Purpose and Scope of Anti-Money laundering Legislation including the International Context

Question 1

What is the fundamental purpose of money laundering legislation?
A. To increase tax revenues
B. To conceal criminal proceeds
C. To detect and deter the legitimisation of illicit funds
D. To regulate real-estate transactions

Answer 1

C. To detect and deter the legitimisation of illicit funds
Explanation: AML laws require firms to identify and report suspicious activity, preventing criminals from integrating illicit proceeds into the legitimate economy .

Question 2

Under PoCA, which activity would constitute an “arrangement” offence?
A. Buying property with legally earned savings
B. Structuring multiple cash deposits below reporting thresholds
C. Drafting a will for a client
D. Providing routine legal advice

Answer 2

B. Structuring multiple cash deposits below reporting thresholds
Explanation: “Arrangement” covers organising or facilitating the retention or control of criminal property, such as splitting funds to evade detection .

Question 3

Which threshold in the MLR 2017 triggers full Customer Due Diligence?
A. £5,000
B. €10,000
C. $15,000
D. €1,000

Answer 3

B. €10,000
Explanation: Any transaction or linked series over €10,000 mandates full CDD: identity verification, beneficial-owner checks and ongoing monitoring .

Question 4

Which international body issues the 40 Recommendations that underpin the UK’s AML framework?
A. United Nations (UN)
B. Basel Committee
C. Financial Action Task Force (FATF)
D. European Central Bank (ECB)

Answer 4

D. Financial Action Task Force (FATF)
Explanation: The FATF sets global AML/CFT standards through its 40 Recommendations, adopted in UK law via PoCA and the MLR .

Question 5

A client instructs a solicitor to deposit a €9,900 cheque (just under the threshold) into client funds, with no plausible source explanation. The solicitor should:
A. Accept and proceed without question
B. File a Suspicious Activity Report (SAR) with the NCA
C. Decline to hold client funds temporarily
D. Report directly to the Law Society

Answer 5

A. File a Suspicious Activity Report (SAR) with the NCA
Explanation: Even below threshold, unexplained structured transactions trigger suspicion requiring a SAR to deter layering

Question 5

A firm acting for a corporate purchaser discovers a 30% beneficial owner is a PEP. Under MLR 2017, the firm must:
A. Refuse the instruction outright
B. Apply enhanced due diligence measures
C. Delegate CDD to the Law Society
D. Ignore PEP status if turnover is low

Answer 5

B. Apply enhanced due diligence measures
Explanation: Identifying a PEP triggers enhanced CDD—additional verification, senior-management approval and ongoing monitoring

Question 6

After filing a SAR, law enforcement secures a PoCA restraint order on the client’s bank account. This illustrates AML’s purpose of:
A. Protecting data privacy
B. Asset recovery & confiscation
C. Tax evasion prevention
D. Market regulation

Answer 6

C. Asset recovery & confiscation
Explanation: PoCA restraint orders freeze suspected criminal assets, enabling recovery upon conviction .

Question 7

A solicitor acting for an art dealer requires source-of-funds checks on a €5M purchase made via an offshore shell company. This is driven by:
A. MLR 2017 thresholds only
B. The SRA Code of Conduct
C. Protection of the financial system
D. UN Convention requirements

Answer 7

D. Protection of the financial system
Explanation: High-value goods dealers are regulated to safeguard market integrity, preventing illicit funds entering through art transactions .

Question 8

A FATF mutual evaluation criticises UK real-estate for opacity. The UK’s response—introducing the PSC register—is an example of implementing which international standard?
A. EU AML Directive
B. UN Convention
C. FATF Recommendation
D. Basel III Accord

Answer 8

B. FATF Recommendation
Explanation: FATF peer reviews drive policy changes like beneficial-ownership registers to enhance transparency in high-risk sectors .

Question 9

Which UN convention underpins the UK’s criminalisation of money laundering?
A. UN Convention against Transnational Organized Crime (Palermo, 2000)
B. UN Framework Convention on Climate Change
C. Vienna Convention on Diplomatic Relations
D. Hague Convention on Private International Law

Answer 9

A. UN Convention against Transnational Organized Crime (Palermo, 2000)
Explanation: The Palermo Convention mandates states criminalise money laundering, implemented in UK law via PoCA .

Question 10

Under the MLR 2017, record-keeping obligations require firms to retain CDD and transaction records for:
A. Two years
B. Five years
C. Seven years
D. Ten years

Answer 10

C. Five years
Explanation: Firms must keep CDD and SAR records for at least five years from the end of the business relationship or transaction .

Question 11

Which PoCA offence covers knowingly using the proceeds of crime in a legitimate investment?
A. Concealment
B. Acquisition, use & possession
C. Arrangement
D. Facilitation

Answer 11

D. Acquisition, use & possession
Explanation: Purchasing assets with criminal property falls under acquisition/use/possession offences .