Fraud and Financial Crime. How to proceed when a bank employee suspects that funds received into a client’s account may be the proceeds of a crime
Seminararbeit 2016 10 Seiten
MONEY LAUNDERING OFFENCES
I. An employee suspects that funds received into a client’s deposit account at a UK authorised retail banking institution may be the proceeds of a crime. Where there is criminal property, there is a high risk of money laundering, the activity through which the illegal origins of criminal proceeds are concealed or disguised, and an offence under the Proceeds of Crime Act 2002. II. The Money Laundering Regulations 2007 – which apply to any regulated financial or credit institution - place a general obligation on firms within its scope to establish adequate and appropriate policies and procedures to prevent money laundering. III. In this paper, I will scrutinize the obligations to report knowledge or suspicions of possible money laundering activities to financial intelligence authorities, as well as the various issues arising from the available disclosure mechanisms, by closely referring to the Proceeds of Crime Act 2002, the Money Laundering Regulations 2007, the Joint Money Laundering Steering Group Guidance Notes and other relevant industry guidelines from the Financial Action Task Force, HM Revenue and Customs and the National Crime Agency.
MONEY LAUNDERING OFFENCES
A. The substantive money laundering offences I. The basic laundering offence: to conceal, disguise, convert or transfer the proceeds of crime or to remove the proceeds of crime from the jurisdiction. II. The aiding and abetting offence: to enter into, or become concerned in an arrangement, in which a person knows or suspects the acquisition, retention, use or control of the proceeds of crime. III. The handling stolen goods offence: to acquire, use or possess the proceeds of crime. B. Secondary substantive offences I. The failure to disclose offence: where a person working in a business in the regulated sector knows or suspects, or has reasonable grounds for knowing or suspecting, that another person is engaged in an offence under sections 327 to 329 of the Proceeds of Crime Act 2002 but fails to disclose that knowledge or suspicion to a relevant officer. II. The tipping off offence: where a person working in a business in the regulated sector knows or suspects that another person’s suspected involvement with money laundering is under investigation or in contemplation of investigation, and regardless makes a disclosure to any person likely to prejudice any investigation. III. The prejudicing an investigation offence: where a person knows or suspects that a money laundering investigation has or is about to be commenced in respect of another makes a material disclosure to any other person which is likely to prejudice any such investigation, or interferes with relevant material.
I. Before a suspicious activity report (hereinafter designated as “SAR”) is filed with the National Crime Agency (“NCA”), it is the responsibility of the bank’s Money Laundering Reporting Officer (“MLRO”), upon receiving an internal suspicion report, to evaluate the reasonability of the employee’s suspicions that monies cleared into a client’s deposit account may be the proceeds of a criminal activity. II. Following the disclosure of information to law enforcement, action must be taken to avoid the release of information relating to the SAR or the processing of a transaction from the client in question without the NCA’s approval, as it may have the undesired effect of alerting the client and affecting an ongoing investigation.
A. Internal reporting I. The very first step should be fulfilling the statutory obligation, placed on all employees of a regulated firm, to report “as soon as is reasonably practicable” to their MLRO (or the nominated officer’s appointed alternative) where they have grounds for suspicion that a client is engaged in, or attempting, money laundering. II. The report should include full details of the customer who is the subject of concern and as full a statement as possible of the information giving rise to the suspicion. III. Until the MLRO advises the member of staff making an internal report that no report to the NCA is to be made, further deposits received or payment transactions made by that client, whether of the same nature or different from that giving rise to the original suspicion, should be reported to him as they arise. The client’s higher risk profile will now require enhanced due diligence measures, namely the ongoing scrutinizing of transactions looking for unusual activity. IV. All suspicions reported to the MLRO should be documented or recorded electronically in the firm’s files. V. Where an employee fails to comply with the obligation under the Proceeds of Crime Act 2002 to make disclosures to the MLRO as soon as practicable after the information giving rise to the knowledge or suspicion comes to him, the firm is open to criminal prosecution or regulatory censure. Furthermore, a criminal sanction can be brought against the employee for a prison term of up to five years and/or a fine. B. External reporting I. The MLRO must carefully examine the internal report and determine whether it truly gives grounds for knowledge or suspicion. II. If so, he must report to the NCA’s UK Financial Intelligence Authority (the national reception point for disclosure of suspicions within the NCA) the transaction that, after his evaluation, he knows or suspects, or has reasonable grounds to know or suspect, may be linked to money laundering or attempted money laundering. The SAR must be made as soon as is reasonably practicable after the information has reached him if he has grounds for suspicion that a client is engaged in money laundering, at the nominated officer’s own risk of committing an offence for “failure to disclose”. III. The firm should include in the SAR as much relevant information about the client and the transaction that it has in its records. This is of most importance, as reports of poor quality are often thought to hamper regulatory enforcement action. IV. As there is statutory protection for notifications and reports made in good faith, there will be no liability for loss for the institution. Hence, any and all suspicions should be clearly documented, in order to refute any future assertions that they were made in bad faith. C. After the disclosure The firm should stay alert for currency flow in or out of the account in respect of which the disclosure to the NCA has been made, submitting further disclosures or consent applications if the suspicion remains.
 Proceeds of Crime Act 2002, s327
 As defined by the 2006/48/EC Banking Consolidation Directive of 14 June 2006
 Money Laundering Regulations 2007, Regulation 20(1)
 Proceeds of Crime Act 2002, s327
 Idem, s328
 Idem, s329
 Proceeds of Crime Act 2002, s330
 Idem, s333A
 Idem, s342
 Idem, s330(5); Money Laundering Regulations 2007, Regulation 20(2)(D)(ii)
 The Joint Money Laundering Steering Group, “Prevention of money laundering and combating terrorist financing - Guidance for the UK financial sector”, s6.22, 2014
 Idem, s6.24
 Idem, s6.22
 Proceeds of Crime Act 2002, s334
 Idem s330; Money Laundering Regulations 2007, Regulation 20(2)(d)
 Money Laundering Regulations 2007, Regulation 20(2)(d); Proceeds of Crime Act 2002 s331
 Proceeds of Crime Act 2002, s331
 Idem, s330
 FATF Report, “Money Laundering and Terrorist Financing in the Securities Sector”, p.56, October 2009
 Financial Services and Markets Act 2000 s131A
 Shah v HSBC Private Bank UK Limited  EWHC 1283
 The Joint Money Laundering Steering Group, “Prevention of money laundering and combating terrorist financing - Guidance for the UK financial sector”, s6.72, 2014