Money Laundering: MLRs and PoCA
- high risk or suspicious attributes
- DPRK and Iran are current FATF-considered high-risk jurisdictions
- AMLG any suspect territory can be where there is prevalence of drug-trafficking, terrorism or
corruption
- Chap 12 AMLG suggests warning signs:
- secretive clients
- unusual instructions e.g. outside firm’s area of expertise
- use of firm’s client account to deposit and return money to a third party.
- high risk attribute (e.g. Iranian national) and high risk activity (buying a property with offshore
account) will mean a high risk of money laundering
PoCA
Firstly: is it criminal property?
s.340(3) PoCA defines criminal property
Direct involvement offences: ss.327-329
Defence under s.338 - authorised disclosure
- timing: before (s.338(2)) and appropriate consent is obtained, during(s.338(2A)) and relevant
conditions are met or after (s.338(3)), and relevant conditions are met.
- ensure you apply further conditions in subsections (2) of each of ss.327-329
ss.327(2A) s328(s2A) and s329(2A) ‘outside the UK’ Defences e.g. selling of cannabis if done in
Colorado where this is legal, so proceeds from such sale is legal if proceeds came from Colorado.
Reporting: s.330, s.331, s.333A - work in the regulated sector e.g. a sham trust creation. To
prevent lawyers turning a blind eye.
You must spot all elements of offence under relevant statute.
s.330 No direct involvement but you:
- know about
- suspect
- have reasonable grounds for suspecting money laundering
- can identify the person involved or the whereabouts of the criminal property
- then you must disclosure this to the nominated officer/MLRO - money laundering reporting
officer
- otherwise guilty of failure to disclose under s.330
otherwise, make a report to MLRO and wait for appropriate consent. MLRO may refer it on to
NCA. NCA may then approve this, OR they will not reply; wait 7 days for deadline for expire after
which MLRO will give consent to continue.
Client may become curious as to delay but you must not tip them off by telling them about the
referral under s.333A.
Penalties s.334 PoCA.
Instructing a new client:
conflict check
CDD
CCL
MLRs:
who do MLR relate to? What type of work?
- apply to “relevant persons” so Money Laundering Regulations apply to solicitors Reg 8(2)(d) -
independent legal professionals and “trust or company service providers Reg 8(2)(e).
Does not apply to all activities: Reg 12(1) and (2) e.g. litigation and employment not caught by the
MLRs.
Transaction-based work is more high risk.
Page 1 of 5
, Reg 27 sets out basic obligations of firm to carry out CDD.
CDD must be carried out in any one of four requirements:
- establishing business relationship
- carrying out occasional transaction
- suspect only laundering/terrorist financing
- doubts client’s veracity
All of these trigger requirement to carry out CDD.
• “Business relationship” -Reg 4. A commercial relationship between a relevant person and a
customer arising out of business of relevant person. Element of duration. Reg 4(2) formation of a
company is caught.
• “Occasional transaction” - Reg 3. Not carried out as part of a business relationship as long as it
is for a transfer of funds exceeding eur 1,000 or transaction of vale of eur15,000 or more.
• Other reason to suspect money laundering under AMLG CH.12?
• Suspicious jurisdiction?
CDD
Standard CDD: not simplified and not enhanced.
Reg 28 -
a) identify customer,
b) verify identity; and
c) assess purpose of the business relationship or transaction
if client is a company: Reg 28(3) - identify name, no. registered office, names of directors and
shareholders etc. and this information needs to be verified via documents through a reliable
source.
Reg 28(4) - identify “beneficial owner" of a company and verify their identity using reliable
documents. Person exercising control (PSC register)
Ongoing obligation to monitor existing clients e.g. annual review of clients by compliance offer
Simplified CDD Reg 37(1)
Enhanced CDD Reg 33(1)
Timing:
Reg 30(2) and (3) - carry out CDD before the business relationship or transaction UNLESS only
establishing a business relationship where this can be carried out during, if the delay is necessary,
little risk of ML or TF and verification is completed as soon as is practicable after first contact is
established.
Can never delay CDD for occasional transactions
Reg 39 - relying on other party’s CDD - permissible but law firm must obtain all information
needed to comply with Reg 28. Often simpler to carry out own CDD.
Record keeping. Reg 40 - minimum retention time
- Reg 40(3) minimum time limit
- Reg 19 Policies and procedures
- Reg 24 training - expected to be regular
- Regs 86,87,88, and 92 deal with offences in relation to failure to comply with CDD obligations.
Approach for CDD analysis
1. do the MLR apply to this type of work?
2. new or established client?
3. trigger? e.g. business transaction or business transaction
4. what level of CDD is required for this client
5. when should CDD be conducted for this client?
Page 2 of 5
- high risk or suspicious attributes
- DPRK and Iran are current FATF-considered high-risk jurisdictions
- AMLG any suspect territory can be where there is prevalence of drug-trafficking, terrorism or
corruption
- Chap 12 AMLG suggests warning signs:
- secretive clients
- unusual instructions e.g. outside firm’s area of expertise
- use of firm’s client account to deposit and return money to a third party.
- high risk attribute (e.g. Iranian national) and high risk activity (buying a property with offshore
account) will mean a high risk of money laundering
PoCA
Firstly: is it criminal property?
s.340(3) PoCA defines criminal property
Direct involvement offences: ss.327-329
Defence under s.338 - authorised disclosure
- timing: before (s.338(2)) and appropriate consent is obtained, during(s.338(2A)) and relevant
conditions are met or after (s.338(3)), and relevant conditions are met.
- ensure you apply further conditions in subsections (2) of each of ss.327-329
ss.327(2A) s328(s2A) and s329(2A) ‘outside the UK’ Defences e.g. selling of cannabis if done in
Colorado where this is legal, so proceeds from such sale is legal if proceeds came from Colorado.
Reporting: s.330, s.331, s.333A - work in the regulated sector e.g. a sham trust creation. To
prevent lawyers turning a blind eye.
You must spot all elements of offence under relevant statute.
s.330 No direct involvement but you:
- know about
- suspect
- have reasonable grounds for suspecting money laundering
- can identify the person involved or the whereabouts of the criminal property
- then you must disclosure this to the nominated officer/MLRO - money laundering reporting
officer
- otherwise guilty of failure to disclose under s.330
otherwise, make a report to MLRO and wait for appropriate consent. MLRO may refer it on to
NCA. NCA may then approve this, OR they will not reply; wait 7 days for deadline for expire after
which MLRO will give consent to continue.
Client may become curious as to delay but you must not tip them off by telling them about the
referral under s.333A.
Penalties s.334 PoCA.
Instructing a new client:
conflict check
CDD
CCL
MLRs:
who do MLR relate to? What type of work?
- apply to “relevant persons” so Money Laundering Regulations apply to solicitors Reg 8(2)(d) -
independent legal professionals and “trust or company service providers Reg 8(2)(e).
Does not apply to all activities: Reg 12(1) and (2) e.g. litigation and employment not caught by the
MLRs.
Transaction-based work is more high risk.
Page 1 of 5
, Reg 27 sets out basic obligations of firm to carry out CDD.
CDD must be carried out in any one of four requirements:
- establishing business relationship
- carrying out occasional transaction
- suspect only laundering/terrorist financing
- doubts client’s veracity
All of these trigger requirement to carry out CDD.
• “Business relationship” -Reg 4. A commercial relationship between a relevant person and a
customer arising out of business of relevant person. Element of duration. Reg 4(2) formation of a
company is caught.
• “Occasional transaction” - Reg 3. Not carried out as part of a business relationship as long as it
is for a transfer of funds exceeding eur 1,000 or transaction of vale of eur15,000 or more.
• Other reason to suspect money laundering under AMLG CH.12?
• Suspicious jurisdiction?
CDD
Standard CDD: not simplified and not enhanced.
Reg 28 -
a) identify customer,
b) verify identity; and
c) assess purpose of the business relationship or transaction
if client is a company: Reg 28(3) - identify name, no. registered office, names of directors and
shareholders etc. and this information needs to be verified via documents through a reliable
source.
Reg 28(4) - identify “beneficial owner" of a company and verify their identity using reliable
documents. Person exercising control (PSC register)
Ongoing obligation to monitor existing clients e.g. annual review of clients by compliance offer
Simplified CDD Reg 37(1)
Enhanced CDD Reg 33(1)
Timing:
Reg 30(2) and (3) - carry out CDD before the business relationship or transaction UNLESS only
establishing a business relationship where this can be carried out during, if the delay is necessary,
little risk of ML or TF and verification is completed as soon as is practicable after first contact is
established.
Can never delay CDD for occasional transactions
Reg 39 - relying on other party’s CDD - permissible but law firm must obtain all information
needed to comply with Reg 28. Often simpler to carry out own CDD.
Record keeping. Reg 40 - minimum retention time
- Reg 40(3) minimum time limit
- Reg 19 Policies and procedures
- Reg 24 training - expected to be regular
- Regs 86,87,88, and 92 deal with offences in relation to failure to comply with CDD obligations.
Approach for CDD analysis
1. do the MLR apply to this type of work?
2. new or established client?
3. trigger? e.g. business transaction or business transaction
4. what level of CDD is required for this client
5. when should CDD be conducted for this client?
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