Money Laundering and Terrorist Financing Flashcards
(19 cards)
Summarise the RICS Professional Standard : Countering bribery and corruption, money laundering and terrorist financing 2019, in terms of money laundering and terrorist financing?
RICS Firms must:
● Not allow ML or TF
● Have procedures in place to comply with law
● Report suspicion to relevant authority – National Crime Agency
● Retain records of how the firm has met the requirements of the professional statement
● Evaluate and review risks presented by the firm
● Understand the client and purpose of the instruction
● Use third party reliance for checks when confident in the quality of third party information
● Basic ID checks on clients
What is money laundering?
When money from criminal activities is disguised or converted as legitimate assets.
What is terrorist financing?
The supply of finance for terrorist activities.
What are offences under the Proceeds of Crime Act 2022?
1) C - Concealing criminal property
2) A – Arrangement - entering into an arrangement which facilitates the acquisition or use of criminal property
3) A - Acquiring - acquiring or using criminal property
Do all companies need a money laundering reporting officer (MLRO)?
No, but RICS regulated firms do. The MLRO reports to the National Crime Agency.
What is the key legislation relating to money laundering and terrorist financing?
Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 (amended 2023)
What are the penalties for failure to comply with the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 (amended 2023)?
● Max 14 years in prison and/or unlimited fine for assisting with money laundering
● Max 5 years prison and/or unlimited fine for tipping off OR not reporting money laundering
Explain the levels of due diligence included in the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 (amended 2023)?
Customer (CDD)
Verify the identity of the client:
● for a private individual - Proof of ID (passport), Proof of address
● for a company Certificate, registration number, office address, directors, London stock exchange listing
Enhanced (EDD)
More detailed examination of background and transition purpose for:
● Politically exposed person (PEP) and family members / close associates
● Those in a high-risk third country
Simplified (SDD)
When low risk of money laundering or terrorist financing - not appropriate for property transaction.
What common characteristic may indicate money laundering?
Common Characteristics which might indicate money laundering or terrorist financing:
1) Inability or unwillingness to provide identity documents
2) Changes to parties involved in transactions
3) Unusual transaction features
4) Payment in unusual currencies
What are the five main categories of red flags?
1) the client (e.g. secretive or evasive)
2) the parties (e.g. in a high risk country such as Ethiopia, Pakistan, Syria)
3) the source of funds (e.g. unusual such as large cash payments)
4) the transaction (e.g. unusual features such as size, nature of frequency)
5) the instruction (e.g. client willing to pay high fees)
Name some key requirements of the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 (amended 2023)
Firms within the scope of the regulations must:
1) Have a written risk assessment to assess the risk of ML and TF
2) Have procedures in place to address the risk of ML and TF and comply with the legislation
3) Undertake customer due diligence (ID checks of vendor and purchaser)
4) Monitoring ongoing business relationships
5) Record keeping of transactions and due diligence checks maintained for at least 5 years and report any discrepancies to Companies House
6) Have a MLRO and report any suspicious activities to the National Crimes Agency
7) Provide staff training
Summarise the Sanctions and Anti-Money Laundering Act 2018?
● Allows the UK to issue Sanctions
● The sanctions list is a list of individuals or companies subject to legal restrictions
● Must check sanctions list when checking clients and transactions
How is the RICS Professional Standard : Countering bribery and corruption, money laundering and terrorist financing 2019 structured?
Part 1
● Mandatory Requirements for Bribery and Corruption
● Mandatory requirements for money laundering and terrorist financing
Part 2 - Practical guidance
Part 3 - Supplementary Guidance
Explain what the Pandora Papers are and the ethical issues raised within them?
The leak of over 12 million documents that uncovered a complex web of tax havens, shell corporations and offshore accounts that hide the true ownership of high value assets. It raises the ethical issue of tax avoidance - The UK government says tax avoidance “involves operating within the letter, but not the spirit, of the law”.
Why was the Register of Overseas Entities introduced?
The Register of Overseas Entities (ROE) was introduced primarily to enhance transparency and combat economic crime, particularly money laundering, by requiring foreign owners of UK property to reveal their true identities. This measure aims to prevent criminals from using shell companies to hide their wealth and financial dealings in the UK.
How do you ensure you comply with money laundering regulations?
1) Ensure I comply with my firms AML policies:
● Not facilitate or be complicit in money laundering or terrorist financing activities
● Report suspicion to relevant authority – National Crime Agency
2) Ensure any suspicions of money laundering or terrorist financing are reported to the relevant authorities (National Crimes Agency)
3) Keep up to date with legislation / professional standards (Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 / RICS Professional Standard: Countering Bribery and Corruption, Money Laundering and Terrorist Financing 2019)
What amendments were made in The Money Laundering and Terrorist Financing (Amendment) Regulations 2023?
Changed level of enhanced due diligence required between domestic and non-domestic Politically Exposed Persons (PEPs). Domestic subject to lower level of enhanced due diligence.
What is a shell corporation?
A company with minimal assets, no active business operations, and often no physical office. It’s essentially a legal entity that exists on paper, primarily used for financial transactions and holding assets, often for the purpose of tax avoidance or to hide ownership
What is a tax haven?
A country that enables companies or individuals to escape the rule of law in the countries where they operate and live, and to pay less tax than they should in those countries.
