Rockin Dave - Mister Boogie Woogie -Midnight Rock
Don't TRUST YOUR LAWYER!!!
In this section, you will learn in more detail about the relevant UK legislation which has been put in place to tackle money laundering, the offences which it creates and the defences available. Essentially, the major pieces of legislation of which you need to be aware are:
The offences they create can be divided into:
The principal money laundering offences created by the Proceeds of Crime Act 2002 mean that, in summary, it is a criminal offence for anyone to:
These offences are punishable by up to 14 years’ imprisonment and apply to everybody, including not just those working on financial transactions but also, for example, those working in law firms, banks or accountancy practices.
People working in these areas need to take special care because they can, for example, leave themselves open to committing one of these offences if they gain a suspicion that the transaction involves the proceeds of crime and they do not report it.
What does 'criminal property' mean?
Traditionally when thinking about money laundering, proceeds of drug trafficking or organised crime come to mind. These are criminal offences and so any money or benefits derived from them are criminal property.
But these are not the only crimes which lead to money laundering. Any activity which is a crime in this country or, in many cases, in another jurisdiction falls within it. Therefore, we need to report suspicions of proceeds from any crime, including for example tax evasion or any type of fraud.
The definition of criminal conduct was amended from 1 July 2005 by section 102 of the Serious Organised Crime and Police Act 2005, having previously included any conduct overseas which would have been an offence in the UK irrespective of the sentence.
The objective was to simplify and reduce the requirements to report suspicions of money laundering in certain circumstances without weakening the UK’s defences against money laundering.
The Principal Money Laundering Offences - Defences
If, whilst handling a transaction, someone in our firm, a partner, solicitor or support team member, forms a suspicion that money is being laundered, our firm can, in certain cases, obtain consent to continue with the transaction from the authorities before the act which would be an offence has happened, e.g. before the suspicious money has been transferred from client account.
This provides our firm and the person who had suspected money laundering with a full defence to the principal money laundering offences.
In such cases, our firm's Money Laundering Reporting Officer (MLRO) needs to make an external report to SOCA, the relevant authority, and obtain consent.
It is therefore imperative that we make a report about our suspicions to our MLRO with the utmost urgency, using the procedures which you will learn about in Module 6 so that our MLRO can decide whether an external report and consent are necessary.
Our firm's procedures provide for internal reports to be made by anyone who is suspicious to our firm's MLRO who is specially appointed to deal with internal money laundering reports, or a person nominated by him/her to receive your reports. You should consult our firm's procedures if you need to make a report.
The Terrorism Act 2000 also created some money laundering offences. Increasingly, the anti-money laundering regime is referred to as the AML and CTF regime. CTF stands for counter terrorist financing.
These offences relate to terrorist fund raising, using monies for terrorist purposes and involvement in arrangements which facilitate money being made available for purposes of terrorism. Care needs to be taken to be alert to these provisions when funds are being transferred to or for the benefit of clients.
Firms now have to verify the identity of new clients when they first become a client. As part of that verification process, our firm collates information about the client and the work our firm will be doing for the client. As we have seen, this information forms part of our firm’s CDD measures. Up-to-date CDD information including our firm's risk assessment of the client (particularly country risk) should help to identify any suspicions of this nature. This is covered in detail in Module 3.
As a member of the support team, you must pay particular attention to any information passed on by way of messages or otherwise and when dealing with transfers, payments, receipts and accounts departments which could arouse your suspicions.
Reports relating to terrorist fund raising are made in exactly the same way as for Proceeds of Crime Act money laundering offences.
In summary, it is a criminal offence to enter or become concerned in an arrangement which facilitates the retention or control by, or on behalf of another, of terrorist property:
It is a defence to prove that you did not know, or had no reasonable cause to suspect, that the arrangement was related to terrorist property.
The Regulations set out the framework for compliance. Although they have been updated, regulations have been implemented in law firms since at least 1 March 2004. In most cases, firms have adopted a risk based approach and largely ignore any distinction which might be drawn between matters which may fall outside the strict definition.
Our firm has to have in place appropriate and risk sensitive policies and procedures which help to prevent our firm becoming involved in money laundering. Our firm needs to have in place:
There is a general defence to the principal money laundering offences if an authorised disclosure of the suspicions is made to the relevant authority before the act which could result in a money laundering offence occurs and the authority gives appropriate consent to continue.
The way this typically works in practice is as follows:
In summary, it is a criminal offence to fail to report circumstances where you know or suspect, or there are reasonable grounds for you to know or suspect, that another person is engaged in money laundering and that knowledge (or suspicion) came to you in the course of business.
There is a corresponding offence which our MLRO can commit if he/she fails to properly pass on your suspicions to SOCA. This offence is punishable by up to 5 years imprisonment and/or a fine and can be committed by those working within law firms and other businesses conducting financial-type business.
The suspicions about money laundering do not have to relate to a transaction that our firm is currently handling. They do not even have to relate to the client. They may involve information about some other transactions which happened some time ago and with which our firm had no involvement, or which involved someone other than the client.
Important points to note are:
You can therefore clearly see how important it is to pass on any suspicions you may have to our MLRO or person nominated to accept the report in our firm's anti-money laundering procedures. If you are at all unsure about whether your concerns amount to a suspicion, do not hesitate to seek help from the partner/fee earner in charge or our MLRO. Also, remember to keep the matter completely confidential for fear of tipping off the suspect!
As you have just learned, it is essential, if you have a suspicion that money laundering may have occurred or may be about to occur, that you report it without delay to our MLRO.
The difficulty is that it is not always easy to decide whether the concerns you have amount to a suspicion. ‘Suspicion’ is not defined in the Proceeds of Crime Act.
The test differs depending upon whether it is a principal money laundering offence or failure to disclose offence.
For the former, the test is: Do you, as a matter of fact, have a suspicion?
For the latter, the test is: Would a reasonable person have a suspicion based on the facts as known to you or which should reasonably have been known to you?
In this lesson you will learn about:
The anti-money laundering legislation does not define 'suspicion'. However, it does introduce criminal liability for failing to disclose information when there are reasonable grounds for knowing or suspecting that another person is engaged in money laundering.
‘Suspicion’ is personal and subjective and falls far short of proof based on firm evidence. The courts, however, have defined ‘suspicion’ as:
If you have any concerns at all about a matter and are at all unsure about whether or not it amounts to a suspicion, seek immediate guidance from the partner/fee earner, our MLRO or person nominated to accept the report in our firm's anti-money laundering procedures.
Knowledge for these purposes can be:
It is better to bring to their attention a piece of information which they might not have and which may lead to a suspicion than for something important to be missed and a criminal offence committed.
If you consider a transaction to be suspicious:
The Proceeds of Crime Act 2002 introduced criminal liability for failing to disclose information when there are reasonable grounds for knowing or suspecting that another person is engaged in money laundering.
This introduces an objective test for establishing guilt. The test is, therefore, now two-fold:
There are two ‘Tipping Off’ offences which can be committed under POCA. Both relate only to work undertaken within the 'regulated sector', they are:
These offences only apply in relation to work within the 'regulated sector'. Note that in relation to the second offence, you can commit this offence, even where you are unaware that a SAR has been submitted.
The offence of prejudicing an investigation applies to work carried on outside the 'regulated sector'. Prejudicing a confiscation, civil recovery or money laundering investigation, occurs if the person making the disclosure knows or suspects that an investigation is being, or is about to be conducted.
It is a defence that a disclosure is made by a legal adviser to a client, or a client's representative, in connection with the giving of legal advice or to any person in connection with legal proceedings or contemplated legal proceedings.
The Terrorism Act 2000 has been amended to include the offences of:
There are similar defences to these offences including disclosures within an undertaking or group and the exception for solicitors for disclosures made for the purpose of dissuading the client from engaging in conduct amounting to an offence.
If you have concerns:
you MUST review and immediately follow our firm's procedures, which require you to discuss the matter with the relevant partner/fee earner, our MLRO or other designated person.
Your suspicion or concern can relate to a major or a minor crime. You may not even be sure what the particular crime is. It matters not where or when it was committed, so long as it would have been a criminal offence if it had happened in the UK.