Money Laundering

Question 1

Who do the money laundering, terrorist financing and transfer of funds (info on payer) regulations 2017 apply to

Answer 1

Anyone acting in the course of business in the U.K.

Question 2

What if you fails to comply with regs

Answer 2

That is a criminal offence

Question 3

How can firms check employees ability to comply with ML regs

Answer 3

Firms must screen employees who contribute to detection of ML prior and during employment to check knowledge, skills, conduct and integrity

Question 4

How to firms avoid ML

Answer 4

Must have arrangements to ensure compliance with regs
Must monitor and manage risk to business
Provide and maintain record of training of ML

Question 5

What roles must a firm create to avoid ML

Answer 5

Money laundering compliance officer - senior level to ensure compliance with regs

Nominated officers (ML reporting officer)

Both can be same person

Question 6

What is required when doing client due diligence

Answer 6

Verify ID of clients ASAP after first contact

Question 7

When must client ID be verified

Answer 7

Must be before business relationship or transaction carried out

Question 8

Can verifying client ID ever be delayed

Answer 8

May verify client ID during establishment of business relationship if little risk of ML, necessary not to interrupt normal conduct of business and ID is verified ASAP after contact is first established

Question 9

What if you cannot verify the clients ID

Answer 9

Do not establish business relationship or carry out transaction
Terminate relationship

Question 10

What to do with due dilligence ID docs

Answer 10

Keep copy of ID docs and records of transaction for 5 year after end of relationship

Question 11

What is standard due diligence

Answer 11

Verify ID based on docs or inform from reliable source independent of the client

Question 12

What information to seek for standard due diligence trusts

Answer 12

Trustees, settlor, beneficiafies

Question 13

Who should you identify for standard due diligence for partnerships

Answer 13

Individuals that make it up

If you know we’ll just get name, address and nature of business

Consider beneficial owners- more than 25% of capacity, portfolio, votes

Question 14

What information should be provided for standard due dilligence on a company

Answer 14

Company name, number, address

If not on a regulated market get rules, law , subject to and name of

Beneficiaries - anyone who controls it
Or has more than 25% of the shares or votes

Risk based decision about how much unfit to get from parent company’s

Question 15

Offence of failure to prevent criminal facilitation of tax evasion

Answer 15

Strict liability on part of firm

Firm liable for failing to prevent tax evasion by employees or associated persons

Defence of firm can shape they had reasonable prevention procedures in place or was reasonable not to have such proceedure

Question 16

When can simplified due diligence be used

Answer 16

When a risk assessment shows the business relationship or transaction presents a low risk of ML

Get evidence of eligibility for simplified due diligence

Question 17

When to use enhanced due dilligence

Answer 17

When high risk of ML according to risk assessment
Eg politically exposed person or known close associate or family member, unusually complex transaction or risky third country

Question 18

What to do when using enhanced due diligence

Answer 18

Examine background and purpose of transaction
Decide whether to obtain further info
Conduct enhanced ongoing monitoring of business relationship
Establish source of wealth

Question 19

Do you need approval for enhanced due diligence

Answer 19

Need senior management approval if they are a PEP

Question 20

Offences under proceeds of crime act 2002

Answer 20

Arranging
Acquisition, use or possession of proceeds of crime
Conceal, disguise, concert or transfer the proceeds of crime or to remove the proceeds of crime from the jurisdiction
Failure to disclose information about ML to authorities
Failure to disclose (nominated officer)
Tipping off an individual that an investigation into ML is underway
Prejudicing an investigation in ML

Question 21

Can you breach confidentiality to comply with ML obligations

Answer 21

Yes because it is required by law

Question 22

SRA principles that would be breach by a solicitor that does ML

Answer 22

Breach honesty, uphold rule of law and administration of justice

Question 23

SRA warning signs of ML

Answer 23

Client secretive, evasive, avoids contact, refuses to provide info, unusual funding source, loss making or repetitive transaction, urgency, settles too easily, jurisdiction

Question 24

Prejudicing an investigation into ML - S342

Answer 24

Same as tipping off but extends to non-regulated individuals

Question 25

Failure to disclose (nominated officer) - S331 Definition

Answer 25

Know or suspect or have reasonable grounds to know or suspect ML due to their role as nominated officer but fail to disclose to NCA ASAP

Question 26

Defence Failure to disclose (no) s331

Answer 26

Reasonable excuse for non disclosure

Question 27

S333A- tipping off an individual that an investigation into ML is underway Definition

Answer 27

2 offences Disclose a disclosure and likely to prejudice any investigation that follows Disclose investigation to anyone and likely to prejudice investigation No need to show intention to prejudice for either Disclose to anyone - not just client

Question 28

Can tipping off ever be authorised

Answer 28

No

Question 29

Defence to s333A tipping off

Answer 29

No intention to prejudice is NOT a defence because there is no requirement to show intention to prejudice just need it to be likely that it will prejudice Made by adviser to client to persuade them not to ML

Question 30

S330 failure to disclose info about ML to authorities Definition

Answer 30

Knows or suspects or has reasonable grounds to know or suspect that person is engaged in ML (objective test) Info comes in course of business in regulated sector Info may assist in identifying ML or location of laundered property and Does not make disclosure ASAP to NO or NCA

Question 31

S330 failure to disclose info about ML to authorities Defences

Answer 31

Unable to provide info to assist in identifying ML or location or laundered property Intended to disclose but has reasonable excuse for not doing so Not received proper training Overseas defence

Question 32

Overseas defence

Answer 32

If solicitor believes ML is taking place outside U.K. where ML is not illegal

Question 33

S327 conceal, disguise, convert or transfer the proceeds of crime or to remove the proceeds of crime from the jurisdiction Defences

Answer 33

Authorised disclosure defence Overseas defence

Question 34

S329 acquisition, use or possession of proceeds of crime Example

Answer 34

If you think they are paying your fees with proceeds of crime

Question 35

S329 acquisition, use or possession of proceeds of crime

Answer 35

Authorised disclosure Overseas Adaquate consideration unless knew or suspected goods or services would help carry out criminal conduct. Not if value of work is significantly less than money received

Question 36

S328 arranging Definition

Answer 36

Enter into or become concerned in an arrangement which a person knows or suspects facilitated the acquisition, retention, use or control of proceeds of crime on behalf of another person No requirement that funds pass through hands of solicitor Suspicion - subjective. Must know or suspect it is criminal property

Question 37

Would litigation and dividing assesses according to a court judgement fall within s328 arranging

Answer 37

No but reinvesting those assets would be an offence under s328

Question 38

Defence to s328 arranging

Answer 38

Authorised disclosure Intended to disclose but has reasonable excuse for failing to do so. Document reasons for non-disclosure

Question 39

Authorised disclosure defence

Answer 39

By solicitor to police, HMRC or NO. ASAP prior to transaction taking place and consent of NO or NCA is obtained Once NO has reported it to NCA cannot give consent until either receive consent of NCA or hear nothing for 7 working days (starting with 1st working day after disclosure made) When consent refused by NCA nominated officer cannot give consent unless 31 days pass from day of refusal

Question 40

Making an authorised disclosure NOT prior to transaction taking place

Answer 40

Can make authorised disclosure while prohibited act on going if they didn’t know or suspect it was criminal property when they began acting and disclosure was made ASAP after they knew or suspected it and made on solicitors own initiative Can disclose after act completed but must have good reason for failing to disclose sooner. Must be ASAP on own initiative