Criminal Law 1 Assignment: Money Laundering and Sanctions Review

This criminal law assignment delves into the intricacies of money laundering, risk assessment, and the implications of sanctions within a financial context. The assignment begins by defining and explaining the risk-based approach, its measures, and its significance in mitigating money laundering a...Read More

Running head: CRIMINAL LAW
Criminal Law
Name of the Student
Name of the University
Author Note

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Question A
i. Risk based Approach is a technique to ensure the adoption of actions for the purpose of
restricting or mitigating the money laundering as well as terrorist financing in proportion to
the risks acknowledged. A National Risk Assessment, covering the extent of associated risks
in relation to various sectors, which includes Company Service Providers or Trust, Private
Members’ Clubs as well as High Value Goods Dealers, has been published by the
Department of Justice & Equality and the Department of Finance. For the purpose of
adopting the risk based approach three measures needs to be taken. Firstly, the presence of a
risk needs to be identified. Secondly, an attempt of risk assessment needs to be undertaken.
Thirdly, strategies needs to be formulated with a view mitigate as well as regulate the
recognised risks. An appropriate risk based approach would enable a business or entity to
ensure sensible business judgement in relation to the clients associated with them. The
promoters of the risk based principle relating Anti-Money Laundering (AML) were the
regulatory authorities of Britain. This concept has been first brought forward by the Financial
Services Authority (FSA) in the year 2000 in their book namely, A New Regulator for the
New Millennium. However, subsequent to that the risk based approach has been promoted
through international organisations. In the year 2012, the FATF published an updated
recommendations namely, International Standards on Combating Money Laundering and the
Financing of Terrorism and Proliferation. The central focus for the appropriate application of
the FATF Recommendations that has been adopted in the year 2012 is the risk based
approach. The risk based approach would enable the allocation of the resources in a more
efficient way1. It has brought about a revolution in the principle concerning money
laundering. The risk based approach is based on a principle, which requires the resources to
1 Vidal, Bernardo Manuel Sebastião Alves de. Compliance with the FATF Recommendations and how it effects
suspicious activity reports. Diss. 2018.

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be directed in a way that prioritise the greatest risk associated to be extended with the greatest
attention. The main agenda behind the risk analysis is to detect the area where the money
laundering as well as the terrorist financing is found to the highest. The risk based approach
relating to the Anti-Money Laundering requires a proactive cooperation of the banks as well
as the financial institutions in identifying or finding the outlets for the purpose of restricting
the activities relating to money laundering2.
ii. Risk profiling depicts a procedure to that is utilised by the professionals for the purpose of
determining the minimum level of risks that has been involved in the investment for the
clients. The objectives of the risk profile are the identification of the extent of return
pertaining to the client for the purpose of identifying the risk. This in turn would enable the
clients to meet their objectives in relation to the investment, assess their risk capacity as well
as assess the risk tolerance. The information relating to the Customer Due Diligence (CDD)
consists of the facts regarding the customer with the help of which the organisation would be
able to determine the level to which the customer is likely to bare the organisation to risk.
These risks may cover terrorist financing as well as money laundering. The CDD can be
initiated by authenticating the identity of each of the clients and determination of any risk
associated with them3. The Anti-Money Laundering regulatory programme comprises of the
assessment of the customer risk and it is the most essential component of the Anti-Money
Laundering regulatory programme. An organisation needs to implement a risk profiling
procedure for the purpose of determining the optimum level risks associated with certain
clients. For the purpose of determining the optimum level, the assessment of the higher level
risk as well as the medium level of risks would also be required to be assessed. The customer
due diligence consists of various mechanisms, which includes identifying as well as verifying
2 Bello, Abdullahi Usman, and Jackie Harvey. "From a risk-based to an uncertainty-based approach to anti-
money laundering compliance." Security Journal 30.1 (2017): 24-38.
3 Naheem, Mohammed Ahmad. "Money laundering using investment companies." Journal of Money Laundering
Control 18.4 (2015): 438-446.

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the identity of the customers as well as the beneficial owners. These identification as well as
verification needs to be carried out to obtain information with respect to the purpose and the
kind of business relationship involved. The mechanism also includes the conducting of the
due diligence which has been going out. The identity in relation to the customer needs to be
identified as well as verified irrespective of the risk-based approach. However, any other
customer due diligence mechanism needs to be accompanied by the requirements of the risk-
based approach. These mechanisms are required to be carried out in accordance with the
minimum standards of the risk-based approach4.
Question B
In the present situation, the firm has been subjected to a fine by the regulator for the breach of
the UK sanctions regime. The firm belonged to the regulated sector. There has arisen a need
for the review of the internal policies of the firm and procedures the internal policies. The
regulators report has been required to be reviewed relating to the fine. The task that has been
assigned is the preparation of a report that needs to be designed for being considered by the
Senior Management as well as the Group Risk Committee. A suggestion to the firm in
relation to the improvement of the overall sanctions policy and procedures framework for the
purpose of betterment of the systems and controls in order to respond to the criticisms of the
regulator. For the purpose of achieving the same, the areas highlighted in the report of the
regulator needs to be analysed and a recommendation with respect to the same needs to be
provided:
4 Ullrich, Carsten. "A risk-based approach towards infringement prevention on the internet: adopting the anti-
money laundering framework to online platforms." International Journal of Law and Information Technology
26.3 (2018): 226-251.

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 High Volumes of Payment and Customer Alerts Outstanding:
The payments that are visible in the records of the firm have been in huge volume. However,
all such payments have been made without and check on the outstanding in relation to the
receipts. This requires a more systematic sanction of payments being made. The customer
alert outstanding and the payments need to be balanced. The organisation should focus more
on the customer alerts outstanding and is it right to recover the same before giving sanction
for payments. A minimum amount of customer alerts outstanding need to be fixed at which
the payment is required to be allowed. This is because the outflow of resources from the
organisation needs to balance with the inflow. Moreover, the payments need to be assessed
and its destination is to be determined and verified before sanctioning the same5.
 Payments made without any checks on the Ultimate Destination of Funds:
There needs to be several checkpoints in an organisation prior to a payment is made. In this
regulation of payments, the most important aspect that needs to be considered is the final
destination of the funds that are being paid. All the payments that an organisation makes need
to be regulated and verified in a proper manner. They need to be various checking criteria and
all these needs to be applied for the purpose of deciphering the objectives of such payments.
The payments being made need to be run through checks to determine whether it has been
supported with a proper allocation6.
 Inadequacies in Regular Screening:
This screening software used in the organisation was not maintained properly. This has made
the screening of the customer profile to be faulty. Hence, the payment that has been made
was not a regulated one. The identification of the risks related to the clients has not been
5 Savona, Ernesto Ugo, and Michele Riccardi. "Assessing the risk of money laundering: research challenges and
implications for practitioners." European Journal on Criminal Policy and Research 25.1 (2019): 1-4.
6 Xue, Yao-Wen, and Yan-Hua Zhang. "Research on money laundering risk assessment of customers–based on
the empirical research of China." Journal of Money Laundering Control 19.3 (2016): 249-263.

5CRIMINAL LAW
properly verified. No proper screening of the client has been carried out owing to the fault in
the screening system. This has made the organisation more prone to risks. This is because the
resources has not been allocated properly and there has been no proper screening of the
payments that has been made to the customers. The customers due diligence for the purpose
of risk profiling has not been properly carried out before finding the potential clients7.
 Staffs were Unqualified and Poorly Trained:
The organisation has failed to recruit staff who were qualified and properly trained. This
makes the company more prone to being exposed to risks. This is because inexperienced and
unskilled staff are not capable enough to carry out the screening process and implement a risk
based approach for the purpose of keeping the organisation out of the danger of being
exposed to risks. This requires the organisation to arrange for proper training programs to
enhance the skills of the staffs. The unskilled staffs needs to be terminated and it should be
filled with more qualified and skilled staffs8.
 Lack of Support from the Board of Directors
The board of directors has been aloof from the regular affairs of the organisation. This has
made the employees to be more arbitrary in their activities. There was an anomaly in the
affairs of the business. This requires a strict attention of the senior management. The board of
directors needs to ensure greater involvement in the regular affairs of the organisation. All the
decisions in the organisation need to be carried out by the actors participation of the board of
directors in the decision making9.
7 King, C., 2018. Anti-Money Laundering: An Overview. In The Palgrave Handbook of Criminal and Terrorism
Financing Law (pp. 15-31). Palgrave Macmillan, Cham.
8 Gelb, Alan. "Balancing Financial Integrity with Financial Inclusion: The Risk-Based Approach to «Know
Your Customer»." CGD Policy Paper 74 (2016): 1-24.
9 Merrell, Daniel James, and Susan Beth Van Horn. "Methods of and systems for money laundering risk
assessment." U.S. Patent No. 7,805,362. 28 Sep. 2010.

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Question C
i. Issue
Whether any potential criminal offences relating to money laundering legislation have been
committed, if it transpires that the £4 million is the proceeds of crime.
Rule
U/s 330 of the Proceeds of Crime Act 200210, any person who has the knowledge or even the
suspicion open another individuals regarding their involvement in the offence of money
laundering essay to have committed the offence of money laundering. Again, the person
suspecting for having knowledge needs to have reasonable grounds supporting such a
knowledge or suspicion. Again for the purpose of holding such a person liable the suspicion
or knowledge and the grounds based on which such as knowledge what suspicion has been
formed need to be available to that person in the course of his business in regulated sector.
Any person who is having such knowledge or suspicion is required to disclose the same to the
proper authority11.
Application
In the present situation, Rachel, an account manager at HJ Bank receives a request from
Daniel, a high-value, established client at the bank, to move £4 million from one of his
accounts to an overseas account in Dubai in the name of OneCorp. The value of the transfer
is slightly above the normal level of activity for the account and there does not appear to be
any obvious rationale for the transfer. This was an obvious ground for Rachel to form a
suspicion or knowledge of any offence of money laundering.
10 The Proceeds of Crime Act 2002
11 Herlin-Karnell, Ester, and Nicholas Ryder. "The robustness of EU financial crimes legislation: A critical
review of the EU and UK anti-fraud and money laundering scheme." European Business Law Review 28.4
(2017): 427-446.

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Rachel has been concerned about some of Daniel’s activities for some time, particularly
around source of funds on certain transactions but to date has failed to submit an internal
suspicious activity report (SAR). This can be treated as a failure on the part of Rachel to
commit an offence of failure to disclose money laundering.
Rachel contacts Daniel to obtain further information about the transfer but is told that he is
away on holiday and cannot be contacted. Anxious not to lose the account, Rachel discusses
the issues with her line manager, who refers the matter to senior management. Permission is
given to make the transfer which Rachel completes. No external SAR is submitted to Law
Enforcement. This can be treated as an offence of money laundering committed by the
institution. This is because any person who is having such knowledge or suspicion is required
to disclose the same to the proper authority. Hence, an offence relating to money laundering
legislation have been committed, if it transpires that the £4 million is the proceeds of crime.
Conclusion
An offence relating to money laundering legislation have been committed, if it transpires that
the £4 million is the proceeds of crime.
ii. Issue
Whether any civil legal liability that may be incurred by HJ Bank in the scenario.
Rule
Any organisation which has been involved in money laundering by any office employees for
the failure to disclose, need to immediately start an investigation into the matter. The
institution will be under an obligation to suspend all the employees involved in the same and
who has failed to make proper disclosure and take appropriate actions to stop such an offence
of money laundering after having a suspicion or knowledge about the same. The bank needs

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to assist the authorities who are supposed to deal with the matter in every possible way for
the purpose of combating such an act of money laundering12.
Application
As both Rachel as well as the line manager as failed to submit an external SAR to the Law
enforcement, it can be treated to have committed the offence of money laundering. Hence,
the bank needs to assist the Law Enforcement in investigating the money laundering.
Conclusion
A civil legal liability has been incurred by HJ Bank in the scenario.
iii. Issue
Whether any regulatory consequences that may flow from the action of HJ Bank and its
employees.
Rule
U/s 334 of the Proceeds of Crime Act 200213, any person who has been guilty of an offence
of non-disclosure for any offence of money laundering that he has suspicion or knowledge
about will be required to be penalised. A person committing such an offence will be subjected
to summary conviction. This may subject the person to improvement for a period of 6 months
or below. A person may also be subject to a file, which is not exceeding a particular statutory
limit. Depending on the extent to which the offence has been committed, both the
imprisonment as well as the fine can be imposed upon such a convicted person. Any person
committing such an offence also be subjected to indictment for conviction. In such a case the
first made be subjected to improvement for a period of up to 5 years. He may also be
12 Ryder, Nicholas. Money Laundering-an Endless Cycle?: A Comparative Analysis of the Anti-money
Laundering Policies in the United States of America, the United Kingdom, Australia and Canada. Routledge,
2012.
13 The Proceeds of Crime Act 2002

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subjected to a fine. In certain cases a person can be awarded with both imprisonment as well
as fine14.
Application
The bank may be subjected to conviction u/s 334 of the Act for being involved in the offence
of money laundering. The employees are also liable u/s 334 of the Act for being involved in
the offence of money laundering. The organisation will be subjected to fine and the
employees would be subjected to fine as well as imprisonment.
Conclusion
A regulatory consequence would flow from the action of HJ Bank and its employees u/s 334
of the Act.
Question D
i. In the present situation, the firm’s business, policies, systems, processes and culture,
presents concerns in respect of a range of matters that have surfaced. The course of action
that an MLRO needs to undertake in each of the situation would be as follows:
 A request for additional staffing and resource to enhance, strengthen and protect the
firm from financial crime has been rejected and, in fact, a decision to cut the AML
Division budget has been proposed. This can be treated as a breach of the risk based
approach by the organisation and the Money Laundering Reporting Officer (MLRO)
would report the regulatory authorities regarding the same. The decision to cut the
AML Division budget is likely to expose the firm to the risk of facing a money
laundering activities15.
14 Ryder, Nicholas. Money Laundering-an Endless Cycle?: A Comparative Analysis of the Anti-money
Laundering Policies in the United States of America, the United Kingdom, Australia and Canada. Routledge,
2012.
15 Chhina, Ramandeep Kaur. "Managing money laundering risks in commercial letters of credit: Are banks in
danger of non-compliance? A case study of the United Kingdom." Journal of Money Laundering Control 19.2
(2016): 158-168.

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 A recent report from the local Financial Intelligence Unit (FIU) suggested that the
firm’s SARs were of a low quality in terms of content and value of the reports. This
needs to be addressed with a stringent policy. The SARs needs to properly filed. For
this purpose the firm is required to apply proper risk profiling. The clients need to be
subjected to customer due diligence. Proper verification as well as identification of
risks needs to be carried out for the purpose of implementing a risk based approach16.
 There have been a number of complaints from business divisions the team is acting as
a ‘blockage’ to new business because of the ‘unreasonable’ demands for CDD
information being placed on new clients. This needs such business divisions to be
presented with an explanation regarding the importance of the implementation of the
Customer Due Diligence information. They are required to be provided with proper
facts and information of the consequences that may follow in the failure to comply
with the risk based approach requirement17.
 A warning has been received from the COO that financial crime concerns are of low
risk and should not be allowed to hinder business development. This needs to dealt
with carefully the COO to be presented with an explanation regarding the importance
of the implementation of the risk based approach. They are required to be provided
with proper information of the consequences that may follow in the failure to comply
with the risk based approach requirement. And needs to be presented with the
penalties that are required to be paid in case any money laundering activities being
witnessed for the deliberate discrepancies in the implementation of a proper risk based
approach18.
16 Lowe, Richard John. "Anti-money laundering–the need for intelligence." Journal of Financial Crime 24.3
(2017): 472-479.
17 Nobanee, Haitham, and Nejla Ellili. "Anti-money laundering disclosures and banks’ performance." Journal of
Financial Crime 25.1 (2018): 95-108.
18 Isa, Yusarina Mat, et al. "Money Laundering Risk: from the bankers’ and regulators perspectives." Procedia
Economics and Finance 28 (2015): 7-13.

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 The regulator has recently commented about the ‘cavalier’ attitudes displayed by the
business and has placed the firm under regulatory review. This needs to be addressed
with utmost importance. The organisation needs to carry out an investigation
regarding the inadequacies in the implementation of the risk based approach. It needs
to allocate the resources in a diligent manner. The firm would formulate proper
policies for the detection of the areas which are likely to be a zone of risk. A proper
report of the risk based approach needs to be presented to the regulatory and the
recommendations of the regulator need to be addressed19.
ii. The inadequacies in the CDD as well as the risk profiling of the firm is likely to subject the
firm to money laundering activities. Any such consequences would render the MLRO liable
for his failure to comply with the risk based approach. The firm as a whole would also be
subjected to regulatory action and would also be penalised for the same. The involvement of
any of the employees of the firm in any breach of the risk profiling policies and any exposure
to risk consequent to that would hold the whole firm as liable20.
19 Harrison, Karen, and Nicholas Ryder. The law relating to financial crime in the United Kingdom. Routledge,
2016.
20 Hopkins, Matt, and Nikki Shelton. "Identifying Money Laundering Risk in the United Kingdom: Observations
from National Risk Assessments and a Proposed Alternative Methodology." European Journal on Criminal
Policy and Research 25.1 (2019): 63-82.

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Bibliography
Bello, Abdullahi Usman, and Jackie Harvey. "From a risk-based to an uncertainty-based
approach to anti-money laundering compliance." Security Journal 30.1 (2017): 24-38.
Chhina, Ramandeep Kaur. "Managing money laundering risks in commercial letters of credit:
Are banks in danger of non-compliance? A case study of the United Kingdom." Journal of
Money Laundering Control 19.2 (2016): 158-168.
Gelb, Alan. "Balancing Financial Integrity with Financial Inclusion: The Risk-Based
Approach to «Know Your Customer»." CGD Policy Paper 74 (2016): 1-24.
Herlin-Karnell, Ester, and Nicholas Ryder. "The robustness of EU financial crimes
legislation: A critical review of the EU and UK anti-fraud and money laundering scheme."
European Business Law Review 28.4 (2017): 427-446.
Hopkins, Matt, and Nikki Shelton. "Identifying Money Laundering Risk in the United
Kingdom: Observations from National Risk Assessments and a Proposed Alternative
Methodology." European Journal on Criminal Policy and Research 25.1 (2019): 63-82.
Isa, Yusarina Mat, et al. "Money Laundering Risk: from the bankers’ and regulators
perspectives." Procedia Economics and Finance 28 (2015): 7-13.
King, C., 2018. Anti-Money Laundering: An Overview. In The Palgrave Handbook of
Criminal and Terrorism Financing Law (pp. 15-31). Palgrave Macmillan, Cham.
Lowe, Richard John. "Anti-money laundering–the need for intelligence." Journal of Financial
Crime 24.3 (2017): 472-479.
Merrell, Daniel James, and Susan Beth Van Horn. "Methods of and systems for money
laundering risk assessment." U.S. Patent No. 7,805,362. 28 Sep. 2010.

13CRIMINAL LAW
Naheem, Mohammed Ahmad. "Money laundering using investment companies." Journal of
Money Laundering Control 18.4 (2015): 438-446.
Ryder, Nicholas. Money Laundering-an Endless Cycle?: A Comparative Analysis of the
Anti-money Laundering Policies in the United States of America, the United Kingdom,
Australia and Canada. Routledge, 2012.
Savona, Ernesto Ugo, and Michele Riccardi. "Assessing the risk of money laundering:
research challenges and implications for practitioners." European Journal on Criminal Policy
and Research 25.1 (2019): 1-4.
The Proceeds of Crime Act 2002
Ullrich, Carsten. "A risk-based approach towards infringement prevention on the internet:
adopting the anti-money laundering framework to online platforms." International Journal of
Law and Information Technology 26.3 (2018): 226-251.
Vidal, Bernardo Manuel Sebastião Alves de. Compliance with the FATF Recommendations
and how it effects suspicious activity reports. Diss. 2018.
Xue, Yao-Wen, and Yan-Hua Zhang. "Research on money laundering risk assessment of
customers–based on the empirical research of China." Journal of Money Laundering Control
19.3 (2016): 249-263.