Financial Crime Prevention Flashcards

What is the primary UK legislation for preventing money laundering?

Answer: Proceeds of Crime Act 2002 and Money Laundering Regulations 2017

The Proceeds of Crime Act 2002 (POCA) creates the principal money laundering offences, while the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017) set out the regulatory framework for prevention.

What are the three stages of money laundering?

Answer: Placement, layering, integration

The three stages of money laundering are: placement (introducing criminal proceeds into the financial system), layering (moving money through complex transactions to disguise its origin), and integration (making the money appear legitimate).

What is Customer Due Diligence (CDD)?

Answer: The process of identifying and verifying customers' identities and understanding the nature of their business

CDD involves identifying the customer, verifying their identity using reliable and independent sources, and understanding the nature and purpose of the business relationship. It is a fundamental AML requirement.

When is Enhanced Due Diligence (EDD) required?

Answer: When there is a higher risk of money laundering, such as with politically exposed persons or complex transactions

EDD is required in situations presenting a higher risk of money laundering or terrorist financing, including dealing with PEPs, correspondent banking relationships, complex or unusual transactions, and customers from high-risk jurisdictions.

What is a Suspicious Activity Report (SAR)?

Answer: A report made to the National Crime Agency when there is knowledge or suspicion of money laundering

A SAR must be submitted to the UK Financial Intelligence Unit at the National Crime Agency (NCA) when a person knows or suspects, or has reasonable grounds to suspect, that money laundering or terrorist financing is taking place.

What is 'tipping off' in the context of anti-money laundering?

Answer: Informing a person that a SAR has been made or that an investigation is being carried out, which is a criminal offence

Tipping off is a criminal offence under POCA that occurs when a person discloses that a SAR has been made or that a money laundering investigation is being or may be conducted, if that disclosure is likely to prejudice the investigation.