Money Laundering

Question 1

Who is responsible for ensuring that a firm takes all steps to comply with money laundering legislation in a firm?

Answer 1

COLP, COFA and all managers

Question 2

What nominated officer must all law firms have in this regard?

Answer 2

Money Laundering Reporting Officer

Question 3

What is the central document that all law firms should keep regarding money laundering?

Answer 3

Anti Money Laundering Risk Assessment Document

Question 4

What are the four key elements of money laundering?

Answer 4

• Criminal source of the funds is disguised
• The form of the funds will be converted – often from paper bills to money in a bank account
• The trail by which the conversion occurs will be disguised
• The launderer will retain control of the funds – directly or indirectly

Question 5

Name five classic warning signs that money laundering may be about to occur?

Answer 5

Instructions outside subject matter expertise
Disputes that settle too easily
Use of client accounts
Setting up a trust
Property purchases

Question 6

Who do the direct involvement offences under PoCA apply to?

Answer 6

Everyone - lawyers and otherwise

Question 7

Who do the indirect involvement offences under PoCA apply to?

Answer 7

People working in the regulated sector

Question 8

What are the three direct involvement offences under PoCA?

Answer 8

• S327: Concealing, disguising or transferring criminal property
• S328: Becoming concerned in an arrangement which facilitates the retention of criminal property
• S329: Possession of criminal property

Question 9

What defences are available to an offence under PoCA?

Answer 9

Making an authorised disclosure to the MLRO or a nominated officer

Question 10

When it is ok to make an authorised disclosure after you [solicitor] have done the prohibited act?

Answer 10

Only if you have a reasonable excuse for the delay

Question 11

What conditions apply if a solicitor is making a disclosure only while committing money laundering?

Answer 11

They must be making it of their own initiative, and as soon as practicable, and not have been aware of the nature of the act when they started doing it.

Question 12

What are the indirect offences under PoCA? Who do they apply to?

Answer 12

Failure to disclosure
Tipping off

Apply to people who work in the regulated sector

Question 13

What are the elements of the offence of failure to disclose?

Answer 13

If you know about, suspect, or have reasonable grounds for suspecting and work in the regulated sector - you must report

Question 14

If you are disclosing a risk of money laundering, what form should the disclosure take?

Answer 14

• Identity of the person who you know / suspect is laundering the proceeds of criminal conduct
• The whereabouts of the laundered property
• The information on which your knowledge / suspicion is based

disclosure made either to the MLRO or the National Crime Agency

Question 15

Once you have made a disclosure to MLRO / NCA, how long must you wait to take action?

Answer 15

No action UNLESS
- Authorised by the National Crime Agency
- After 7 working days from disclosure, the NCA has not refused authority to continue
- NCA refused consent and moratorium period (31 days starting with day firm received notice that consent was refused) has expired.

Question 16

What does the indirect offence of tipping off include?

Answer 16

Includes disclosing that an investigation is being contemplated / carried out

Question 17

When should you apply the Money Laundering Regulations and carry out CDD?

Answer 17

• Start a business relationship
• Carry out an occasional transaction
• Suspect money laundering
• Doubt client’s veracity

Question 18

Who do the MLR apply to?

Answer 18

Credit institutions
Financial institutions
Auditors, insolvency practitioners, external accountants and tax advisors
Independent legal professionals
Trust or company service providers
Estate agents
High value dealers
Casinos

Question 19

Why should solicitors be particularly aware of what ‘trust or company service providers’ entails? What does it include?

Answer 19

Includes someone providing services to do the following:
- Form companies or other legal persons
- Acting or arranging for another person to act as a director / secretary / partner
- Providing a registered office / business address
- Arranging for someone to act as a trustee

Question 20

What do the Money Laundering Regulations not apply to?

Answer 20

Employment or litigation cases

Question 21

What is the threshold over which customer due diligence must be undertaken for an occasional transaction

Answer 21

1000 Euro

Question 22

What are the three levels of CDD

Answer 22

Standard
Enhanced
Simplified

Question 23

What is included in standard CDD?

Answer 23

Identify customer
Verify their identity based on documents / data
If customer is a company – identify name / company number / address of RO
Identify beneficial owner – private company – includes any individual who owned or controlled over 25% of voting rights in the company (PSCs)
- Must also carry out CCD on these individuals
Ongoing monitoring of the business relationship

Question 24

In which circumstances should organisations conduct enhanced CDD?

Answer 24

In any case where there is a high risk of money laundering / terrorist financing
Transaction / business relationship with a person established in a high risk third country
Correspondent relationships
Customer is a political exposed person or family member / known close associate of a PEP
Use of false / stolen documents
If transaction is complex, unusually large, or unusual pattern of transactions with no economic or legal purpose

Question 25

What does enhanced CDD include?

Answer 25

* Examining the background and purpose of the transaction * Monitoring relationship intensely * Further sources to verify * Taking more measures to check background and financial situation of customer / other parties is consistent with purpose / intended nature of relationship

Question 26

If enhanced CDD is being applied to a high risk country, what should also be included in the process?

Answer 26

* Additional information on - Client and beneficial owner - Nature of business relationship - Source of funds / wealth of client and BE - Reason for transactions * Approval of senior management of the practice for establishing / continuing the business relationship * Enhanced monitoring of relationship

Question 27

When can simplified CDD take place?

Answer 27

* Can occur if low degree of risk considering the risk assessment and risk factors * Must adjust extent / timing / type of CCD to reflect assessment that risk of ML is low. * Carry out sufficient monitoring still.

Question 28

What are examples of low risk factors that would give rise to simplified CDD?

Answer 28

* Public administration * Publicly owned enterprise * Financial or credit institution * Listed on regulated market * Individual resident in a geographical area of low risk * If product is a life insurance policy with low premium, Pension scheme, Child trust fund, Junior ISA

Question 29

At what time should CDD take place?

Answer 29

* Before the establishment of the relationship / carrying out the transaction * If it is a business relationship: - Identity can be verified while relationship is being established provided that - Delay is necessary so as to not interrupt the normal conduct of business - There is little risk of money laundering

Question 30

When are you able to rely on CDD carried out by another person?

Answer 30

If you are the second solicitor, you can use the CDD of the first solicitor if: * Second solicitor needs to obtain all information to satisfy MLR * And enter into a written agreement with first solicitor which - Enables second solicitor to obtain from the third party, within two working days, any information to verify identity - Third party must retain copies of data and documents for a specific period

Question 31

When can a client terminate a retainer with a solicitor, and why?

Answer 31

At any time and for any reason

Question 32

What evidence might be used to verify the identity of a UK natural person?

Answer 32

* Signed passport * Current photocard driving licence Common to use a service provider like 192.com

Question 33

What evidence might be used to verify the identity of a UK partnership ?

Answer 33

* If it is a reputable organisation with a long history / substantial public information may be ok to get o Name o Trading address o Registered address o Name of business * Individuals running smaller partnerships - identified as individuals

Question 34

What evidence might be used to verify the identity of a UK company private?

Answer 34

* Name * Company number * Address of RO * Law to which company is subject + constitution * Full names of the board of directors + senior persons responsible for its operations Evidence: * Incorporation certificate * Articles * Audited accounts * Details of company details + directors * Information from reputable electronic verification service provider

Question 35

What evidence might be used to verify the identity of a listed UK company?

Answer 35

* Listed on regulated market - only need to carry out simplified CDD + prove it is listed - Copy of dated page of website of stock exchange - Photocopy of listing in newspaper - Information from an online registry