Anti-money laundering
Chapter 9 – enforcement
9.1General comments
The UK AML/CTF regime is one of the most robust in Europe. Breaches of obligations under the regime are backed by disciplinary and criminal penalties.
Law enforcement agencies and regulators are working co-operatively with the regulated sector specifically and solicitors generally to assist compliance and increase understanding of how to effectively mitigate risks. However, be in no doubt of the seriousness of the sanctions for a failure to comply, nor the willingness of supervisory and enforcement bodies to take appropriate action against non-compliance.
9.2Supervision under the regulations
Regulation 23 provides for several bodies to be supervisory authorities for different parts of the regulated sector.
Where a person in the regulated sector is covered by more than one supervisory authority, either the joint supervisory authorities must negotiate who is to be the sole supervisor of the person, or they must co-operate in the performance of their supervisory duties.
A supervisory authority must:
- monitor effectively the persons it is responsible for
- take necessary measures to ensure their compliance with the requirements of the regulations
- report to SOCA any suspicion that a person it is responsible for has engaged in money laundering or terrorist financing
9.2.1 Solicitors Regulation Authority
The supervisory authority listed in the regulations for solicitors in England and Wales is the Law Society of England and Wales. This responsibility has been delegated in practice to the Solicitors Regulation Authority (SRA).
9.2.2 Other supervisors
Other supervisory authorities which may be of relevance to some solicitors include:
- The Financial Services Authority – www.fsa.org.uk
- The Insolvency Practitioners Association – www.insolvency-practitioners.org.uk
- The Council of Licensed Conveyancers – www.theclc.gov.uk
- The Chartered Institute of Taxation – www.tax.org.uk
Where the SRA reaches agreement with another supervisor about who is to be the supervisory authority for the solicitor, this agreement will be made known to the solicitor in accordance with Regulation 23(3).
In all other cases of supervisory overlap, and where you have questions about AML supervision, contact the SRA.
The SRA will be publishing information for trust and company service providers who are regulated by the SRA and are authorised persons. Details will appear on the SRA's website at www.sra.org.uk, and the Law Society's website at www.lawsociety.org.uk/moneylaundering.
The Joint Money Laundering Steering Group (JMLSG) provides guidance to the financial sector which the FSA considers when assessing compliance with AML/CTF obligations.
9.2.3 Enforcement powers under the regulations
Part 5 of the regulations gives designated authorities a variety of powers for performing their functions under the regulations. They can also impose civil penalties for non-compliance.
The powers are:
- Regulation 37: power to require information from, and attendance of, relevant and connected persons without a warrant
- Regulation 38: power to enter and inspect without a warrant
- Regulation 39: power to obtain a warrant to do things under regulations 37 and 38
- Regulation 40: power to obtain a court order requiring compliance with regulation 37
HM Treasury has stated that designated authorities may use these powers in their role as supervisor, and only on those relevant persons they supervise.
9.3Disciplinary action
Conduct which fails to comply with AML/CTF obligations may also be a breach of Rule 5 of the Solicitors' Code of Conduct 2007, and result in disciplinary action by the SRA.
For further information on the Solicitors' Code of Conduct go to www.sra.org.uk or contact the professional ethics helpline on 0870 606 2577 (inside the UK), 1100 to 1300 and 1400 to 1600, Monday to Friday.
9.4Offences and penalties
Not complying with AML/CTF obligations puts you at risk of committing criminal offences. Below is a summary of the offences and the relevant penalties. In addition to the principal offences, you could also be charged with offences of conspiracy, attempt, counselling, aiding, abetting or procuring a principal offence, depending on the circumstances.
9.4.1 POCA
|
Section |
Description |
Penalty |
|
327 |
Conceals, disguises, converts, transfers or removes criminal property |
On summary conviction – up to six months imprisonment or a fine or both On indictment – up to 14 years imprisonment or a fine or both |
|
328 |
Arrangements regarding criminal property |
|
|
329 |
Acquires, uses or has possession of criminal property |
|
|
330 |
Failure to disclose knowledge, suspicion or reasonable grounds for suspicion of money laundering – regulated sector |
On summary conviction – up to six months imprisonment or a fine or both On indictment – up to five years imprisonment or a fine or both |
|
331 |
Failure to disclose knowledge, suspicion or reasonable grounds for suspicion of money laundering – nominated officer in the regulated sector |
|
|
332 |
Failure to disclose knowledge or suspicion of money laundering – nominated officer in non-regulated sector |
|
|
333 |
Tipping off – before 26 December 2007 |
On summary conviction – up to six months imprisonment or a fine or both |
|
333A |
Tipping off – regulated sector |
On summary conviction - up to three months imprisonment or a fine not exceeding level 5 or both. On conviction on indictment- up to two years imprisonment or a fine or both. |
|
342 |
Prejudicing an investigation |
On indictment – up to five years imprisonment or a fine or both |
9.4.2 Terrorism Act
|
Section |
Description |
Penalty |
|
15 |
Fundraising |
On summary conviction – up to six months imprisonment or a fine or both On indictment – up to 14 years imprisonment or a fine or both |
|
16 |
Use and possession |
|
|
17 |
Funding arrangements |
|
|
18 |
Money laundering |
|
|
19 |
Failure to disclose |
|
|
21A |
Failure to disclose – regulated sector |
|
|
21 |
Tipping off – regulated sector |
On summary conviction- up to three months imprisonment or a fine not exceeding level 5 on the standard scale, or both On conviction on indictment- up to two years imprisonment, or a fine or both |
9.4.3 Regulations
Regulation 45 lists a number of sections, the breach of which is an offence.
|
Section |
Description |
Penalty |
|
7 (1) |
Applying CDD to new customers |
On summary conviction – a fine On indictment – up to two years imprisonment or a fine or both |
|
7 (2) |
Applying CDD to existing customers |
|
|
7 (3) |
Determining extent of CDD on a risk-sensitive basis and being able to demonstrate this to the SRA |
|
|
8 (1) |
Conducting ongoing monitoring |
|
|
8 (3) |
Determining extent of ongoing monitoring on a risk-sensitive basis and being able to demonstrate this to the SRA |
|
|
9 (2) |
Verification prior to the establishment of a business relationship or carrying out of an occasional transaction |
|
|
11 (1)(a) |
Not use a bank account without CDD |
|
|
11 (1)(b) |
Not establish a business relationship or carry out an occasional transaction if no CDD |
|
|
11 (1)(c) |
Terminate existing relationship or occasional transaction if no CDD |
|
|
14 (1) |
Conduct enhanced due diligence |
|
|
15 (1) |
Relates to financial and credit institutions
|
|
|
15 (2) |
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16 (1) |
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16 (2) |
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16 (3) |
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16 (4) |
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19 (1) |
Keep your own records |
|
|
19 (4) |
Keep records others have relied on |
|
|
19 (5) |
Be prepared to provide records others have relied on |
|
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19 (6) |
Ensure those you rely on are willing to provide records |
|
|
20 (1) |
Establish policies and procedures |
|
|
21 |
Train relevant employees |
|
|
26 |
Does not relate to solicitors |
|
|
27 (4) |
||
|
33 |
||
|
Directions under 18 |
Not to act where Treasury makes a direction |
9.5Joint liability
Regulation 47 provides that offences under the regulations can be committed by a firm as a whole, whether it is a body corporate, partnership or unincorporated association.
However, if it can be shown that the offence was committed with the consent, contrivance or neglect of an officer, partner or member, then both the firm and the individual can be liable.
9.5Prosecution authorities
The Crown Prosecution Service is a prosecuting authority for offences under POCA, the Terrorism Act and the regulations.
The Revenue and Customs Prosecutions Office is a prosecuting authority for offences under POCA and the regulations.
The FSA is a prosecuting authority under POCA and the regulations as a result of section 402 of the Financial Services and Markets Act 2000.
The Office of Fair Trading, the Local Weights and Measures Authority and the Department of Enterprise, Trade and Investment in Northern Ireland are all prosecuting authorities for breaches of the regulations.