MONEY LAUNDERING and PROCEEDS OF CRIME
Internal Controls:
Works falls within ambit of MLR.
Must have Money laundering Reporting Officer (MLRO)
No need for sole practitioner to appoint separate MLRO
Reg 21(1) MLR 2017: Must appoint Money Laundering Compliance Principal (MLCP)
MLRO and MLCP can be the same person.
Must have policies and procedures to comply with PoCA 2002 reporting obligations.
Must have Compliance Officer for Legal practice (COLP)
Must have Compliance Officer for Finance and Administration (COFA)
Screening:
Reg 21(1)(b): Assess skills, knowledge, integrity and conduct of employees involved in identifying ML.
Reg 21(1)(c): Must have independent audit function to assess adequacy of policies and procedures.
Elements to Money laundering
1. Criminal source of funds is disguised
2. Form of funds is converted (paper money to bank account)
3. Trail of conversion is disguised
4. Launder retains direct or indirect control of funds
Risk of money laundering:
Launderer tries to deposit cash into a firm’s client account
Launderer tries to invest in property or acquire business using proceeds of crime
Firm is asked to set up a complex transaction (e.g. trust) structure then used to launder
Must have control over who deposits what into client account – not share details
Compliance with Proceeds of Crime Act 2002, Part 7
S.340(3): Criminal Property – Property known or suspected to represent a benefit from criminal conduct.
These offences apply to all legal work (different to MLR that only apply to certain types of work).
S.334: Penalty for direct and indirect is imprisonment, a fine or both.
Direct Involvement Offences (fact pattern may lead to multiple – cover all)
S.327: Concealing, disguising, converting or transferring criminal property or removing from UK.
S.328: Entering an arrangement you know or suspect facilities the acquisition, retention, use or control
of criminal property by or on behalf of another.
S.329: Acquiring, using or possessing criminal property.
Defences to Direct Involvement Offences
Must make an Authorised Disclosure: S.338 – A disclosure to a constable, customs officer or nominated officer
(MLRO) by the alleged offender that it is criminal property and one of the following applies:
S.338(2): Disclosure made before the prohibited act (e.g. accepting the money).
S.338(2A): Disclosure made during the prohibited act AND did not know or suspect before that was
prohibited AND disclosure made on own initiative as soon as practicable. Given cheque, suspect ML,
called into meeting, then report.
S.338(3): Disclosure made after the prohibited act AND good reason for failure to make before AND
disclosure is made on own initiative as soon as practicable. Threat of harm, make deposit, report.
AND meet the requirements under S.327(2), S.328(2) and S.329(2):
Make a S.338 disclosure AND have Appropriate Consent - S.335 and S.336: Once MLRO decides to make
a disclosure to NCA neither MLRO or fee earner may authorise or undertake a prohibited act unless
authorised by the NCA or 7 working days have passed since reporting.
Not make a S.338 disclosure BUT have a reasonable excuse.
Internal Controls:
Works falls within ambit of MLR.
Must have Money laundering Reporting Officer (MLRO)
No need for sole practitioner to appoint separate MLRO
Reg 21(1) MLR 2017: Must appoint Money Laundering Compliance Principal (MLCP)
MLRO and MLCP can be the same person.
Must have policies and procedures to comply with PoCA 2002 reporting obligations.
Must have Compliance Officer for Legal practice (COLP)
Must have Compliance Officer for Finance and Administration (COFA)
Screening:
Reg 21(1)(b): Assess skills, knowledge, integrity and conduct of employees involved in identifying ML.
Reg 21(1)(c): Must have independent audit function to assess adequacy of policies and procedures.
Elements to Money laundering
1. Criminal source of funds is disguised
2. Form of funds is converted (paper money to bank account)
3. Trail of conversion is disguised
4. Launder retains direct or indirect control of funds
Risk of money laundering:
Launderer tries to deposit cash into a firm’s client account
Launderer tries to invest in property or acquire business using proceeds of crime
Firm is asked to set up a complex transaction (e.g. trust) structure then used to launder
Must have control over who deposits what into client account – not share details
Compliance with Proceeds of Crime Act 2002, Part 7
S.340(3): Criminal Property – Property known or suspected to represent a benefit from criminal conduct.
These offences apply to all legal work (different to MLR that only apply to certain types of work).
S.334: Penalty for direct and indirect is imprisonment, a fine or both.
Direct Involvement Offences (fact pattern may lead to multiple – cover all)
S.327: Concealing, disguising, converting or transferring criminal property or removing from UK.
S.328: Entering an arrangement you know or suspect facilities the acquisition, retention, use or control
of criminal property by or on behalf of another.
S.329: Acquiring, using or possessing criminal property.
Defences to Direct Involvement Offences
Must make an Authorised Disclosure: S.338 – A disclosure to a constable, customs officer or nominated officer
(MLRO) by the alleged offender that it is criminal property and one of the following applies:
S.338(2): Disclosure made before the prohibited act (e.g. accepting the money).
S.338(2A): Disclosure made during the prohibited act AND did not know or suspect before that was
prohibited AND disclosure made on own initiative as soon as practicable. Given cheque, suspect ML,
called into meeting, then report.
S.338(3): Disclosure made after the prohibited act AND good reason for failure to make before AND
disclosure is made on own initiative as soon as practicable. Threat of harm, make deposit, report.
AND meet the requirements under S.327(2), S.328(2) and S.329(2):
Make a S.338 disclosure AND have Appropriate Consent - S.335 and S.336: Once MLRO decides to make
a disclosure to NCA neither MLRO or fee earner may authorise or undertake a prohibited act unless
authorised by the NCA or 7 working days have passed since reporting.
Not make a S.338 disclosure BUT have a reasonable excuse.
