#16819 - Anti Money Laundering

MONEY LAUNDERING

Main Money Laundering Offences for Solicitors – Proceeds of Crime Act 2000 [POCA]

Section	Offence
327	Concealing, disguising, converting or transferring criminal property or removing it from the UK
328	Entering into or becoming concerned in an arrangement which you know or suspect facilitates the acquisition, retention, use or control of criminal property by or on behalf of another person Scope of offence: Not only actually handling client money – processing is enough Mens rea can just be knowledge or suspicion Exception when dealing with litigation – Bowman v Fels (2005) EWCA Civ 226: C and D engaged in civil litigation – D had not paid VAT on some property Not a requirement here for solicitors to report money-laundering suspicion UNLESS litigation is a sham (insurance fraud arising from staged accidents)
329	Acquiring, using or possessing criminal property
330	Failure to disclose suspicions of money laundering – objective test is applied R v Griffiths and Pattison (2006) EWCA Crim 2155: “the absolute obligation [of all professionals involved in handling money/financial transactions] to observe scrupulously the terms of [POCA] and the inevitable penalty that will follow failure to do so”
333A	Tipping off a person whom you know or suspect has been laundering money that a report has been made or that an investigation is being carried out or contemplated
342	Prejudicing a money laundering investigation
Penalties under POCA Conviction for the above-mentioned POCA offences carries a prison term of up to 14 years and/or a fine.

Main Defences

Authorised Disclosure for s.328 “Arrangement” offence and s.330 “Suspicions” offence
No knowledge/suspicion – s.328 “Arrangements” offence; s.330 “Suspicions” offence (but see objective test) and s.333A(3) “Tipping off” offence
“Reasonable excuse”
Individual solicitors’ defence – lack of training
Legal Professional Privilege (LPP) unless the information supplied by the client is given with the intention of furthering a criminal purpose.

Procedural Requirements – Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 [MLR]

Reg
8	Applies to persons acting in the course of business in the UK including “independent legal professionals”.
26	Firms must apply to the SRA for approval under the MLR – acting without such approval is a criminal offence carrying a penalty of imprisonment and/or a fine.
18	Take appropriate steps to identify and assess the risks of money laundering and terrorist financing.
21	Establish and maintain policies, controls and procedures to manage the money laundering and terrorist financing risks identified in the risk assessment. Nominate a money laundering reporting officer (MLRO) Train staff – Firms are obliged to provide training to employees in respect of money laundering, and particularly on how to recognise and deal with transactions that potentially involve money laundering.
27	Instigate client due diligence (CDD) procedures – subject to limited exceptions, solicitors are obliged to obtain verification of the identity of each client before a business relationship is established and before a transaction is carried out.
	28(11)	Due diligence must be ongoing throughout the client relationship.
	37	Simplified due diligence: low risk client/transactions (e.g. client is a public company listed in the UK on the Stock Exchange; a UK public authority)
	28	Standard due diligence: applies to most clients – verify client’s identity using “documentation, data or information from a reliable source independent of the person whose identity is being verified”.
	33	Enhanced due diligence (EDD): higher risk of money laundering or terrorist financing identified by firm’s risk assessment, including if client is a PEP Political exposed person (PEP): an individual entrusted with a prominent public function – higher risk for potential involvement in bribery and corruption
40	Keep records.
Require the internal reporting of knowledge or suspicion of money laundering If you know or suspect that the proceeds of crime are involved in a particular matter, immediately disclose your concerns to your firm’s MLRO. Do not mention to the client your concerns or (if applicable) the fact that your concerns have been reported to the NCA – you could be committing the offence of tipping off under s.333A POCA Require the MLRO to file a suspicious activity report (SAR) with the National Crime Agency (NCA) Await consent from NCA to proceed The NCA will advise your MLRO whether or not the proposed transaction can proceed authority to proceed is given in the vast majority of transactions and authority is normally given within 2-3 days of the MLRO filing the SAR and requesting consent. If The MLRO hears nothing from NCA for seven working days – starting with the first working day after the disclosure is made – the transaction may proceed.

Approach to Money Laundering Questions – Example:

Memo from supervisor:

I understand that you have acted for Walter Kingston, a fairly new client, on a number of share purchases, usually involving sums of around 20,000. Walter has today phoned to say that he has come across a great new business and wishes to invest 700,000 in a controlling interest. Please prepare a note for me explaining how I should proceed.

Procedure	Example
Explain how a suspicion of money laundering arises.	A suspicion of money laundering arises because of the significant difference in value between that of the previous transactions and that of the transaction proposed.
Identify relevant primary and secondary legislation.	Under s.330 Proceeds of Crime Act 2002 (“POCA”), a disclosure is required as soon as is practicable.
To whom internally in the firm should the suspicion be reported?	You should immediately report your concerns to your firm’s Money Laundering Reporting Officer (MLRO).
What steps should that individual then take?	The MLRO will follow your firm’s procedures to try to...

#16819 - Anti Money Laundering - Civil Litigation

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