MONEY LAUNDERING QUIZ QUESTIONS - FOR BUSINESS LAWYERS

Name: Adam McKenna

Team: Company Commercial (Exeter) Date: 30 September 2010

NB Add notes to qualify or explain your answers, when appropriate.

True or False?

1. If you take on a client without doing proper “customer due diligence” under the money
laundering laws, you personally can be prosecuted.
True

2. You can only be guilty of the money laundering offence of possessing criminal property
if this occurs when you are doing regulated work.
False

3. If you suspect someone of money laundering, you should get in touch with the Serious
Organised Crime Agency, to make a report.
False

4. In general, your obligation to report money laundering does not apply when doing
litigation work.
True

5. Clients are entitled to expect lawyers to keep their affairs confidential. Therefore you
should only tell your firm's Money Laundering Reporting Officer about money
laundering matters in the most serious cases.
False

6. You must report suspicions of terrorist financing even if the funds involved are not
“criminal property” and even if you are doing unregulated work.
True

7. After you have made a money laundering report, you should keep it confidential. You
must not tip off someone that they are under suspicion.
True

Notes

Add notes as appropriate

3. You should inform the Money Laundering Reporting Officer who may in turn
decide to notify SOCA.

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Customer Due Diligence (“CDD”)

Assume in all these cases that you are instructed to do regulated work.

8. Is it acceptable to do any work for a client before you have completed CDD?

A No.

B Yes sometimes, if it is necessary and low risk.

C Yes, so long as CDD is carried out before you receive any funds.

D Yes, so long as CDD is carried out before completion.

9. Tick all which are acceptable as evidence of your client’s name.

A Her passport, issued by the United States of America.

B Her UK photocard driving licence.

C A recent utility bill.

D A cheque, drawn on an account in her name.

10. Tick any of the following you should do upon receipt of CDD documents.

A Check any photos against your client’s appearance.

B Take a photocopy.

C Ask your client to sign the copy to confirm its authenticity.

D Keep the copy in your firm’s records.

11. You are instructed by a firm of estate agents. The firm is established as an LLP,
with three members (partners). What CDD evidence should you seek?

A None. Since estate agents are themselves regulated by the Money Laundering
Regulations “simplified due diligence” applies.

B Your client is registered as an LLP, so you can get all the CDD information you
need from Companies House.

C All three members will probably be beneficial owners. You should make a risk-
sensitive judgement about how much evidence you need to verify their identity.

D You can rely on the firm’s website to give you all the CDD information you need.

12. You are instructed by Company A, which is a wholly-owned subsidiary of Company

B, whose shares are held equally by five brothers. Who counts as a beneficial
owner for CDD purposes? Tick all that apply.

A The directors of Company A.

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B The directors of Company B.

C Company B itself.

D The shareholders in Company B.

13. A new client telephones you and instructs you to help resolve a tax matter. He is
unable to attend your office for CDD purposes. Tick all of the following statements
which are true.

A Because your client does not attend for the purposes of CDD you must take
measures to compensate for the increased risk.

B You cannot act for a client who is not willing to attend for CDD purposes.

C If you receive original correspondence between the client and HM Revenue and
Customs, this may tend to confirm the client’s identity.

D It is a trick question. There is no need to do CDD if one is giving tax advice.

Cause for Suspicion?

Consider the following scenarios, and identify which of these responses is most
appropriate.

A There is no reason to consider making a report.

B You should seek more information, and depending on the response may make a
money laundering report.

C It appears appropriate to make a money laundering report forthwith.

Add a note to explain your reasons if there is room for doubt. You are doing regulated work
in all cases.

14. A client has suggested paying the firm £50,000 in cash towards a property
transaction.
A B C
Dealing with cash – report to MLRO.

15. A client has paid £1,000 in cash directly into the firm’s office account, in settlement
of a bill.
A B C
Dealing with cash – report to MLRO.

16. The firm has received £1m on behalf of a client, through his sale of a share
in a business. He asks for the money to be paid to a bank account in Liechtenstein.
A B C
Find out more details of bank account – if it is in his name and reputable bank, may be
fine, if in someone else’s name, may need to make a report.

17. You are acting for a client who is bringing a claim for unfair dismissal. The
employer alleges that your client had stolen several thousand pounds during his
employment.
A B C

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 If client has stolen money then could be dealing with criminal property. Normally
employment work comes under unregulated though.

18. A client is known to have sympathy for radical causes. He asks the firm to
assist in transferring some funds to a charity abroad.
A B C
No commercial explanation for this – why does he need help from solicitors to do this?
Enquire and find out more information.

19. It becomes apparent that a client is claiming state benefits to which he is not
entitled.
A B C
Client is dealing with criminal property.

20. A client asks for large sums to be transferred to various bank accounts in a
country known to have a problem with corruption.
A B C
Seek more information about the bank accounts to be transferred to.

21. You discover that your client is the brother of a government minister in a
South American country.
A B C
Client’s brother is a politically exposed person and is a target for corruption and bribery.

Making a Report

22. Your client tells you that some assets he plans to use in a transaction were
stolen by him from a relative. You conclude that this information is privileged. What
is your position?

A If privilege applies it resolves your problem and you may proceed with the
transaction.

B You can proceed with the transaction so long as you obtain consent from SOCA.

C Even if you obtain consent to proceed from SOCA, you would still be exposed to
a claim by the true owner of the stolen assets.

D It is a trick question. Privilege cannot apply.

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Additional questions for business lawyers

1. Of these seven businesses, identify the three which appear to be highest risk for
money laundering. Give a short reason for your answer in each case.

A A biotech company listed on the Alternative Investment Market.

     

B A fast-food retailer.
Deals with cash and gives criminals the opportunity to launder cash and evade tax.

C A firm of accountants.
     

D The Chairman of the Central Bank of Ruritania (instructing you in his personal
capacity).
International element.

E An investment fund management company.

     

F An Australian entrepreneur, who is too busy to come to the UK but sends you
instructions by email and phone.
International element and anonymity.

G A manufacturing business which was established in 1925.

     

2. You are instructed in a transaction by a Nigerian businessman. What particular

checks will you carry out on your client before you accept him as a client?
Enhanced due diligence – find out the possibility of meeting for CDD. Also find out the
source of funds, and whether Nigeria is a poorly regulated jurisdiction. Is the client a
politically exposed person? – check with a Google search.

3. Your client has deposited funds in your client account towards a planned
transaction. When that transaction is abandons he gives you various instructions to
pay sums of money on his behalf to recipients in the UK and abroad. What is your
position?

A Since you received this money towards a legitimate transaction, there is no

problem.

B You should carry out fresh identification checks on your client.

C You should decline to make the payments to third parties unless there is a legal
transaction involved, and consider making a money laundering report.

D You should never had accepted the funds from your client in the first place.

4. Your client is a company incorporated abroad, using a bearer share structure. How
will you carry out due diligence on the beneficial owners?
Insist that a reputable bank or a suitable custodian confirms in writing: that they are
holding the share certificates; who they are holding the share certificates for; and
whether there is any change in ownership or control.

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 5. Which of the following come within the definition of “beneficial owner” of a UK
company for which you act? Tick all which apply.

A The directors of the company.

B The directors of its listed German parent company.

C The numerous shareholders of its listed German parent company.

D The holders of loan notes issued by the company.

6. You act for a business, upon which you have carried out suitable customer due
diligence. It is receiving a loan of £100,000 from a private individual, who sends you
a cheque for that amount, towards a property acquisition. What is your position?

A You may accept and bank this cheque without any formalities.

B You must carry out customer due diligence on the drawer of the cheque.

C You only need to carry out customer due diligence on the drawer of the cheque if
he is contributing more than 25% of the capital of the company.

D You should make a money laundering report.

7. You have acted for a company for five years, in a number of transactions. You
receive instructions to act in a new transaction from a newly appointed finance
director. What customer due diligence is now appropriate under the Money
Laundering Regulations?

A You should update your due diligence, to identify who are now the beneficial
owners of your client.

B So long as you have due diligence documents on file for this client, there is no
problem.

C Since this is an existing client, there is no due diligence required.

D You should simply carry out due diligence on the newly appointed finance
director.

8. Your corporate client has made money from paying what appear to have been
bribes in another country. You receive a legal opinion that these payments did not
amount to a criminal offence in the country in which they were paid. What is the
position?

A Since the relevant conduct was not a criminal offence, there is no need to make
a money laundering report.

B Since the conduct would have been an offence in the UK, you should report the
matter to your MLRO.
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C Since the client paid, rather than received the bribe, there is no problem with
money laundering law.

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