LPC - money laundering

what is money laundering

process by which criminals seek to alter or launder their proceeds of crime so that it appears the funds come from a legitimate source

who do the Money Laundering and Terrorist financing regulations 2019 apply to

persons acting in the course of business carried out in UK - reg 8

what is firm required to do

take appropriate steps to identify and assess the risk of money laundering to which business is subject to - reg 18

risk factors 

clients, countries it operates, transactions

what does a firm need to keep a record of

up to date written record of all the steps taken in terms of the risk assessment

what is a nominated officer

receive reports from within the firm concerning any suspected money laundering and liaise with National Crime Agency reg 21(3)

what does reg 21(1)(a)

need compliance officer

what 2 internal controls do firms need

screening of relevant employees and independent audit function

what are firms carrying out relevant business obliged to do

obtain verification of the identify of each of their clients

what sets out when client’s identity needs to be verified

reg 27

when must verification take place 

reg 30 - before a business relationship is established or the carrying out of the transaction 

when can you do simplified due diligence

business relationship or transaction presents a low risk of money laundering or terrorist financing

factors when determining if low risk

regulated market, location of market, where client is established and does business

what is standard due diligence

verify the identity of the client on basis of documents or information obtained from a reliable source which is independent of the person whose identity is being verified - reg 28 

enhanced due diligence - regarding 33 

high risk of money laundering, high risk third country, false or stolen documents, PEP, complex or unusually large transactions

PEP

individual concerned with prominent public functions

what firms obliged to do - reg 24

provide training to employees and any agents

what might no training provide

defence to some of offences under Proceeds of Crime Act 2002

Arrangements - s.328(1) 

person commits an offence it he enters or becomes concerned in an arrangement which he knows or suspects facilitates the acquisition, retention, use or control of criminal property by or on behalf of another person 

is there a requirement that the funds pass through the hands of person concerned with arrangement

no

criminal property - s.340

person’s direct or indirect benefit from criminal conduct

criminal conduct

any offence committed within the UK

when does a solicitor not commit an offence under section.328 arrangement 

make an authorised disclosure to firm’s nominated officer as soon as practically possible prior to transaction taking place and authorisation of NCA obtained to complete the transaction

once report suspicious activity to NCA, when can nominated officer consent to proceed

receives consent of NCA, hears nothing 7 working days, consent refused but subsequently granted within 31 days

provisions under s.338(2A) solicitor avoiding breach s.328

disclosure made while prohibited act ongoing, when began act didn’t know or suspect property constituted or represented a person’s benefit from criminal conduct and disclosure made as soon as is practicable after knows or first suspects

disclosure after prohibited arrangement act

s.338(3) solicitor must have good reason for failure to disclosure prior to their completing the act

potential defence to breaching s328

intended to make an authorised disclosure but has a reasonable excuse for failing to do so 

Bowman v Fels [2005]

taking steps in litigation and resolution of issues in a litigious context excluded from scope of s328 but not if sham or purpose of money laundering

Overseas defence

criminal conduct occurred outside of UK and was not unlawful in country where it happened

penalties for arrangement

max sentence of 14 years imprisonment

acquisition use or possession s.329 

if they acquire, use or have possession of criminal property

adequate consideration defence for s.329 offence

adequate consideration for acquiring, using and possessing the criminal property, unless the individual knew or suspected that those goods or services might help to carry out criminal conduct

s.330 failure to disclose offence

know or suspect, or have reasonable grounds to know or suspect that a person is engaged in money laundering and information comes to them in course of business in regulated sector, information may assist in identifying the money launderer or the location of any laundered property, don’t make an authorised disclosure as soon as is practicable

what’s the test for failure to disclose offence 

objective - even when genuinely didn’t know or suspect that a person was engaged in money laundering 

what is the information in the failure to disclose offence

assist in identifying the money launderer or the location of the laundered property

when will solicitor not be in breach of s330

genuinely unable to provide the information

defence to s330

make an authorised disclosure to the firm’s nominated officer as soon as practically possible

reasonable excuse for non-disclosure 

intended to make a disclosure and have reasonable excuse for not doing so 

when can legal professional privilege not be relied on

where the communication takes place with purpose of carrying out an offence

two aspects of tipping off offence

disclosing a suspicious activity report s333A(1) and disclosing an investigation (s333A(3))

defences to tipping off

did not know suspect that the disclosure would prejudice in investigation and disclosure made for purpose of dissuading client from engaged in alleged money laundering s333