MONEY LAUNDERING + PROCEEDS OF CRIME *NON-MANDATORY IBS
• 1) Does MLR apply?
• 2) New/existing client? Existing = CDD already undertaken
• 3) What is CDD? à Only if suspects ££ laundering, not litigation
• 4) Type of CDD + evidence required?
• 5) When?
HIGH-RISK ATTRIBUTES
• Nationality/residence: North Korea, Iran
• Occupation: Regularly works in high-risk jurisdictions / attended offshore investment conference in tax haven?
HIGH-RISK ACTIVITIES
• AMLPN 11 Warning signs
o Outside expertise: Practice area, inexperienced solicitor
o Client based abroad instructs you
o Unusual retainer: Dispute settles easily, paid in cash
o Trust set up for no reason
• Payment
o Paying in cash / paid by unknown 3rd party
o Seller + Buyer give similar names/addresses/both overseas
o Overpayments
o Off-shore funds w/ no evidence of source
o Uses client account as banking service
• Family transactions
• Nature of transaction
o Unusual/one-off, esp. high-value transactions by individuals
o Client wants transaction completed v. quickly
o Transaction w/ 1 side hasn’t instructed solicitor
o Involves property held < 6 months / back-to-back sales
OFFENCES UNDER PROCEEDS OF CRIME ACT 2002
DIRECT INVOLVEMENT OFFENCES *> 1 may apply, e.g. deposit ££ w/o linked to transaction = s328 + 329
• S327 Transferred/concealed criminal property *Converting = e.g. cash into buying property
• S328 Involved in arrangement that you know/suspects facilitates acquisition/retention/use/control of criminal
property
• S329 Acquired/used/possessed criminal property
DEFENCES
• 1) S327(2)/328(2)/329(2)
o S338 disclosure AND if before, appropriate consent /
o Reasonable excuse for not disclosing /
o Carried out function he has to enforce PoCA / other criminal provisions
• 2) S327(2A)/328(3)/329(2A) Criminal conduct occurred outside UK + not unlawful there
o E.g. Dealing in UK w/ ££ generated from sale of cannabis in licensed shop in NL
• 3) S338 Authorised disclosure to MLRO +
o (2) Before prohibited act, e.g. before accepts ££
o (2A) During prohibited act
§ Initially ≠ know/suspect criminal property
§ Disclosed as soon as practicable, e.g. reported after urgent meeting
o (3) After prohibited act
§ Good reason for failing to disclose +
§ Disclosed as soon as practicable, e.g. threatened w/ harm to make deposit
REGULATED SECTOR OFFENCES
• Sched 9 PoCA ‘Regulated sector’ =
o Tax advice
o Participating in financial/real property transactions on:
§ Buying + selling real property/business entities +
§ Managing client ££/securities/other assets
, REPORTING OBLIGATIONS
• S330 Offence if –
o 1) Knows/suspects X is money laundering
o 2) Received info in course of business in regulated sector
o 3) Can identify the person / whereabouts of laundered property / info will assist in doing so
o ∴ Disclosure must incl.
§ Identity of person
§ If known, whereabouts of laundered property
§ Basis of suspicion
• MLRO = can be COLP
• S336 If MLRO files Suspicious Activity Report to National Crime Agency, cannot authorise/undertake work for
client for 7 working days, unless consents
o But MLRO decides if reports to NCA
TIPPING OFF
• S333A Cannot disclose if impedes investigation on money laundering
o If terminates retainer w/ client, cannot say it’s b/c they’re under investigation
PENALTIES
• AMLPN 9.1
o S327-329
§ Summary: 6 months imprisonment +/ fine
§ Indictment: 14 years imprisonment +/ fine
o S330
§ Summary: 6 months imprisonment +/ fine
§ Indictment: 5 years imprisonment +/ fine
o S333A
§ Summary: 3 months imprisonment +/ fine
§ Indictment: 2 years imprisonment +/ fine
CLIENT DUE DILIGENCE
1) DOES MLR APPLY?
• Reg 3(1) ‘Relevant person’ =
o (d) ‘Independent legal professionals’ = provides legal services on financial/real property transactions to
§ Buy/sell real property / business entities *Not employment/litigation (unless sham litigation)
§ Manage bank accounts/client ££/assets
§ Form/operate/manage companies + trusts
o (e) ‘Trust service providers’
2) SHOULD I UNDERTAKE CDD?
• Reg 7(1)
o 1) Establishes business relationship
§ Reg 2(1) Professional relationship w/ element of duration
o 2) Occasional transaction
§ Reg 2(1) €15k+ one-off transaction
o 3) Suspects client = money laundering
o 4) Doubts authenticity/adequacy of docs/info obtained to identify + verify client
3) WHAT CDD LEVEL?
• Reg 5 Standard CDD
o Identify customer + verify identify based on docs/data/info (e.g. birth certificates, passports,
certificates of incorporation) obtained from reliable + independent source (e.g. CH)
o Identify + verify beneficiary owner
§ Reg 6(1) Owns/controls > 25% of shares/voting rights / directors
o Obtain info on purpose + intended nature of business relationship
• Reg 8 Ongoing monitoring
o Scrutinise transactions + up-to-date CDD docs, e.g. suspicious change in ownership/sources of funds,
passport expires
• Reg 13 Simplified CDD
o Professional institutions separately regulated
§ Credit/financial institutions
§ Companies on listed exchange
§ Public authorities
• 1) Does MLR apply?
• 2) New/existing client? Existing = CDD already undertaken
• 3) What is CDD? à Only if suspects ££ laundering, not litigation
• 4) Type of CDD + evidence required?
• 5) When?
HIGH-RISK ATTRIBUTES
• Nationality/residence: North Korea, Iran
• Occupation: Regularly works in high-risk jurisdictions / attended offshore investment conference in tax haven?
HIGH-RISK ACTIVITIES
• AMLPN 11 Warning signs
o Outside expertise: Practice area, inexperienced solicitor
o Client based abroad instructs you
o Unusual retainer: Dispute settles easily, paid in cash
o Trust set up for no reason
• Payment
o Paying in cash / paid by unknown 3rd party
o Seller + Buyer give similar names/addresses/both overseas
o Overpayments
o Off-shore funds w/ no evidence of source
o Uses client account as banking service
• Family transactions
• Nature of transaction
o Unusual/one-off, esp. high-value transactions by individuals
o Client wants transaction completed v. quickly
o Transaction w/ 1 side hasn’t instructed solicitor
o Involves property held < 6 months / back-to-back sales
OFFENCES UNDER PROCEEDS OF CRIME ACT 2002
DIRECT INVOLVEMENT OFFENCES *> 1 may apply, e.g. deposit ££ w/o linked to transaction = s328 + 329
• S327 Transferred/concealed criminal property *Converting = e.g. cash into buying property
• S328 Involved in arrangement that you know/suspects facilitates acquisition/retention/use/control of criminal
property
• S329 Acquired/used/possessed criminal property
DEFENCES
• 1) S327(2)/328(2)/329(2)
o S338 disclosure AND if before, appropriate consent /
o Reasonable excuse for not disclosing /
o Carried out function he has to enforce PoCA / other criminal provisions
• 2) S327(2A)/328(3)/329(2A) Criminal conduct occurred outside UK + not unlawful there
o E.g. Dealing in UK w/ ££ generated from sale of cannabis in licensed shop in NL
• 3) S338 Authorised disclosure to MLRO +
o (2) Before prohibited act, e.g. before accepts ££
o (2A) During prohibited act
§ Initially ≠ know/suspect criminal property
§ Disclosed as soon as practicable, e.g. reported after urgent meeting
o (3) After prohibited act
§ Good reason for failing to disclose +
§ Disclosed as soon as practicable, e.g. threatened w/ harm to make deposit
REGULATED SECTOR OFFENCES
• Sched 9 PoCA ‘Regulated sector’ =
o Tax advice
o Participating in financial/real property transactions on:
§ Buying + selling real property/business entities +
§ Managing client ££/securities/other assets
, REPORTING OBLIGATIONS
• S330 Offence if –
o 1) Knows/suspects X is money laundering
o 2) Received info in course of business in regulated sector
o 3) Can identify the person / whereabouts of laundered property / info will assist in doing so
o ∴ Disclosure must incl.
§ Identity of person
§ If known, whereabouts of laundered property
§ Basis of suspicion
• MLRO = can be COLP
• S336 If MLRO files Suspicious Activity Report to National Crime Agency, cannot authorise/undertake work for
client for 7 working days, unless consents
o But MLRO decides if reports to NCA
TIPPING OFF
• S333A Cannot disclose if impedes investigation on money laundering
o If terminates retainer w/ client, cannot say it’s b/c they’re under investigation
PENALTIES
• AMLPN 9.1
o S327-329
§ Summary: 6 months imprisonment +/ fine
§ Indictment: 14 years imprisonment +/ fine
o S330
§ Summary: 6 months imprisonment +/ fine
§ Indictment: 5 years imprisonment +/ fine
o S333A
§ Summary: 3 months imprisonment +/ fine
§ Indictment: 2 years imprisonment +/ fine
CLIENT DUE DILIGENCE
1) DOES MLR APPLY?
• Reg 3(1) ‘Relevant person’ =
o (d) ‘Independent legal professionals’ = provides legal services on financial/real property transactions to
§ Buy/sell real property / business entities *Not employment/litigation (unless sham litigation)
§ Manage bank accounts/client ££/assets
§ Form/operate/manage companies + trusts
o (e) ‘Trust service providers’
2) SHOULD I UNDERTAKE CDD?
• Reg 7(1)
o 1) Establishes business relationship
§ Reg 2(1) Professional relationship w/ element of duration
o 2) Occasional transaction
§ Reg 2(1) €15k+ one-off transaction
o 3) Suspects client = money laundering
o 4) Doubts authenticity/adequacy of docs/info obtained to identify + verify client
3) WHAT CDD LEVEL?
• Reg 5 Standard CDD
o Identify customer + verify identify based on docs/data/info (e.g. birth certificates, passports,
certificates of incorporation) obtained from reliable + independent source (e.g. CH)
o Identify + verify beneficiary owner
§ Reg 6(1) Owns/controls > 25% of shares/voting rights / directors
o Obtain info on purpose + intended nature of business relationship
• Reg 8 Ongoing monitoring
o Scrutinise transactions + up-to-date CDD docs, e.g. suspicious change in ownership/sources of funds,
passport expires
• Reg 13 Simplified CDD
o Professional institutions separately regulated
§ Credit/financial institutions
§ Companies on listed exchange
§ Public authorities
