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Money Laundering Compliance
Author:
Tim Bennett
ISBN:
9781780434964
Buy Book in Print
Edition:
3rd
Publisher:
Bloomsbury Professional
Copyright:
2014 Bloomsbury Professional
GO
Contents
Contents
Expand All
Collapse All
Preface
Close section
Table of cases
A
Table of Statutes
Table of SIs
Table of foreign legislation
Close section
Table of European Legislation
Primary Legislation
Secondary legislation
Abbreviations and References
Glossary of terms
Close section
Chapter 1: Introduction: the core principles, and towards a 'cashless society'
Towards a 'cashless society'
Electronic money
Close section
Chapter 2: The UK AML-CFT framework – background
Legislative history
Measures against drug trafficking
CJA 1988; and CJA 1993: extension to 'other serious crimes'
The Proceeds of Crime Act 2002
The Serious Organised Crime and Police Act 2005
The Serious Crime Act 2007
The EU Initiatives ('3MLD' and '4MLD')
Close section
Chapter 3: The UK AML-CFT framework - the principal UK ML offences
Introduction and Background
The Principal Offences
The Four Elements
Predicate Offences
Penalties
Defences
Close section
Chapter 4: The UK AML-CFT framework – failure to disclose and tipping-off
Failure to disclose/failure to report
Tipping-off
Reporting
Civil Injunctions
Close section
Chapter 5: The UK AML-CFT framework – tracing, asset recovery and forfeiture
Assets Recovery Agency
The NCA
Confiscation
Civil recovery and 'recovery Order'
Recovery of cash
Criminal lifestyle
Freezing and Confiscation of the Proceeds of Crime
Comments
Tracing
Piercing the Corporate Veil
Close section
Chapter 6: The UK AML-CFT framework – the Money Laundering Regulations 2007 and JMLSG Guidance
The Money Laundering Regulations
Scope and Definitions
Beneficial Owner
'Equivalent Countries'
FSMA, FSA and FCA
The Joint Money Laundering Steering Group Guidance for the UK Financial Sector (2013 Revised version)
Training
Training Initiatives and Resources
Close section
Chapter 7: The UK AML-CFT framework – technical issues
'All crimes' offences
Territorial limits and 'dual criminality'
Proceeds
Time limits and retrospectivity
'Knowledge', 'suspicion' and 'reasonable grounds'
Close section
Chapter 8: Fiscal offences, foreign tax enforcement, 'legacy' issues, FATCA and Amnesty programmes
Historical background
Fiscal offences
The All-Crimes Approach
Fraudulent evasion of income tax
Foreign tax evasion
Suspicion
Practical difficulties
Countries that include fiscal crime in money laundering
Other legal and technical issues relating to fiscal offences being AML-CFT offences
Wider issues affecting international private banking
Legacy Issues
The Foreign Account Tax Compliance Act (FATCA) and US issues
Risks
Amnesties/Disclosure Facilities, 'Whistleblowing' and Disengagement
Close section
Chapter 9: Tax transparency, TIEAs, OECD automatic exchange of tax information and the Common Reporting Standard
Data Leaks, Theft and Penetration
The 2008 Economic Crisis
TIEAs
FATCA
The OECD Multilateral Convention on Administrative Assistance in Tax Matters (Automatic Exchange of Information in Tax Matters)
The Model CAA and the CRS
The Early Adopters and Other Committed Parties
Comments on the OECD CRS
Seizure of Information
Close section
Chapter 10: EU initiatives and the Money Laundering Directives
Introduction
The First Money Laundering Directive of 1991 ('1MLD')
Extension of 1MLD: The Second Money Laundering Directive 2000 ('2MLD')
The Third Money Laundering Directive (EU Directive 2005/60) ('3MLD')
Beneficial Owner
Equivalent Jurisdictions
TSPs & CSPs
Feedback
The Fourth Money Laundering Directive (EU Directive) ('4MLD')
Additional EU Initiatives
Bribery and Corruption
Close section
Chapter 11: Customer due diligence, compliance and risk management
Customer Due Diligence – Introduction
CDD Requirements
Identifying the customer, verifying customer identity and what it entails
Companies
Trusts
Proof of identity
Proof of residence (verification of address)
'Residence'
Who can 'certify'?
Source of Wealth and Source of Funds and Destination of Funds
Source of Wealth
Source of Funds
Destination of Funds
A Worked Example
Gold Plating
Ensuring Compliance
Politically Exposed Persons
Databases
Proliferation of government databases
Blacklists
OFAC Lists, Kingpin Designations etc
Sanctions Lists
Conclusions
Close section
Chapter 12: STR reporting procedures and dealing with the client
Introduction: the MLRO
Suspicious Transactions and client reporting
The reporting process and procedures – Internal
The reporting process and procedures – External
Consent or otherwise
Indemnity
False reporting
International reporting statistics
Close section
Chapter 13: Legal professionals and practitioners – specific issues
Introduction
Law Society AML-CFT Practice Note
Legal professional privilege and confidentiality – general position
Legal Professional Privilege and Confidentiality issues post-PoCA 2002
Confidentiality issues, Conflict of Interest, and Reporting – post Bowman v Fels
Client Care Letters, LPP and Reporting
Constructive Trust issues
3MLD , the Money Laundering Regulations 2007 and 4MLD
4MLD and Client Accounts
STRs, Fraud Allegations and 'Freeze Orders'
The IBA International Anti-Money Laundering Forum
Other Supranational Issues
Close section
Chapter 14: Trustees, executors and TSPs– specific issues
Introduction
'Core CDD' on Trusts: Proof of identity/ Proof of residence
Who is the 'Beneficial Owner' of a Trust?
Approved Certifiers
Regulation of TSPs
Onsite inspection visits
The Effect of Regulation
Opening Accounts for Trusts
TSPs: Reporting by trustees and Mandate provisions to deal with AML-CFT and reporting
Caversham Trustees case, Jersey
Public Register of PSCs of Trusts
AML-CFT Enforcement Actions against Trusts and Underlying Companies
Executors and Probate
Constructive trust issues
Common failings
Blacklisted Jurisdictions
Reference Resources
'Trust Bashing': the supra-national initiatives and perception issues
The problem of institutional tax evasion
Close section
Chapter 15: CSPs: specific issues
Introduction
Approved Certifiers
CSPs: Appointment of first directors
CSPs: Mandate provisions to deal with AML-CFT and reporting
Public Register of PSCs of Companies
CSP Industry issues
The Jason Sharman Case Study
Blacklisted Jurisdictions
Close section
Chapter 16: Banks (internal policies) and investment managers – specific issues
Introduction: Banks are one of the 'key gatekeepers' in the AML-CFT war
Customer due diligence for banks
Risk profiling
Trigger events
Banking initiatives
Other Wolfsberg Group initiatives
Issues for the banks
Initiatives affecting Funds and Investment Managers
Close section
Chapter 17: AML in selected non-UK Jurisdictions
The Bahamas
Bermuda
Canada
The Cayman Islands
Guernsey
Hong Kong
Isle of Man
Jersey
Singapore
Switzerland
The United States
Close section
Chapter 18: Bribery and corruption
Introduction
Definitions
The Bribery Act 2010
Supranational: Convention on combating bribery of foreign public officials in international business transactions (OECD 1997)
Reports: No longer business as usual – fighting bribery and corruption (the FBC report), OECD, June 2000
Reports: Behind the Corporate Veil – Using Corporate Entities for Illicit Purposes (OECD, November 2001)
Supranational: The UN convention against corruption (2003)
EU Initiatives against corruption
The Council of Europe Anti-Corruption Convention
APEC Corruption Information-Sharing Agreement 2014
The Wolfsberg Group's Statement against corruption
MEASURING CORRUPTION
Issues for the future – dangers for TSPS, CSPS, banks and legal practitioners
Close section
Chapter 19: Concerns and conclusions
Changes since '9-11'
The AML-CFT Mission: accomplished or not?
The Costs of AML-CFT Enforcement?
Privacy Concerns
Human Rights
Foreign Tax Evasion
Asset Forfeiture
The Future
Close section
Appendix 1: Statutory and EU Provisions
Close section
Appendix 1.1: Proceeds of Crime Act 2002
Part 2 Confiscation: England and Wales
Part 5 Civil recovery of the proceeds etc. of unlawful conduct
Part 7 Money laundering
Part 8 Investigations
Schedule 2 Lifestyle offences: England and Wales
Close section
Appendix 1.2: Serious Organised Crime and Police Act 2005
Part 2 Investigations, prosecutions, proceedings and proceeds of crime
Close section
Appendix 1.3: Fraud Act 2006
Fraud
Obtaining services dishonestly
Supplementary
Schedule 2 Transitional provisions and savings
Close section
Appendix 1.4: Bribery Act 2010
General bribery offences
Bribery of foreign public officials
Failure of commercial organisations to prevent bribery
Close section
Appendix 1.5: Money Laundering Regulations 2007 (SI 2007/2157)
Part 1 General
Part 2 Customer due diligence
Part 3 Record-keeping, procedures and training
Part 4 Supervision and registration
Part 5 Enforcement
Schedule 1 Activities listed in points 2 to 12[, 14 and 15]1 of Annex 1 to the capital requirements directive
Schedule 2 Financial activity, simplified due diligence and politically exposed persons
Politically exposed persons
[Schedule 3 Professional bodies]1
Schedule 4 Connected persons
Close section
Appendix 1.6: Extracts from the Joint Money Laundering Steering Group ('JMLSG') Prevention of money laundering/combating terrorist financing 2013 revised version1
Part 1: Guidance for the UK Financial Sector (June 2013, revised November 2013)
Part II: Sectoral Guidance (2013 Review Version, amended June 2013)
2.1 What is an "equivalent jurisdiction" and why does it matter?
2.2 Categories of country
EU/EEA member states
EU agreed list
FATF members
Gulf Co-operation Council
Other jurisdictions
Membership of an international or regional 'group'
Contextual factors
Evidence of relevant (public) criticism
Mutual evaluation reports
Implementation standards (including effectiveness of supervision)
Incidence of trade with the jurisdiction
Prohibition notices
Advisory notices HM Treasury
FCA
Close section
Appendix 1.7: Draft of the 4th EU Anti-Money Laundering Directive
1 Context of the proposal
2 Results of consultations with the interested parties and impact assessment
3 Legal elements of the proposal
4 Budgetary implication
5 Additional information
Close section
Appendix 2: FATF and Supranational reports
Appendix 2.1: FATF Members
Appendix 2.2: The FATF Blacklist
Close section
Appendix 2.3: International standards on combating money laundering and the financing of terrorism and proliferation: the FATF recommendations
A. AML/CFT POLICIES AND COORDINATION
B. MONEY LAUNDERING AND CONFISCATION
C. TERRORIST FINANCING AND FINANCING OF PROLIFERATION
D. PREVENTIVE MEASURES
21. Tipping-off and confidentiality
E. TRANSPARENCY AND BENEFICIAL OWNERSHIP OF LEGAL PERSONS AND ARRANGEMENTS
F. POWERS AND RESPONSIBILITIES OF COMPETENT AUTHORITIES, AND OTHER INSTITUTIONAL MEASURES
G. INTERNATIONAL COOPERATION
37. Mutual legal assistance
INTERPRETIVE NOTE TO RECOMMENDATION 1 (ASSESSING RISKS AND APPLYING A RISK-BASED APPROACH)
INTERPRETIVE NOTE TO RECOMMENDATION 3 (MONEY LAUNDERING OFFENCE)
Close section
Appendix 2.4: FATF Standards 9 Special Recommendations (SR) on Terrorist Financing (TF) © FATF
II. Criminalising the financing of terrorism and associated money laundering
IV. Reporting suspicious transactions related to terrorism
VIII. Non-profit organisations
Appendix 2.5 Wolfsberg Anti-Corruption Guidance (August 2011) (relates to Chapter 18)1
Close section
Appendix 3: Amnesty Programmes and Disclosure Facilities
Close section
Appendix 3.1: 2014 Offshore Voluntary Disclosure Program (US)
OTHER TAX AMNESTIES:
Appendix 3.2: France: The New Voluntary Disclosure Program Notes courtesy of Jean-Marc Tirard & Maryse Naudin of Tirard, Naudin
Appendix 3.3: Israel Voluntary Disclosure/ Tax Amnesty
Appendix 3.4: The Swiss-UK Tax Cooperation Agreement
Close section
Appendix 3.5: Memorandum of Understanding – Isle of Man
Conditions for participation in the Disclosure Facility
Persons eligible to participate in the disclosure facility
Level of disclosure required by HMRC
Financial commitment
Persons who may participate in the facility conferred by paragraphs 6 to 8
Tax and Penalties
Specified percentage
Errors on tax returns
Property excluded from the facility in paragraph 6
The Bespoke Service
Close section
Appendix 3.6: Memorandum of Understanding - Guernsey
PREAMBLE
TERMS
Conditions for participation in the Disclosure Facility
Persons eligible to participate in the disclosure facility
Level of disclosure required by HMRC
Financial commitment
Persons who may participate in the facility conferred by paragraphs 6 to 8
Tax and Penalties
Specified percentage
Errors on tax returns
Property excluded from the facility in paragraph 6
The Bespoke Service
Close section
Appendix 3.7: Memorandum of Understanding - Jersey
PREAMBLE
TERMS
SCHEDULE 1 Defined words and phrases
SCHEDULE 2 The Disclosure Facility
Appendix 3.8: Isle of Man Disclosure Facility – making a disclosure
Appendix 3.9: Guernsey Disclosure Facility – making a disclosure
Appendix 3.10: Jersey Disclosure Facility – making a disclosure
Appendix 3.11: Liechtenstein Disclosure Facility (LDF)
Appendix 3.12: Berwin Leighton Paisner Disclosure Facility Comparison: Isle of Man, Jersey, Guernsey and Liechtenstein
Close section
Appendix 4: OECD Exchange of Information, Early Adopters and Other Committed Parties (relates to Chapter 9)
Close section
Appendix 4.1: Extract from the OECD global forum on transparency and exchange of information for tax purposes – Tax Transparency 2013 Report on Progress
Table 1 : Overall ratings for jurisdictions for whom Phase 2 reviews have been completed
Table 2 : Jurisdictions that cannot move to Phase 2 review until they act on the recommendations to improve their legal and regulatory framework
Appendix 4.2: Standard for Automatic Exchange of Financial Account Information – Common Reporting Standard1
Close section
Appendix 4.3: Early Adopters and Other Committed Parties
Early adopters group
Other committed parties (excluding the United States)
Close section
Appendix 4.4: EY Global Tax Alert
OECD issues Standard for Automatic Exchange of Information in Tax Matters
Which countries are committed to the CRS?
Detailed comments
Local implementation
Close section
Appendix 5: Customer Due Diligence
Close section
Appendix 5.1: House of Commons Library Report 25 September 2013 'Bank accounts: problems of identification'
A. Introduction
Close section
Appendix 5.2: Wolfsberg Anti-Money Laundering Principles for Private Banking (2012)1
Preamble
1 Client Acceptance: General Principles
2 Client Acceptance: Situations requiring Additional Diligence / Attention; Prohibited Customers
3 Updating Client Files
4 Practices when identifying Unusual or Suspicious Activities
5 Monitoring and Screening
6 No Inappropriate Assistance
7 Control Responsibilities
8 Reporting
9 Education, Training and Information
10 Record Retention Requirements
11 Exceptions and Deviations
12 AML Organisation
Source of Wealth
Net Worth
Close section
Appendix 5.3: The Wolfsberg AML Principles: FAQs with Regard to Beneficial Ownership in the Context of Private Banking
Q. 1. What does "beneficial ownership" mean for AML purposes?
Q. 2. What does the term "beneficial ownership" mean in the context of natural persons?
Q. 3. What does "beneficial ownership" mean in the context of a legal entity, such as a Personal Investment Company (PIC)?
Q. 3A. What implications, if any, are there if corporate entities are not legally required to disclose, as a matter of public record or otherwise, who their ultimate beneficial owners are?
Q. 3B. What implications, if any, are there, for due diligence purposes, if shares of a PIC are held in bearer form?
Q. 4. What does "beneficial ownership" mean in the context of trusts?
Q. 4A. Why is it appropriate for the private banker to understand who has control over the funds held in the trust structure or who has the power to remove the trustee, even if the person having such control or power is not the source of funds?
Q. 4B. Why is it appropriate for the private banker to determine the persons for whose benefit the trust is established?
Q. 4C. What should the private banker review in seeking to understand the structure of the trust sufficiently for purposes of 1.2.3?
Q. 5. What does beneficial ownership mean in the context of partnerships, foundations and unincorporated associations?
Appendix 5.4: Jonathan Goldsmith: 'Clients' Money in the News'11
Appendix 5.5: Alan Binnington: 'Money Laundering and Tax Evasion – the Banker's Dilemma'12
Close section
Appendix 6: Suspicious Transaction Reports ('STRS') and Reporting NCA Suspicious Activity Reports ('SARs') Annual Report 2013
Key statistics
Electronic reporting
New reporters
Analysis of SARs reporting by sector
Engagement with regime participants
Themes and trends
Glossary Codes
SOCA Alerts
Staffing and development
Transparency and governance of the regime
Retention and deletion of SARs
HMRC increasing the use of SARs
Consent
Close section
Appendix 7: Lawyers, Law Reports and Cases
Appendix 7.1: Shah v HSBC
Appendix 7.2: R v Duff
Appendix 7.3: Warren
Appendix 7.4: Ferguson
Appendix 7.5: Double
Appendix 7.6: Griffiths
Appendix 7.7: Dougan
Appendix 7.8: Gauntlett and Beveridge
Appendix 7.9: The Law Society Anti-money laundering Practice note October 2013
Appendix 7.10: House of Commons Library report, 14 November 2012 'The impact of AML legislation on professional services (accountants and solicitors)
Appendix 7.11: Torn? NLJ, 3 August 2012 How do banks juggle duty to their customers with money-laundering obligations, asks Simon Goldstone1
Appendix 7.12: May
Close section
Appendix 8: Trustees and Money Laundering
Close section
Appendix 8.1: Trustees and Money Laundering Case studies (updated)
Case study1
Case study 2
Case study 3
Case study 4
Close section
Appendix 8.2: Extracts from 'Practical Implications of Money Laundering Regulations – Tax Evasion'
Introduction
Tax evasion
Ignoring tax evasion
The business proposition
Offshore organisations
Close section
Appendix 8.3: Client Alert
The Caversham Case
Close section
Appendix 9: AML in selected non-UK Jurisdictions
Close section
The Bahamas
Introduction
Background
Money Laundering
Financial Transactions Reporting Act 2000
Disclosure and Tipping Off
OTHER LEGISLATIVE PROVISIONS
INFORMATION AND PROSECUTIONS
Conclusion
Close section
Bermuda
Introduction
The Regulators
Bermuda's AML Regime
Current Legislation
MONEY LAUNDERING OFFENCES
Suspicious transactions
Pending changes
BMA general guidance notes
Close section
Canada
Introduction
Background
Canadian money laundering and terrorist financing laws
FINTRAC
Privacy
Suspicious transaction
REAL ESTATE DEVELOPERS, DEALERS IN PRECIOUS METALS AND STONES, AND LAWYERS
Lawyers
Financial Action Task Force evaluation
Close section
Cayman Islands
Introduction
Cayman Islands' anti-money laundering regime
Proceeds of crime offences
Know your client
Conclusion
Close section
Guernsey
Background
The constitutional position
International evaluations
Anti-money laundering legislation in the new millennium
Money laundering legislation
Offences in relation to money laundering and terrorist funds
Recognition of suspicious customers/transactions
Disclosure/tipping off
The future
Close section
Hong Kong
Introduction
Primary legislation
Civil remedies
Close section
The Isle of Man
Introduction
Legislation and regulation overview – money laundering in the Isle of Man
Future measures
The Isle of Man's current primary legislation
How effective is the current primary legislation?
Disclosures
Tipping off
Inchoate offences
IOM POCA – further provisions
Guidance issued by Isle of Man Authorities
Civil law aspects
Close section
Jersey
Introduction
Constitutional position
Jersey's finance industry
Evaluations
Legislative and regulatory structure
Primary legislation
Secondary legislation
Guidance from the JFSC
Legal professional privilege
The informal freeze
Enforcement
Close section
Singapore
Introduction
Legislative framework
Non-legislative measures
Education and training
Close section
United States of America
Introduction
Criminal anti-money laundering laws
Bank Secrecy Act
Corporate and business entity liability and compliance programs
Appendix 10: AML-CFT Prosecutions & Fines:
Close section
Appendix 11: Data Leaks, Penetrations and Thefts; Whistleblowing; Federal Secrecy Index
Appendix 11.1: Examples of Data Leaks, Penetration and Thefts
Appendix 11.2: Whistleblowers (and see 8.16)
Close section
INDEX
A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
R
S
T
U
W
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