Glossary

A · B · C · D · E · F · I · L · M · N · O · P · R · S · T

A

Authorised disclosure

A report to the NCA made before the firm does an act that could help launder money. It can give the firm a defence for that act. Julian’s SAR on Merranby’s purchase was one, sent before exchange. MLRO’s Decision Note, paragraph 4 · Chapter 8 · see DAML, Deemed consent

B

Beneficial owner

A person who in the end owns or controls the client, through every company and trust in between. A director is not always one. Merranby’s beneficial owners are the settlor, the trustee and the beneficiaries of the trust. Client Due Diligence File, definitions, “Beneficial Owner” · Chapter 1 · see Settlor

C

Certificate of incumbency

A formal statement of who runs a company and who holds its shares. Ostrick’s names its nominee directors and shows the trustee as the holder of all its shares. Beneficial Ownership Record, paragraph 2 · Chapter 4 · see Nominee director

Certified copy

A copy signed by a responsible person as true to the original. The trustee would not send the trust deed, so it sent a certified extract of the parts the firm needed. Beneficial Ownership Record, paragraph 8 · Chapter 4 · see Reliance

Client account

The bank account in which a law firm holds its clients’ money. Everything paid for a purchase passes through it. The SRA Accounts Rules let a firm use it only for its legal work, never as a bank. Matter Opening Checklist, paragraph 6 · Chapter 6 · see Source of funds

Client and matter risk assessment

The firm’s written view of how risky one client and one job are. It weighs the risk factors together and gives a rating, which sets how closely the firm checks. Merranby’s purchase is rated high. Client and Matter Risk Assessment, Tab 2 · Chapter 2 · see Firm-wide risk assessment, Red flag

Client due diligence (CDD)

The checks a firm must make before it acts: who the client is, who owns or controls it, and what the deal is for. The Regulations call it customer due diligence. On a high-risk matter, CDD is complete only when every enhanced check is done. Matter Opening Checklist, paragraph 4 · Chapter 1 · see Enhanced due diligence

D

DAML

Short for “defence against money laundering”: the request, made in a SAR, for a defence to do a named act. Merranby’s SAR named three acts: exchange, completion and the return of the £500,000. MLRO’s Decision Note, paragraph 5 · Chapter 8 · see Authorised disclosure, Deemed consent

Deemed consent

The defence a firm has when the NCA does not refuse its request within seven working days. It covers only the acts the SAR names. It is not a clearance, so the firm’s own checks must still be finished. MLRO’s Decision Note, paragraph 7 · Chapter 8 · see Moratorium period

E

Enhanced due diligence (EDD)

Closer checks than usual, for a high-risk matter or one with a PEP behind the client. The firm finds out who really controls the client, and where its money and wealth come from. Nothing beyond opening the matter happens until they are done. EDD and Senior Management Approval, Tab 6 · Chapter 5 · see PEP, Senior management approval

F

Failure to report

The crime of not reporting laundering that you know of or suspect, or should have suspected, from your work. The longest sentence is 5 years. Telling the MLRO as soon as you can meets your duty. Matter Opening Checklist, paragraph 2 · Chapter 1 · see MLRO, Suspicion

False positive

A screening hit on a name that matches the sanctions list but belongs to someone else. Merranby’s was a name similar to the settlor’s, with another date of birth. The File keeps the hit and the reason it was cleared. Screening Record, paragraph 4 · Chapter 5 · see OFSI

Family member

A close relative of a PEP, such as a child or a child’s husband or wife. A family member holds no office but gets the same close checks, because they could hold money or act for the PEP. The settlor’s daughter and Oliver are both family members. Screening Record, paragraph 3 · Chapter 5 · see PEP

Firm-wide risk assessment

A firm’s written view of where money laundering could reach its business: its clients, their countries, its work and its deals. Each matter’s checks must reflect it. Hollanby Darroway’s rates buying property without a loan as higher risk. Client and Matter Risk Assessment, paragraph 2 · Chapter 2 · see Client and matter risk assessment

I

Internal report

Your written report of a suspicion to the MLRO, on the firm’s form. You send it to him alone and keep no copy. His signed acknowledgement is your proof that you reported. Internal Suspicion Report, Tab 8 · Chapter 7 · see Suspicion, Tipping off

L

Legal professional privilege

A client’s right to keep legal advice secret. A lawyer need not report what reached him in privileged circumstances. Facts the firm finds while checking its client are not privileged, so privilege did not stop the report on Merranby. MLRO’s Decision Note, paragraph 2 · Chapter 8

M

Material discrepancy

A gap between the PSC register and the firm’s own checks that may reasonably be linked to laundering, or may hide details of the client’s business. The firm must report it to Companies House. Merranby’s register left out the trust behind its owner. CDD Record: Merranby, paragraph 7 · Chapter 3 · see PSC register

MLRO

The money laundering reporting officer: the person in a firm to whom every suspicion is reported. Only the MLRO decides whether the firm reports to the NCA. At Hollanby Darroway it is Julian, a partner. Client Due Diligence File, definitions, “MLRO” · Chapter 1 · see Internal report, Suspicious activity report

Moratorium period

The wait that starts if the NCA refuses a defence. The named acts wait 31 days from the refusal, and a court may extend that, up to 186 days in all. When the period ends, the firm has a defence. MLRO’s Decision Note, paragraph 4 · Chapter 8 · see Deemed consent

N

National Crime Agency (NCA)

The UK body that receives suspicious activity reports and may refuse a firm a defence. Only the firm’s MLRO reports to it, never the trainee directly. MLRO’s Decision Note, paragraph 4 · Chapter 1 · see Suspicious activity report

Nominee director

A director who signs a company’s papers but acts on someone else’s instructions. Ostrick’s directors act on the trustee’s instructions. A nominee is a link in the chain of owners, never a beneficial owner. Beneficial Ownership Record, paragraph 2 · Chapter 4 · see Beneficial owner

O

OFSI

The Office of Financial Sanctions Implementation. On a true sanctions match, the money is frozen and the MLRO reports to OFSI at once. Only an OFSI licence lets the money move, and a report to the NCA cannot free it. Screening Record, paragraph 4 · Chapter 5 · see False positive

Ongoing monitoring

A closer watch on the matter for as long as the firm acts, one of the measures for a PEP. On Merranby’s purchase, the accounts team checks every payment against the log of where the money comes from. EDD and Senior Management Approval, paragraph 4 · Chapter 5 · see Source of funds

P

Paying-away exemption

A shortcut that lets a regulated firm pay back a sum below £3,000 without a defence when a relationship ends. The money must go to the client, or to someone the client directs. The £500,000 failed both tests, so the firm relied on its defence. Closing Note, paragraph 4 · Chapter 10 · see Deemed consent

PEP

A politically exposed person: someone with a prominent public function, such as a minister or deputy minister. A PEP is a reason to check harder, not to refuse. The settlor, a serving deputy minister, is one. Screening Record, paragraph 2 · Chapter 5 · see Family member, Senior management approval

PSC register

The public list at Companies House of the people with significant control over each company. The company files its own entries, so the firm never relies on the register alone. Merranby’s first named only Oliver. CDD Record: Merranby, paragraph 5 · Chapter 3 · see Material discrepancy

R

Red flag

A fact that should make you look closer, such as a new company or a client in a hurry. It is not proof of a crime. One flag alone may not matter much, but several together usually do. Client and Matter Risk Assessment, paragraph 3 · Chapter 1 · see Suspicion

Reliance

Using another regulated firm’s identity checks instead of repeating them. It covers identity only, never source of wealth or the PEP measures, and the firm stays liable. Merranby’s trustee offered a letter for the firm to rely on. Beneficial Ownership Record, paragraph 6 · Chapter 4 · see Certified copy

S

Senior management approval

The written agreement of a senior person in the firm to act where a PEP or a PEP’s family stands behind the client. The firm’s policy gives it to the managing partner. Here it came with one condition: evidence of the 2021 sale before exchange. EDD and Senior Management Approval, paragraph 3 · Chapter 5 · see PEP

Settlor

The person who set up a trust and gave it its money. Merranby’s settlor, Oliver’s father-in-law, keeps the power to replace the trustee. So he controls the trust and is a beneficial owner. Client Due Diligence File, definitions, “Settlor” · Chapter 4 · see Beneficial owner

Source of funds

The accounts the money for a deal comes from, and how it reached them. A bank statement shows only the last step. So for Merranby the firm traces the price from the trust to Ostrick, and on to the firm. Source of Funds and Source of Wealth Log, paragraph 1 · Chapter 6 · see Source of wealth

Source of wealth

How the people behind a client came to have their money at all. The family says the trust’s £12 million came from selling the settlor’s family company in 2021. The firm needs the sale papers to prove it. Source of Funds and Source of Wealth Log, paragraph 1 · Chapter 6 · see Source of funds

Suspicion

Thinking that something may be true without being able to prove it. The possibility must be more than fanciful, but it need not be likely. To report, you need only what you saw and why it worries you. MLRO’s Decision Note, paragraph 3 · Chapter 7 · see Internal report

Suspicious activity report (SAR)

The MLRO’s report of a suspicion to the NCA. Once the MLRO suspects, he must send one. A SAR is not an accusation, and it can also ask for a defence for an act the firm is about to take. MLRO’s Decision Note, paragraph 4 · Chapter 1 · see DAML

T

Tipping off

Telling anyone that a report has been made, or that an investigation is under way, where that is likely to harm it. The longest sentence is 2 years. Telling a colleague who must act on the report is not tipping off. Matter Opening Checklist, paragraph 8 · Chapter 9 · see Internal report