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Housing Internal Audit Forum Anti-Money Laundering Update

Presentation ———— 22 September 2017

Introduction – money laundering in the housing sector

Introduction – the Panama Papers

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Introduction – Money Laundering Regulations 2017

An overview of the UK Anti-Money Laundering and Counter-Terrorist Finance regimes

●  Money laundering offences

●  Terrorist financing offences

●  Reporting and tipping-off offences

●  Customer due diligence

●  Recognising, reporting and obtaining consent

●  Money Laundering Regulations 2017

•  Key changes

•  Common issues

●  Real life examples from the housing sector

Money laundering offences Proceeds of Crime Act 2002 offences concerning “criminal

property”:

●  Section 327: concealing, disguising, converting, transferring

criminal property

●  Section 328: entering into or becoming concerned in an

arrangement which facilitates another’s retention, use or

control of criminal property

●  Section 329: acquiring, using or possessing criminal property

“Knowledge or suspicion” is a pre-requisite to committing an

offence.

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Terrorist financing offences Terrorism Act 2000 offences, including: ●  Section 15: providing funds with reasonable cause to suspect

that they will be used for terrorism ●  Section 17: entering into or becoming concerned in an

arrangement as a result of which money or other property is made available with reasonable cause to suspect that it is or may be used for terrorism

●  Section 18: entering into or becoming concerned in an arrangement which facilitates another’s retention or control of terrorist property

Based on “reasonable cause” to suspect – so actual knowledge or suspicion not necessary.

Reporting offences

Under both POCA and TA it is a crime to fail to make a report: ●  POCA sections 330 – 332:

•  Regulated sector obligations – for registered providers, lending and estate agency work key areas

•  Voluntarily created obligations – also often the case in the housing sector

●  TA, section 19: •  Obligations on all persons in in employment, profession,

trade or business as well as those in the regulated sector •  Suspicion or belief that another has committed a terrorist

finance offence ●  Detailed rules set out in the Money Laundering Regulations

2007

Tipping off offences

Under both POCA and TA, it is a crime to “tip off” targets of suspicions:

●  POCA: •  Section 333A: regulated sector •  Section 342: non-regulated sector

●  Terrorism Act 2000, section 21D

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Customer due diligence

●  On clients

●  Individuals

●  Companies: controllers (directors etc.) as well as beneficial

owners (shareholders etc.)

●  Trustees and others involved in trusts

●  Enhanced due diligence in higher risk situations

●  Simplified due diligence in lower risk situations

Recognition, reporting and consent

Under both POCA and TA, it is both necessary and possible to obtain consent to act when to do so would otherwise be a crime: ●  POCA:

•  Get consent from the National Crime Agency •  Must do so before acting •  NCA can refuse permission •  Deemed consent provisions after period of time

●  Terrorism Act 2000, section 19: •  As POCA but no deemed consent provisions

EU 4th Money Laundering Directive

●  EU 4th Money Laundering Directive came into force on

26 June 2015

●  Persons of Significant Control Register – implemented in 2016

●  Otherwise implemented in the UK on 26 June 2017 via the Money Laundering Regulations 2017

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Money Laundering Regulations 2017 – key changes

Greater emphasis on AML policies, procedures, controls, monitoring and auditing and on a risk-based approach. Key changes:

●  Organization-wide risk assessments

●  Risk assessment for each new customer / transaction

●  More onerous CDD and no automatic simplified CDD

●  Domestic Politically Exposed Persons (PEPs)

●  Compliance officer

●  Screening of employees

●  Independent audit function

●  Training

Money Laundering Regulations 2017 – common issues

●  What parts of the business are caught?

•  Estate agency work

•  “Lending”, e.g. equity loans

•  Voluntary extension to other activities?

●  Cash

●  Source of funds and reliance on solicitors

●  Who should/can be the compliance officer?

●  Impact of domestic PEPs on risk assessments

●  Trusts

Practical example: 1

●  Acting for a housing association

●  Selling a residential home to an individual purchaser

●  Purchaser has appointed reputable solicitors

●  However, purchaser sends completion monies to the

housing association directly, not via his solicitors

●  What about reservation deposits?

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Contact

© Trowers & Hamlins LLP 2014 Trowers & Hamlins LLP is a limited liability partnership registered in England and Wales with registered number OC 337852 whose registered office is at 3 Bunhill Row, London EC1Y 8YZ. Trowers & Hamlins LLP is authorised and regulated by the Solicitors Regulation Authority. The word “partner” is used to refer to a member of Trowers & Hamlins LLP or an employee or consultant with equivalent standing and qualifications or an individual with equivalent status in one of Trowers & Hamlins LLP’s affiliated undertakings. A list of the members of Trowers & Hamlins LLP together with those non-members who are designated as partners is open to inspection at the registered office. Trowers & Hamlins LLP has taken all reasonable precautions to ensure that information contained in this document is accurate, but stresses that the content is not intended to be legally comprehensive. Trowers & Hamlins LLP recommends that no action be taken on matters covered in this document without taking full legal advice. (c) Copyright Trowers & Hamlins – October 2014 – All Rights Reserved. This document remains the property of Trowers & Hamlins LLP. No part of this document may be reproduced in any format without the express written consent of Trowers & Hamlins LLP.

Ned Beale Partner, Litigation & Dispute Resolution d +44 20 7423 8357 e nbeale@trowers.com