Module 3 AML

Question 1

What does Module 3 cover?

Answer 1

Module 3 covers: The Gambling Act; FATF; The Risk, Assessment of Risk & The Risk Based Approach; Where does the law come from – EU, Brexit; Proceeds of Crime Act 2002 and the Terrorism Act 2000 – the offences; The Economic Crime Levy; Money Laundering Regulations; Sanctions; The Regulator, LCCP, supervision and Guidance; Introduction to the important institutions, and groups; Anti Bribery & Corruption; LesA Policies and Procedures.

Question 2

What is money laundering?

Answer 2

Money Laundering is the process by which criminal proceeds are sanitised to disguise their illicit origins. Acquisitive criminals will attempt to distance themselves from their crimes by finding safe havens for their profits where they can avoid confiscation orders, and where those proceeds can be made to appear legitimate.

Question 3

What are the three stages of money laundering?

Answer 3

Placement - the process of getting criminal money into the financial system; Layering - the process of moving money in the financial system through complex webs of transactions, often via offshore companies; Integration - the process by which criminal money ultimately becomes absorbed into the economy, such as through investment in real estate.

Question 4

How does Module 3 link AML to the Gambling Act licensing objectives?

Answer 4

Operators have a responsibility to uphold the three licensing objectives set out in the Gambling Act 2005. The first of those licensing objectives is to, ‘prevent gambling from being a source of crime or disorder, being associated with crime or disorder or being used to support crime’.

Question 5

What does the presentation say about using criminal proceeds in casinos?

Answer 5

Using money in casinos, regardless of the amount, that is the proceeds of any crime can amount to money laundering if the person using or taking the money knows or suspects that it is the proceeds of crime.

Question 6

What is FATF?

Answer 6

The Financial Action Task Force (FATF) leads global action to tackle money laundering, terrorist and proliferation financing. The FATF researches how money is laundered and terrorism is funded, promotes global standards to mitigate the risks, and assesses whether countries are taking effective action.

Question 7

What else does FATF do according to the presentation?

Answer 7

FATF continuously monitors how criminals and terrorists raise, use and move funds. FATF regularly publishes reports that raise awareness about the latest money laundering, terrorist financing and proliferation financing techniques so that countries and private sector can take the necessary steps to mitigate these risks.

Question 8

What are the FATF Recommendations?

Answer 8

The FATF Recommendations ensure a co-ordinated global response to prevent organised crime, corruption and terrorism. They help authorities go after the money of criminals dealing in illegal drugs, human trafficking and other crimes. The FATF also works to stop funding for weapons of mass destruction.

Question 9

How many FATF members are there?

Answer 9

In total there are 40 members of the FATF; 38 jurisdictions and 2 regional organisations (the Gulf Cooperation Council and the European Commission).

Question 10

What seven areas are the 40 FATF Recommendations divided into?

Answer 10

AML/CFT Policies and coordination; Money laundering and confiscation; Terrorist financing and financing of proliferation; Preventive measures; Transparency and beneficial ownership of legal persons and arrangements; Powers and responsibilities of competent authorities and other institutional measures; International cooperation.

Question 11

What is a FATF mutual evaluation?

Answer 11

The mutual evaluation report is an assessment of a country’s measures to combat money laundering and the financing of terrorism and proliferation of weapons of mass destruction. FATF mutual evaluations are in-depth country reports analysing the implementation and effectiveness of measures to combat money laundering and terrorist financing.

Question 12

What are the two basic components of FATF mutual evaluations?

Answer 12

Mutual Evaluations have two basic components: effectiveness and technical compliance.

Question 13

What is the risk-based approach to AML?

Answer 13

A risk-based approach to AML is key to effective compliance programs around the world. It shifts the focus of AML compliance from post-analysis of data, to proactive judgment. It requires the regulated sector to work on an ongoing basis to understand the money laundering threats faced and deploy commensurate measures to manage their risk exposure.

Question 14

What history of the risk-based approach does the presentation give?

Answer 14

The 1990s checkbox approach; Financial Services Authority (FSA) proposed a ‘risk-based’ approach; first implementation was 2007 by the FATF; further codified in FATF 2012 update to the International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation.

Question 15

What is the National Risk Assessment?

Answer 15

The aim of the National Risk Assessment was to identify, understand and assess the money laundering and terrorist financing risks faced in the UK. It is pursuant to Regulation 16 of the MLR’s.

Question 16

What does the slide show for casino sector risk in the National Risk Assessment?

Answer 16

For casinos, the slide shows: Money Laundering – NRA 2017 Low, NRA 2020 Low, NRA 2025 Medium. Terrorist Financing – NRA 2017 Low, NRA 2020 Low, NRA 2025 Low.

Question 17

What does the presentation say about the Gambling Commission’s AML Risk Assessment?

Answer 17

The Gambling Commission released its most recent version of its risk assessment of money laundering and terrorist financing in the British gambling market in November 2023. This publication meets the Commission’s regulatory obligation as a statutory supervisor under Regulation 17(1) of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.

Question 18

What does LC 12.1.1.3 say?

Answer 18

‘ensure that such policies, procedures and controls are implemented effectively, kept under review, revised appropriately to ensure that they remain effective and take into account any applicable learning or guidelines published by the Gambling Commission from time to time.’

Question 19

What methodology boxes are shown in the Commission’s AML risk assessment diagram?

Answer 19

Impact; Threat; Likelihood; Vulnerabilities; Controls; Consequences.

Question 20

What current overall risk rating is shown for non-remote casinos?

Answer 20

The slide shows Casino (Non-Remote): previous overall risk rating HIGH; current overall risk rating HIGH.

Question 21

What terrorism red flag indicators are listed?

Answer 21

A customer’s income or expenditure which is inconsistent with their occupation; unusual or suspicious religious quotes, or single words or phrases relating to known terrorist ideology; use of multiple foreign bank accounts; unexpected large withdrawals or complete withdrawals and sudden account closure; transactions structured to avoid internal threshold or SAR reporting (‘smurfing’); MSB usage with multiple overseas destinations or open loop FX; accounts linked to pre-paid cards; customer IP address being used by other customers.

Question 22

What does the presentation say about casinos offering MSB activities?

Answer 22

While under the Regulations HMRC is the supervisory authority for money service businesses, the Commission and HMRC have agreed that the Commission will act as the supervisory authority for MSB activities carried out by casinos. All types of MSB activity are seen as carrying Money Laundering and Terrorist financing risk as they could be used by criminals to break their funds up and conceal its source or destination.

Question 23

What does LC 12.1.1 require on AML risk assessments?

Answer 23

Licensees must conduct an assessment of the risks of their business being used for money laundering and terrorist financing. Such risk assessment must be appropriate and must be reviewed as necessary in the light of any changes of circumstances and in any event reviewed at least annually. Following completion of the risk assessment, licensees must ensure they have appropriate policies, procedures and controls to prevent money laundering and terrorist financing.

Question 24

What areas do Les A and LAO risk assessments consider?

Answer 24

Both LesA and LAO Risk Assessments consider the risks of ML and the financing of terrorism in 5 areas: Customer risk, Transactional risk, PEP and Sanction risk, Business and Product risk, Internal risk.

Question 25

What does the presentation say about proliferation financing and high-risk countries changes?

Answer 25

From 1 April 2023, the Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022 introduce changes to the MLRs 2017, including a requirement to carry out proliferation financing risk assessments. The Money Laundering and Terrorist Financing (High-Risk Countries) (Amendment) Regulations 2024 came into force on January 23, 2024 and amend the definition of 'high-risk third countries' under the MLRs.

Question 26

What was the effect of Brexit according to the presentation?

Answer 26

Before Brexit we complied with EU AML Directives and transposed those Directives into UK law. We had previously transposed the 4th Directive in the MLR 2017 and had already transposed the 5th Anti-Money Laundering Directive into UK law, so there were no immediate changes to the AML framework for the UK after 31 December 2020.

Question 27

What does the presentation say about the 6th Anti-Money Laundering Directive?

Answer 27

The UK opted out of transposing the 6th Anti-Money Laundering Directive, primarily because many of its requirements are already covered by existing UK law. One exception is the proposed new offence of corporate liability, where the UK government announced a secondary review to be taken forward by the Law Commission.

Question 28

What does POCA do?

Answer 28

The Proceeds of Crime Act 2002 sets out the offences of money laundering and the legislative scheme for the recovery of criminal assets. The aim of the asset recovery schemes in POCA is to deny criminals the use of their assets, recover the proceeds of crime and disrupt and deter criminality.

Question 29

What are the POCA offences under sections 327, 328 and 329?

Answer 29

Section 327 - concealing criminal property: conceals, disguises, converts, or transfers criminal property, or removes criminal property from England and Wales, Scotland or Northern Ireland. Section 328 - arrangements involving criminal property: enters into, or becomes concerned in an arrangement which he knows or suspects facilitates the acquisition, retention, use or control of criminal property by or on behalf of another person. Section 329 - acquiring criminal property: acquires, uses or has possession of criminal property.

Question 30

What penalties are given for the main POCA offences?

Answer 30

Section 334 states that a person convicted of an offence under sections 327, 328 or 329 is liable to imprisonment for 14 years or a fine or both.

Question 31

What is the failure to disclose offence under section 330?

Answer 31

A person in the regulated sector commits an offence if he knows or suspects, or has reasonable grounds for knowing or suspecting, that another person is engaged in money laundering and does not report that suspicion.

Question 32

What is tipping off under section 333?

Answer 32

It is an offence for a person in the regulated sector to 'tip off' a person suspected of money laundering that he or someone else has made a lawful disclosure (i.e. a SAR) or that there is a money laundering investigation taking place.

Question 33

What penalties are given for failure to disclose and tipping off?

Answer 33

Section 334 states that a person convicted of an offence under these sections is liable to imprisonment for 5 years or a fine or both.

Question 34

What offences under the Terrorism Act 2000 are highlighted?

Answer 34

Section 15: Funding Terrorism. Section 22: Use and Possession of Terrorist Property. Sections 21A and 21B: Failure to Disclose. Section 17: Arrangements to Facilitate Terrorism.

Question 35

What penalties are mentioned under the Terrorism Act 2000?

Answer 35

Serious offences such as funding terrorism or using terrorist property can lead to up to 14 years in prison, an unlimited fine, or both. Failure to disclose can lead to up to 5 years in prison, a fine, or both.

Question 36

What are the Money Laundering Regulations 2017?

Answer 36

The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 came into force on 26 June 2017. They implement the EU’s 4th Directive on Money Laundering and replaced the Money Laundering Regulations 2007.

Question 37

What do the MLR 2017 require casinos to do?

Answer 37

The Regulations require remote and non-remote casinos to, for example: identify the source of funds for customers and source of wealth and funds for Politically Exposed Persons; undertake Money Laundering and Terrorist Financing risk assessments; conduct customer and enhanced due diligence checks; establish policies, procedures and controls and provide employee training to mitigate the risks of Money Laundering and Terrorist Financing.

Question 38

What does the presentation say is the striking difference between MLR 2017 and MLR 2007?

Answer 38

The striking difference between the MLR 2017 and MLR 2007 is the more pronounced emphasis on tailored risk management and controls and case-specific CDD, backed by criminal sanction.

Question 39

What does the presentation say about internal requirements under MLR 2017?

Answer 39

Regulated firms are required to establish an independent MLR 2017 compliance audit function, appoint a Board member or member of management to be responsible for compliance and continually screen, train and monitor all employees relevant to the compliance function.

Question 40

What does the presentation say about CDD under MLR 2017?

Answer 40

'Identify and verify' remains the bedrock of CDD. Enhanced CDD is required where, for example, a transaction is unusually complex, there is association with a high-risk country, or the customer has a cash-intensive business. The MLR 2017 also create more flexibility by enabling simplified CDD where, having assessed a specific case by reference to a range of risk factors, the regulated person considers the money laundering risk to be low.

Question 41

What new key areas to the casino sector are mentioned under MLR 2017?

Answer 41

Access to suspicious activity reports (SARs); proliferation financing risk assessments; reporting of discrepancies in beneficial ownership information; wider information sharing and disclosure; and information sharing requirements where crypto asset payments are accepted.

Question 42

What is the Economic Crime Levy?

Answer 42

The Economic Crime (Anti-Money Laundering) Levy is part of the government’s wider objective to develop a long-term Sustainable Resourcing Model to tackle economic crime. It was introduced into law through the Finance Act 2022 and aims to raise £100 million per year from the AML regulated sector. The levy is collected by supervisory authorities, in our case the Gambling Commission.

Question 43

What does the presentation say about sanctions and sanctions evasion?

Answer 43

Sanctions are restrictive measures - typically economic, diplomatic, or financial - imposed on countries, entities, or individuals to influence conduct or penalise misconduct. The presentation also says to consider filing a Suspicious Activity Report to the UKFIU if you suspect money laundering or terrorist financing related to sanctions evasion, and that operators should be alert to typologies such as complex ownership structures, use of enablers, and transfers through crypto or MSBs.

Question 44

What does the GC guidance ordinary code say?

Answer 44

In order to help prevent activities related to money laundering and terrorist financing, licensees should act in accordance with the Commission’s guidance on anti-money laundering, The Prevention of Money Laundering and Combating the Financing of Terrorism - Guidance for remote and non-remote casinos.

Question 45

What is the purpose of the GC AML guidance?

Answer 45

The guidance sets out what is expected of casino operators and their employees in relation to the prevention of money laundering, terrorist financing and proliferation financing, but allows them some discretion as to how they apply the requirements of the AML/CTF regime in the particular circumstances of their business. It will be of direct relevance to senior management and nominated officers in remote and non-remote casinos.

Question 46

What does the Bribery Act slide say are the principal offences?

Answer 46

Bribing Another; Being Bribed; Bribing a Foreign Public Official; Failure of a Commercial Organisation to Prevent Bribery.

Question 47

What groups are impacted by the Bribery Act 2010?

Answer 47

Individuals including UK citizens, UK residents, and some individuals outside the UK; organisations including UK companies, foreign companies with UK operations, and partnerships; public officials including UK and foreign public officials; and corporate and commercial entities because the Act imposes strict liability on commercial organisations for failing to prevent bribery.

Question 48

What six principles for adequate procedures are listed under the Bribery Act guidance?

Answer 48

Proportionality; Top-Level Commitment; Risk Assessment; Due Diligence; Communication; Monitoring and Review.

Question 49

Who does Les A anti-bribery policy apply to?

Answer 49

Les A policy applies to all staff, agents, consultants, contractors or any suppliers or others associated with our business wherever they are in the world.