Money laundering Flashcards

Question

What section exempts professional firms from general prohibition?

Answer 1

Clear, not misleading, fair way Info re nature of remuneration received re the contract of insurance

Answer 2

**preparing or administering insurance contracts** can't rely execution-only. need to use s 327.

Answer 3

Another name for a company

Answer 4

Advising on, proposing or carrying out work relating to preparing, concluding or assisting in administering or performing contracts of insurance **(baso just drafting or administering insurance contracts - and insurance contracts are anything involving insurance)** the exclusions dont apply, so ***have to rely on s 327*** or seek fca authorisation

Answer 5

No, even if just introduce to insurer or insurance claim against insurers So need to rely on s327 exemption (or seek FCA authorisation)

Answer 6

Can act as agent (on behalf) or arrange (middle man) as long as **not asked to or decline to advise on merits** of entering transaction But not apply for insurance or if get commission from a TP which don't give to client (insurance still need to be execution-only and s 327)

Answer 7

Invite or induce to engage in INVESTMENT ACTIVITY

Answer 8

Contents approved by authorised person e.g. FCA regulated accountant says to recommend a mortgage mcontract

Answer 9

Same as if regulated activity but no exclusion test 1. Made in business 2. Making invite or inducement 3. Is there a specified investment? 4. Is there a specified investment activity? NB no exclusion test applies

Answer 10

1. Real-time promotions - in course of personal visit, phone call etc 2. Non real-time promotions - letters, emails etc - includes comms with other side (so they could also be construed as financial promotion)

Answer 11

**OBIT**. one-off promotions body corp takeover introducer trustees, PRs

Answer 12

1. Before the communication, client instructed solicitor to act for them; 2. Carrying out exempt activity (s 327) OR necessary exclusion applies; AND 3. For purpose of or incidental to the services supplying to client (so if excluded other than cos necessary, can't financially promote)

Answer 13

(letters etc) ONLY if carries out exempt regulated activities and promotion contains certain statements

Answer 14

one-off **non-real-time** or **real-time SOLICITED** if **PERSONAL** to client (remember - real-time: must be necessary exclusion or s 327 / non real-time must be s 327) OR One-off **UN**solicited **real-time** - believe on reas grounds: a) client **understands** risks; and b) would **expect** solicitor to be contacting at that time about that activity

Answer 15

Must bbe: 1. Real-time 1. Not connected (e.g. close relative); 2. Not receive from anyone other than client for it; and 3. Client not requested (or declined to give) advice on merits of investment

Answer 16

Interest in **land** (e.g. residential property) ^ not same as mortgage ^ e.g. looking at buying this lad Most **National Savings** products (inc all National Savings Certificates) Disciplinary proceedings as breach SRA C of C (but not criminal offence etc)

Answer 17

* shares (unless in the share capital of an open-ended investment company or building society incorporated in the UK); * debentures, loan stock and bonds; * gilts * unit trusts and OEICs; * contract of insurance; * regulated mortgages (most resi); * home reversion/home purchase plans (where can sell part/whole home to raise money then become tenant); * deposits. * credit arrangements (except some between solicitor and client)

Answer 18

pools investors' money into a single fund, which is managed by a fund manager (nb OEICs are v similar)

Answer 19

Where solicitor allows client to pay their fees in instalments if 1. Max 12 repayments; 2. Over max 12 months; and 3. No interest or other charges Consumer credit activity. Since would be exempt agreement, COB rules apply. (status disclosure etc)

Answer 20

(those seen as riskiest) 1. Exercise of right to audience 2. Conduct of litigation 3. Reserved instrument activities 4. Preparing probate papers (ie docs needed to obtain or oppose grant) 5. Notarial activities (certify docs) 6. Admin of oaths (eg affidavit)

Answer 21

Buying, selling, subscribing for or underwriting investments on behalf of client e.g. selling client's shares after divorce

Answer 22

3 As Arranging, advising, agent

Answer 23

Government issues Safe form investment Not a specified investment bcos not risky So CAN advise on

Answer 24

e.g. debt management/debt collectiont/debt advice/debt administration Litigation proceedings arising out of consumer credit / hire agreement do not count so can do that (seems fair !) otherwise only if authorised by FCA or s 327

Answer 25

None ! But can use EXEMPTIONS: - Trustees and PRs - Body corporate - One-off promotions (unsolicited NRT/solicited RT - personal, and unsolicited RT in certain situs) - Introducers

Answer 26

Only if acting AS trustee or PR not FOR - or if one solicitor in firm acting as, and activity by another Applies all except advice of TP (makes sense - u should be advising urself) Lending money on or administering regulated mortgage contract

Answer 27

Being remunerated extra Only available for managing and safeguarding if not hold selves out as providing service which comprises of that And doesn't apply for insurance obvs

Answer 28

Process whereby proceeds of crime are changed so that they appear to come from a legitimate source.

Answer 29

1. Company work and trust work - money can be hidden within their structures / layers of ownership - want solicitors involved in management so looks respectable 2. Use of client account - swap illicit money for clean e.g. says going away and transfers just in case it completes, later changes mind so not proceed purchase, says transfer to a diff account 3. Real estate - money has to pass through client account to proceed - criminal can then sell asset to produce legitimate proceeds - seller sometimes complicit (e.g. no mortgage, transfers 500k, seller randomly reduces to 400k, instructs surplus paid to someone else) 4. Sham litigation (e.g. judgment in default against overseas company, overseas company pays firm, who pays client)

Answer 30

terrorist financing

Answer 31

all persons acting in course of business carried out in UK includes independent legal professionals

Answer 32

Criminal offence

Answer 33

Beneficial owners, officers or managers of firm and sole practitioners Must **apply to SRA** for approval under the Regulations SRA must grant unless applicant convicted of a 'relevant offence' (e.g. under previous money laundering legislation, terrorism or any offence involving dishonesty/deception)

Answer 34

Criminal offence which may result in imprisonment, fine or both

Answer 35

structures / arrangements etc to ensure compliance identify, monitor and manage ***risks*** Take action to prevent money laundering

Answer 36

**Firm-wide risk assessment** and maintain **record** of steps taken as a result of it Considering services offered, type of clients and industries Must address risks with trusts, company, real estate and client account use Take into account SRA's risk assessment SRA **may ask to see **the firm's risk assessment and **take action** if inadequate

Answer 37

Establish and maintain written anti-money laundering policies, controls and procedures Proportionate to size / nature of firm Approved by senior management Related to risks identified in risk assessment

Answer 38

1. money laundering compliance officer (MLCO) - only need if appropriate considering size/nature firm - SRA point of contact 2. nominated officer (MLRO - m l reporting officer) - receive internal reports re suspected money laundering and consider whether to report to NCA (can have same individual doing both)

Answer 39

1. **Screen employees** before and during employment - whose work relevant complying Regs or help identify money laundering 2. establish independent audit function to examine firm's policies re regulations 3. ensure able to respond to law enforcement enquiries re business relationships with any person over last 5 years

Answer 40

verify client's ID if: - agree to form business relationship - transferring over 1k euros not as part of business relationship - carrying out occasional transaction over 14k euros - suspects money laundering / terrorist financing - doubts docs supplied re their identity

Answer 41

General rule = first contact So before business reli established or carrying out transaction. However can do DURING business reli if: - little risk of money laundering; - not necessary interrupt normal course business; and - verified as soon as practicable

Answer 42

MUST NOT: - carry out transaction with or for client through a bank account (eg buying house) - establish a business relationship or carry out transaction other than via a bank account MUST: - consider NCA disclosure - terminate any existing business relationship

Answer 43

1. Standard DD 2. Simplified DD 3. Enhanced DD

Answer 44

Individuals: Ideally originals not copies. Just request 2 forms. Address and name. But can ask for 1. one gov doc verifying name AND address or name AND DoB 2. two gov docs - one verifying name and other verifying name + DoB independent reliable source Company/trusts - reasonable measures to understand ownership / structure

Answer 45

A) gov't doc which verifies name and address or DoB; or B) gov't doc which verifies name and a separate doc verifying name and address or DoB Ideally sight of originals. Copies if justifiable on risks.

Answer 46

Info on the individuals If well-established/reputable - enough just to get name, registered or trading address and nature of business

Answer 47

Usual stuff (name, registration number and address) LISTED - check law subject to - incorp docs - names of Ds ALL - proof of registration Good practice = if person instructed is authorised Unless simplified DD applies consider identity beneficial owners

Answer 48

Beneficial owner is not the client Simplified DD not apply

Answer 49

private companies and LLPs: - controls it - owns or controls over 25% svoting rights

Answer 50

Not compulsory - risk-based decision Often seek identity of beneficial owners of parent company

Answer 51

baso same as company - entitled to or controls over 25% share in capital or profits or voting rights - otherwise control over management (eg authority to use funds outside of normal management)

Answer 52

EACH of the following - settlor - trustees - beneficiaries - if beneficiaries not determined, class of persons who have main interest - anyone with power over trust

Answer 53

Identify other beneficial owners If company beneficial owner, need to identify the beneficial owners of the company Simplified DD, no need consider beneficial owners

Answer 54

Firm determined through individual risk assessment that business reli or transaction low risk Considering facts, inc: - if listed on a regulated market - where it is listed - where client does business (e.g. if UK stock exchange low risk) NOT about type of work involved

Answer 55

Must - obtain evidence that client and transaction **eligible** for simplified DD Doesn't necessarily need to obtain info on **beneficial owners** Amount of info need depends on client e.g. PLC - just obtain confirmation of company's listing on stock exchange

Answer 56

Something about arrangement gives high risk of money laundering Circumstances include: - situ identified in firm or SRA/Law Soc risk assessment - high-risk third country - false or stolen ID - complex or unusually large - unusual pattern/purpose - PEP or known associate - other (e.g. not met face to face or payments from unknown TPs) **

Answer 57

Take reasonable measures to consider - background and purpose transaction - whether more ID or info on ownership required Monitor throughout retainer

Answer 58

- head of state/ministers - MPs - Judges of higher courts - boards of banks / members court of auditors - ambassadors/high ranking army officers - members of admin/management/supervisory bodies of State-owned enterprises And spouse, children, parents and children's spouses And their close business relationships

Answer 59

Approval of senior management to act Taking adequate measures to establish source of wealth and funds used Conduct ongoing enhanced monitoring

Answer 60

Yes - must ensure transactions consistent with knowledge of client

Answer 61

Provide and maintain record of training to employees Should be made aware of law and related data protection requirements Should be trained on how to ***identify*** potential ML Doesn't specify how training take place Suggest staff manual No training may give defence to employee

Answer 62

Copy of docs and info obtained to satisfy DD and any relevant supporting records re transaction Keep for at least **5 years** after the relationship or occasional transaction ends

Answer 63

Corporate offence of **failure to prevent criminal facilitation** of tax evasion (e.g. fraudulent evasion VAT/income tax/cheating public revenue) Liable for **employees** and other associated persons **Strict liability** - no knowledge or intention of managers etc required

Answer 64

Had **reasonable prevention procedures** in place OR was **reasonable not to** have them in place Already have procedures in place for money laundering - make sure they also comply CFA 2017 e.g. due diligence policy considers risk tax evasion by firm's own partners/employees/other associated persons e.g. barristers used

Answer 65

Serious restrictions on dealing with 'designated persons' on the sanctions list (sanctioned by UK, EU or UN) Applies to ALL law firms Must inform Office of Financial Sanctions if reasonably suspect someone to be a designated person If wish to act for them, must obtain licence for a fee

Answer 66

No - it's public info

Answer 67

EVEN IF no knowledge or reasonable cause to suspect transaction to which they are a party is in breach of sanctions regime Can still be liable for fines

Answer 68

Yes you do

Answer 69

- Entering or becoming concerned in an **arrangement** which know or suspect facilitates proceeds of crime - **Acquiring** / **using** proceeds crime - **Concealing**, converting or transferring proceeds of crime - **Removing** crime proceeds from Eng and Wales 🏴󠁧󠁢󠁥󠁮󠁧󠁿 - Failure to **disclose** money laundering info to authorities - Firm's **nominated officer** failure to disclose money laundering info to authorities - **Tipping off** individual that investigation into money laundering underway - **Prejudicing** money laundering investigation

Answer 70

Arranging ie Becoming involved **arrangement** which know or **suspects** facilitates ML suspect if "more than fanciful" possibility - subjective. _________________ (ie entering or becoming concerned in arrangement which KNOW OR SUSPECT facilitates acquisition, retention, use or control of CRIMINAL PROPERTY)

Answer 71

Wide - covers any act which assists another to launder money Doesn't matter if didn't pass through solicitor's hands e.g. client is buying a company and discover lots of their contracts were obtained by paying bribes

Answer 72

Threshold is "suspicion" Subjective test - bar is low: D must think there is a possibility which is MORE THAN FANCIFUL that relevant facts exist (ie that there is potential money laundering) (nb more than vague feeling of unease)

Answer 73

Person's direct **or indirect benefit** from criminal conduct e.g. profits from crime / stolen property Must know or suspect property **benefitted from criminal conduct** Must have been an **initial criminal offence** committed in UK or abroad if it would have also been criminal in UK.

Answer 74

**Taking steps in litigation**, provided not sham litigation **Dividing assets** in accordance with court judgment (eg divorce) But could not assist in reinvesting them Consider whether client would be committing offence by receiving the property

Answer 75

Authorised disclosure Reasonable excuse for not making authorised disclosure e.g. info public already in domain Overseas defence - knew or believed occurred abroad and lawful in that country - S of S can override

Answer 76

Make authorised disclosure to constable, HMRC or firm's nominated officer (MLRO) (ideally to MLRO) AND **got consent** of nominated officer or NCA If proceed without consent, no defence A) **Soon as practicable** prior to transaction B) If prohibited act is ongoing: - made whilst ongoing - when began to act, did not know or suspect - soon as practicable after **first suspect** - make on own initiative C) AFTER profited act if: - **good reason** - soon as practicable - own initiative (nb just bcos consent to money laundering ops, prof conduct etc still relevant)

Answer 77

- responsible reporting ML concerns to NCA AKA suspicious activity report (**SAR**) - not obliged raise SAR whenever internal concern raised - discretion - **criminal offence** if fail to report when **reasonable grounds** to suspect ML - must not give consent to solicitor until: 1. received NCA consent; or 2. heard nothing for 7 working days after sending SAR; or (starts next working day) 3. consent refused NCA but then granted within 31 days (starts day of approval)

Answer 78

Max 14 years imprisonment

Answer 79

Acquire, use or possess criminal property Usually where no involvement in original crime but benefitted e.g. paid extortionate legal fees and possibly criminal property

Answer 80

Overseas defence Authorised disclosure defence Adequate consideration defence (main one) - receive money for legal fees, inc disbursements - as long as fees reasonable considering value of work - didn't know/suspect would help carry out illegal activity

Answer 81

Offence conceal, disguise, transfer or remove outside of UK (inc Scotland etc) E.g. resi - converting proceeds into property Transfer - from client account etc ***AD and overseas*** Big one for solicitors

Answer 82

Commit if: 1. knew or **ought** known money laundering 2. receive in course of business/regulated sector 3. had **info** which could assist identifying launderer / property 4. doesn't disclose soon as **PRACTICABLE** *Not necessary for ML to have even occurred*

Answer 83

Failure to disclose (nominated officers or normal individuals) Objective as well as subjective test Reasonable grounds to know or suspect NB training defence applies if there were reasonable grounds to suspect but had no proper training

Answer 84

Reasonable excuse for failing to disclose (eg public domain) Training defence Legal professional privilege - advice and litigation privilege applies - EXCEPT cannot rely if **purpose** of advice is carrying out criminal offence Overseas defence

Answer 85

Max 5 years imprisonment

Answer 86

If know/suspect or reas grounds to know or suspect money laundering DUE TO INTERNAL REPORTS And fail to make disclosure to NCA as soon as practicable Defence if reasonable excuse for not disclosing

Answer 87

2 offences. 1. Disclosing a **disclosure** - usually to NCA or MLRO - to anyone if likely prejudice (eg house delay because investigating) 2. Disclosing an **investigation** - investigation carried out or **contemplated** - and that is likely prejudice Irrelevant whether intended to alert ML or prejudice investigation Both - must have received info course business regulated sector

Answer 88

Did not know or suspect disclosure would prejudice investigation (eg maybe if informs client believing they will fully cooperate with authorities) Or if purpose is to dissuade client from engaging in alleged money laundering - but treat with caution

Answer 89

Unlimited fine and / or max 2 years prison sentence

Answer 90

(baso same as tipping off but applies non-regulated) Suspect ML investigation about to commence And make material disclosure to another Which is likely prejudice or interferes with relevant material

Answer 91

No Client confidentiality is unless required or permitted by law Legislation expressly states disclosure won't breach this Still seek advice if unsure

Answer 92

If direct involvement in money laundering, breach: - Principle 4 act with honesty and - Principle 1 duty uphold RoL/admin justice So likely disciplinary proceedings and significant sanctions

Answer 93

1. The client (e.g. secretive, evasive, avoids personal contact, refuses provide docs, criminal associations) 2. Funding (large cash payments, unexplained from TPs, foreign accounts etc) 3. Transaction (unusual features eg loss making, unexplained urgency, litigation settled too easily) 4. Geographical concerns (eg from far away, unexpected movement between jursdictions, connected with suspect jurisdictions)

Answer 94

Arranging Acquisition, use or possession Concealing etc NOT - failure to disclose - tipping off - prejudicing ^ makes sense if deep it x

Money laundering Flashcards

(120 cards)