed (Reg 31)?
Do not open or maintain account
Do not start or continue the relationship
Consider reporting under POCA or Terrorism Act
When is enhanced due diligence required (Reg 33)?
EDD: High ML risk, PEPs, remote clients, high-risk jurisdictions
Beneficial owner: Controls entity or owns ≥25% of shares/voting rights
