Notes on Professional Conduct & Regulation for the LPC at BPP University. These revision notes summarise key SGS course content in a way that is easy to understand and helped me achieve a Distinction on the PCR exam.
BPP LPC – Professional Conduct & Regulation Exam Notes
PART 1 – Money Laundering and the Proceeds of Crime
Proceeds of Crime Act 2002. Money Laundering Regulations 2017.
- Money laundering involves financial transactions where proceeds from serious crime
(e.g. drug trafficking, terrorism, theft, tax evasion, fraud) are ‘cleaned’ so that its source is
harder, if not impossible, to trace.
- Money laundering can also involve simply receiving or benefitting from the small proceeds of
relatively minor crime.
Internal controls – officers responsible for PoCA and MLR compliance
- If the work the firm is doing falls within the ambit of the MLR, someone in the law firm has to
be appointed to be the money laundering reporting officer (MLRO/nominated officer).
- Regulation 21(1) MLR requires firms to appoint a money laundering compliance principle
(MCLP). The MLRO and MLCP can be the same person.
- Further, the firm has to have policies and procedures obliging anyone in the law firm who
knows or suspects money laundering to comply with the reporting obligations set out in PoCA.
- Each law firm will also have a nominated Compliance Officer for Legal Practice (COLP) and a
Compliance Officer for Finance and Administration (COFA).
- The COLP, COFA and the partners of the firm are responsible for ensuring the firm takes all
steps required to comply with the MLR and PoCA.
Proceeds of Crime Act 2002
- The law applies to all solicitors in relation to all areas of practice. It anticipates the reporting
of suspicious transactions where someone benefits from the proceeds of crime.
Direct involvement offences (ss. 327-329)
1. s327: Concealing, disguising, converting or transferring criminal property or removing
criminal property from the UK;
2. s328: Entering into or becoming concerned in an arrangement which you know or suspect
facilitates the acquisition, retention, use or control of criminal property by or on behalf of
another person;
3. s329: Acquiring, using or possessing criminal property.
à It is quite common for money laundering fact patterns to point to an offence under more than one
of the sections – identify all relevant offences.
- Are there any defences to ss.327-329 PoCA? There are a number of defences available. They
all involve knowing what an “authorised disclosure” is.
o “Authorised disclosure” is defined in s338 PoCA as “a disclosure to a constable,
customs officer or nominated officer by the alleged offender that property is criminal
property” and at least one of s338(2), (2A) or (3) has to be satisfied.
o s338(2) requires disclosure to be before the alleged offender does the prohibited act.
o s338(2A) requires the disclosure to be made during the prohibited act AND he began
to do the act at a time when, because he did not then know or suspect that the
, property represented a person’s benefit from criminal conduct, the act was not
prohibited AND the disclosure is made on his own initiative as soon as practicable.
o s338(3) requires the disclosure to be made after the prohibited act AND there is a
good reason for the solicitor’s failure to make the disclosure before he did the act
AND the disclosure is made on his own initiative and as soon as practicable.
- Defences under s327(2), 328(2) and 329(2) are all the same and involve:
o Making a s338 disclosure AND (if the s338 disclosure was made before the prohibited
act) he has the appropriate consent; or
o Not making a s338 disclosure but having a reasonable excuse for not doing so; or
o Prohibited act is in carrying out a function of enforcement.
Non-Direct Involvement Offences
- Failure to disclose to nominated officer in the ‘regulated sector’ (s330). Offence if you fail to
disclose where:
a) You know or suspect, or have reasonable grounds to know or suspect, that someone
is laundering the proceeds of any criminal conduct; and
b) You receive information in the course of business in the regulated sector; and
c) You can identify the person who is laundering the proceeds of criminal conduct OR
the whereabouts of the laundered property OR where the information received will
or may assist in identifying the person.
- s330(5) details what the disclosure must contain.
- The definition of a business in the regulated sector is found in Schedule 9 para 1(m) and (n)
of PoCA.
- Tipping off (s333A) – Under s333A, it is also an offence to ‘tip-off’ clients about any report
made of information that came to you in the course of business in the regulated sector.
- Penalty for offences (s334).
Money Laundering Regulations 2017
The MLR are designed to ensure that firms establish procedures to forestall and prevent operations
relating to money laundering. The requirement to undertake CDD is set out in the MLR.
To whom do the MLR relate?
- The MLR apply to a number of institutions and professional advisers who are listed as ‘relevant
persons’ under Regulation 8(2).
- Regulation 8(2)(d) is of particular relevance to solicitors. It provides that the MLR apply to
‘independent legal professionals’ who participate or assist in the planning or execution of
financial or property transactions which, pursuant to Regulation 12(1), concern:
o The buying and selling of real property or business entities;
o The managing of client money, securities or other assets;
o The creation, operation or management of trusts, companies, foundations or similar
structures.
- MLR also apply under Regulation 8(2)(e) to ‘trust or company service providers’ which, under
Regulation 12(2) means a firm or sole practitioner who by way of a business provides any of
the following services… forming a company; acting or arranging for another person to act as
directors…
à MLR apply to many types of legal work, but not all. e.g. MLR do not apply to employment or most
litigation cases.
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