PROFESSIONAL CONDUCT & REGULATION
NEW INSTRUCTIONS
1) Customer Due Diligence
2) Conflict Check
3) Client Care (Letter of Engagement)
MONEY LAUNDERING (High Risk / Low Risk)
Attributes
o Country of residence
o Occupation
Activities
o What client is engaged in?
o What are they trying to do? (e.g. using offshore funds)
Whose responsibility is it to:
o Train people to spot money laundering and do something about it
o Is there guidance?
o How is a solicitor at risk?
PROCEEDS OF CRIME ACT 2002
1) Is there criminal property?
Definition (s340(3) PoCA 2002)
2) Is it a “direct involvement” offence (ss327 – 329 PoCA 2002)
s327 – concealing, disguising, converting or transferring criminal property or removing criminal property
from the UK;
s328 – entering into or becoming concerned in an arrangement which you know, or suspect facilitates (by
whatever means) the acquisition, retention, use or control of criminal property by or on behalf of another
person;
s329 – acquiring, using or possessing criminal property
3) Are there any defences?
Was there “authorised disclosure” pursuant to s338 PoCA 2002
o “a disclosure to a constable, customers officer or a nominated officer by the alleged offender that
property is criminal property” and at least one of the following must be satisfied:
o s338(2) – disclosure BEFORE prohibited act
o s338(2A) – disclosure DURING the prohibited act
- AND began to do the act at a time when, because he did not know / suspect that the act was not
a prohibited act
- AND the disclosure is made on his own initiative and as soon as it is practicable to make it
o s338(3) – disclosure AFTER
- AND there is good reason for no earlier disclosure
- AND the disclosure is made on his own initiative and as soon as it is practicable to make it
s338(5) “disclosure to a nominated officer” is a disclosure which
o (a) is made to a person nominated by the alleged offender’s employer to receive authorised
disclosures AND
o (b) is made in the course of the alleged offender’s employment
4) Is it a “non-direct involvement” offence (s330 PoCA 2002)
s330 – fail to make a disclosure to the firm’s MLRO (Reporting Officer) or NCA if:
o know / suspect (or have reasonable grounds to) that someone is laundering proceeds of criminal
conduct
o receive information during business in the regulated sector (Schedule 9); AND
o can identify (s330(5)):
- person laundering the proceeds of criminal conduct; OR
- whereabouts of the laundered property; OR
- information above will / may assist in identifying the person
Regulated Sector INCLUDES:
o a firm / sole practitioner who by way of business provides legal or notarial services to others
5) Was there any tipping off (s333A PoCA 2002)?
Offence to ‘tip-off’ clients of any report made of information (which may prejudice investigation)
6) Penalties (s334 PoCA 2002) – Imprisonment / fine or both
, MONEY LAUNDERING REGULATION 2017
1) Do the MLR apply to this type of work?
2) New / Established client?
3) WHAT CDD is required for this client
4) WHEN should CDD be conducted?
To ensure that firms establish procedures to forestall / prevent operations relating to money laundering
1) To WHOM do the MLR relate? (Reg 8) – Does the MLR Apply? (Reg 12)
‘Relevant Persons’ includes solicitors (Reg 8(2)(d)) as ‘independent legal professionals’ Reg 12(1)
Not all types of legal work is covered – e.g. employment / litigation not covered
2) Risk assessment under Reg 18
Reg 18(1): must take appropriate steps to identify + assess the risks of ML / terrorist financing to which
business is subject
Reg 18(2): must consider any information provided by supervisory body i.e. Law Society, SRA and non-
exhaustive risk factors in Reg 18(2)(B) relating to:
a) Customers
b) Countries of operation
c) Products / Services
d) Transactions
e) Delivery channels
Reg 18(3): take account size + nature of its business when deciding which steps are appropriate
Reg 18(4): maintain up-to-date record of all steps taken Reg 18(6)
3) WHAT steps do the MLR require you to take and when? (Reg 27) (Does the MLR apply)?
Customer Due Diligence (‘CDD’) measures (Reg 3) must be applied when the firm is:
a) Establishing a business relationship
- Reg 4 – “a business, professional or commercial relationship between a relevant person (e.g.
solicitor) and a customer (e.g. client) which arises out of the business of the relevant person and
is expected by the relevant person, at the time when contact is established, to have an element of
duration” (i.e. enduring relationship)
b) Carrying out an occasional transaction
- Reg 3 – “a transaction which is not carried out as part of a business relationship” (i.e. one off)
- Reg 27(1) – CDD measures required if occasional transaction amounts to a transfer of funds
exceeding €1,000
- Reg 27(2) – CDD measures required if a relevant person (who is not a high value dealer) if the
client carries out an occasional transaction that amounts to €15,000+
c) Suspects money laundering or terrorist financing
- Instructions outside firm’s area of expertise
- Unusual issues (e.g. dispute which settles to easily)
- Use of client accounts (e.g. client deposits funds + ends transaction for no apparent reason)
- Setting up a trust (ascertain purpose of trust + why using unusual jurisdiction / structure)
- Property purchase (e.g. large payments from private funds)
- Suspicious fact patterns / documents
- Jurisdictions
o Financial Action Task Force (‘FATF’) Lists
i. DPRK (Korea) / Iran
d) Has doubts about the veracity / adequacy of the identification / documents / data / information
previously provided
4) WHEN (Timing of Verification)
Verification should take BEFORE establishment of relationship / carrying out of transaction (must) (Reg
30(2))
BUT, if a business relationship is being established, Reg 30(3) DOES permit the verification of the client’s
identity to be completed DURING establishment if:
- the delay is necessary so as not to “interrupt normal conduct of business”; and
- there is little risk of money laundering or terrorist financing occurring; and
- verification is completed as soon as is practicable after contact with the client is first
established
BUT, Reg 30(4) allows for verification AFTER account is opened provided that adequate safeguards are
in place to ensure that no transactions are carried out before
5) Standard CDD (Reg 27 – 32)
NEW INSTRUCTIONS
1) Customer Due Diligence
2) Conflict Check
3) Client Care (Letter of Engagement)
MONEY LAUNDERING (High Risk / Low Risk)
Attributes
o Country of residence
o Occupation
Activities
o What client is engaged in?
o What are they trying to do? (e.g. using offshore funds)
Whose responsibility is it to:
o Train people to spot money laundering and do something about it
o Is there guidance?
o How is a solicitor at risk?
PROCEEDS OF CRIME ACT 2002
1) Is there criminal property?
Definition (s340(3) PoCA 2002)
2) Is it a “direct involvement” offence (ss327 – 329 PoCA 2002)
s327 – concealing, disguising, converting or transferring criminal property or removing criminal property
from the UK;
s328 – entering into or becoming concerned in an arrangement which you know, or suspect facilitates (by
whatever means) the acquisition, retention, use or control of criminal property by or on behalf of another
person;
s329 – acquiring, using or possessing criminal property
3) Are there any defences?
Was there “authorised disclosure” pursuant to s338 PoCA 2002
o “a disclosure to a constable, customers officer or a nominated officer by the alleged offender that
property is criminal property” and at least one of the following must be satisfied:
o s338(2) – disclosure BEFORE prohibited act
o s338(2A) – disclosure DURING the prohibited act
- AND began to do the act at a time when, because he did not know / suspect that the act was not
a prohibited act
- AND the disclosure is made on his own initiative and as soon as it is practicable to make it
o s338(3) – disclosure AFTER
- AND there is good reason for no earlier disclosure
- AND the disclosure is made on his own initiative and as soon as it is practicable to make it
s338(5) “disclosure to a nominated officer” is a disclosure which
o (a) is made to a person nominated by the alleged offender’s employer to receive authorised
disclosures AND
o (b) is made in the course of the alleged offender’s employment
4) Is it a “non-direct involvement” offence (s330 PoCA 2002)
s330 – fail to make a disclosure to the firm’s MLRO (Reporting Officer) or NCA if:
o know / suspect (or have reasonable grounds to) that someone is laundering proceeds of criminal
conduct
o receive information during business in the regulated sector (Schedule 9); AND
o can identify (s330(5)):
- person laundering the proceeds of criminal conduct; OR
- whereabouts of the laundered property; OR
- information above will / may assist in identifying the person
Regulated Sector INCLUDES:
o a firm / sole practitioner who by way of business provides legal or notarial services to others
5) Was there any tipping off (s333A PoCA 2002)?
Offence to ‘tip-off’ clients of any report made of information (which may prejudice investigation)
6) Penalties (s334 PoCA 2002) – Imprisonment / fine or both
, MONEY LAUNDERING REGULATION 2017
1) Do the MLR apply to this type of work?
2) New / Established client?
3) WHAT CDD is required for this client
4) WHEN should CDD be conducted?
To ensure that firms establish procedures to forestall / prevent operations relating to money laundering
1) To WHOM do the MLR relate? (Reg 8) – Does the MLR Apply? (Reg 12)
‘Relevant Persons’ includes solicitors (Reg 8(2)(d)) as ‘independent legal professionals’ Reg 12(1)
Not all types of legal work is covered – e.g. employment / litigation not covered
2) Risk assessment under Reg 18
Reg 18(1): must take appropriate steps to identify + assess the risks of ML / terrorist financing to which
business is subject
Reg 18(2): must consider any information provided by supervisory body i.e. Law Society, SRA and non-
exhaustive risk factors in Reg 18(2)(B) relating to:
a) Customers
b) Countries of operation
c) Products / Services
d) Transactions
e) Delivery channels
Reg 18(3): take account size + nature of its business when deciding which steps are appropriate
Reg 18(4): maintain up-to-date record of all steps taken Reg 18(6)
3) WHAT steps do the MLR require you to take and when? (Reg 27) (Does the MLR apply)?
Customer Due Diligence (‘CDD’) measures (Reg 3) must be applied when the firm is:
a) Establishing a business relationship
- Reg 4 – “a business, professional or commercial relationship between a relevant person (e.g.
solicitor) and a customer (e.g. client) which arises out of the business of the relevant person and
is expected by the relevant person, at the time when contact is established, to have an element of
duration” (i.e. enduring relationship)
b) Carrying out an occasional transaction
- Reg 3 – “a transaction which is not carried out as part of a business relationship” (i.e. one off)
- Reg 27(1) – CDD measures required if occasional transaction amounts to a transfer of funds
exceeding €1,000
- Reg 27(2) – CDD measures required if a relevant person (who is not a high value dealer) if the
client carries out an occasional transaction that amounts to €15,000+
c) Suspects money laundering or terrorist financing
- Instructions outside firm’s area of expertise
- Unusual issues (e.g. dispute which settles to easily)
- Use of client accounts (e.g. client deposits funds + ends transaction for no apparent reason)
- Setting up a trust (ascertain purpose of trust + why using unusual jurisdiction / structure)
- Property purchase (e.g. large payments from private funds)
- Suspicious fact patterns / documents
- Jurisdictions
o Financial Action Task Force (‘FATF’) Lists
i. DPRK (Korea) / Iran
d) Has doubts about the veracity / adequacy of the identification / documents / data / information
previously provided
4) WHEN (Timing of Verification)
Verification should take BEFORE establishment of relationship / carrying out of transaction (must) (Reg
30(2))
BUT, if a business relationship is being established, Reg 30(3) DOES permit the verification of the client’s
identity to be completed DURING establishment if:
- the delay is necessary so as not to “interrupt normal conduct of business”; and
- there is little risk of money laundering or terrorist financing occurring; and
- verification is completed as soon as is practicable after contact with the client is first
established
BUT, Reg 30(4) allows for verification AFTER account is opened provided that adequate safeguards are
in place to ensure that no transactions are carried out before
5) Standard CDD (Reg 27 – 32)
