Money Laundering Flashcards
When is an individual considered a ‘beneficial owner’ of a company for the purposes of conducting CDD?
If they own or controls more than 25% of the shares or voting rights in the company.
Money Laundering
Method used by criminals to make it appear as though proceeds of crime derive from a legitimate source
Five key regulatory duties imposed on firms w/ regards to safeguard against money laundering ( under MLR)
1) maintain written risk assessment;
2) establish and maintain policies/controls to mitigate identified risks
3) appoint a money laundering compliance officer (MLCO) and a money laundering reporting officer (MLRO);
4) provide adequate staff training about money laundering and keep records of it.
5) conduct a customer due diligence (CDD) ASAP on all clients and keep records.
How long is a firm required to retain records of CDD records/documents?
5 years
Aim of Customer Due Diligence
Reduce money laundering risk by verifying the identify of clients instructing firm
When MUST a solicitor carry out a CDD?
- establishing a business relationship
- occasional transaction w/ value exceeding £15,000.
- personally suspects money laundering
- doubt the accuracy or adequacy of documents or information previously obtained for CDD
When might simplified CDD be permitted?
Where business relationship or transaction presents a low risk of money laundering.
- ie. company is a well-known financial institution or listed on a regulated market.
Circumstances where enhanced CDD must be undertaken
Person/transaction involving:
- High-risk country (ie. tax havens)
- Politically exposed person (PEP)
- Family member or known associate of PEP
- Other relevant factors - instructing firm
Standard CDD
- verify your client’s identity based on a reliable independent source (such as a passport)
- if relevant, identify any beneficial owner - check their identify + ownership structure of entity.
- Obtain information on nature and purpose business relationship or transaction
Standard CDD procedure where client is company
Verify:
- name
- company number
- registered office or principal place of business
AND unless listed on regulated market, verify:
- law it is subject to
- company constitution
- board of directors’ names and those of senior executives.
Warning signs of money laundering
- client’s behaviour
- unusual sources of funding
- unusual transactions
- third-party funding (ie. in conveyancing transaction)
- sudden changes in instructions
- use of firm’s client accounts
- trust and company formation w/ out legitimate purpose
- unnecessary movement of money from/to high-risk jurisdictions
Role of the nominate officer (MLRO)
receives internal reports of suspicious activity and if appropriate makes a report to the NCA
Role of the MLCO
Compliance officer for the firm responsible for ensuring it complies with MLRs
Procedure for reporting suspicious money laundering activity
- solicitor reports matter to nominate officer.
- nominated officer decides whether to report to NCA by submitting a Suspicious Arrangement Report (SAR)
Non-direct involvement offences
deal with cases where solicitor has failed to respond appropriately given risk/suspicions.
