Actions that the MLRO of BCD should take

IntroductionA Money Laundering Reporting incumbent (MLRO) is an officer within a firm or pr doice that has been put forward to pip apocalypses to the subject Crime Agency (NCA), formerly the Serious organize Crime Agency (SOCA), under the Proceeds of Crimes work on (POCA) 2007 and the Terrorism Act (TA) 2000. It is provided under Regulation 20 of the Money Laundering Regulations 2007 that if an MLRO receives an internal divine revelation of mistrustfuled bills laundering or terrorist financing, they argon needful to involve the disclosure and decide whether the grounds of incredulity are sufficient bountiful to pass the disclosure onto NCA (Ellinger et al 2011 98). Since the MLRO of BCD Bank has received an internal capital laundering suspicion key come to the fore from Christian, they testament be unavoidable to find whether the matter should be passed onto NCA. Given that Radovan Rankovich (RR) is allegedly wanted by the regime in the Ukraine for barbarous pe rforms against the state, and has received a recent transfer of ?15 million from a Corporate Service Provider in Cyprus, it is probably that this would warrant a disclosure to NCA for investigation. In accordance with this, the MLRO testament be required to file a Suspicious Activity Report (SAR) with NCA and afterward liaise with them to deal with this matter accordingly (Ellinger et al 2011 97). Part 7 of POCA makes it a requirement for asserts to make a disclosure to NCA if they reasonably suspect that a idiosyncratic is involved in gold laundering (s. 329). If the MLRO fails to make such a disclosure thus he or she may be base shepherds crookly liable under this Act for a failure to disclose (s. 331).This is beca practice session a person commits an offence under s. 329 if they acquire, use or engage possession of, criminal property. Since a brink would get within the scope of this section, it is possible that BCD Bank would be subject to criminal proceedings if they failed to take the suspend action and thus make the applicable disclosures. If the MLRO does non believe that the grounds of suspicion are sufficient to brood the matter to NCA, then the MLRO lead be required to make win inquiries (International monetary Fund, 2011 65). Once the MLRO has do a subject to NCA, the report provide be protected under s. 337 so that nothing in the report shall be taken to part either restriction on the disclosure of information. Given that BCD Bank may have engaged in money laundering by spareing RRs transactions to take place, they may have a defence under s. 338 if they make demonstrate that they make the disclosure as soon as possible. Similar provisions in any case stick out under the TA if the person is also suspected of terrorist financing. As Christian has received a textbook message stating that RR is wanted by the administration in the Ukraine for criminal actions against the state, it is likely that the MLRO get out also be required to comply with the provisions under the TA for a reasonable suspicion of terrorist financing. An obligation to report under the TA willing therefore bone up which means that the MLRO will be required to disclose the identity of RR, any information that relates to the matter and the whereabouts of the laundered property.There are two different types of report that may be made by the MLRO, namely protected reports and classic reports. A protected disclosure is made by a person during the course of their trade, profession or employment. This type of disclosure is generally made by a person who is carrying our professional activities. An authorised disclosure is made by a person who is about to commit a interdict act or has already committed a prohibited act (Bastable and Yeo, 2011 108). Since the margin has already dealt with the property that is suspected of being laundered, it is more appropriate for an authorised disclosure to be made. The MLRO will also be required to obtain consent from NCA under ss. 335 and 336 to determine whether Christian can action any further transfers out of RRs measure. This will be make by making a consent report to NCA, which will then block any transactions for s nevertheless working days. If NCA gives consent to the MLRO, the MLRO will then be able to give consent to Christian to carry out the transactions (Bastable and Yeo, 2011 108). If NCA refuse consent, however, the proposed transactions will be frozen(p) for a further 31 days, unless consent is granted during that period R (on the application of UMBS Online Ltd 2007 WL 1292620. The Risks and beds for the BankThis particular issue regarding RR is likely to be convoluted for the BCD Bank as they will want to act in the outperform interests of their client, namely RR, so that they remain in business with them whilst at the equal time they are required to fulfil certain obligations imposed upon them by law. Because BCD will be required to disclose their suspicions even if RR has not acted in a criminal manner, this will have a damaging issuance upon RRs reputation and as put by Hislop (2009) absent forged faith, little more than a bad feeling can knowledgeability a coin swans disclosure obligations under POCA 2002, with in some reasons catastrophic commercial consequences for the guest and a damning of his hitherto good name in the business community. If the vernaculars suspicions are incorrect, this can be significantly detrimental for RR. As such, the bank will need to be careful that they are impinging a balance between the interests of RR with its duties to disclose. In the recent case of SHAH and other v HSBC private bank (UK) Ltd (2009) EWHC 79 (QB) the implications Part 7 has upon the rights of the individual and the banking business was clearly highlighted.Here, it was demonstrated that where a bank makes a SAR in respect of a suspicious transaction, they may not be provided with protective covering if the customer decides to challenge the banks suspicions in the future. This is so, despite the fact that a criminal offence may have been committed if the bank failed to make such a disclosure. Customers will have a right to challenge the banks suspicions with the bank then being required to prove that the suspicion was reasonable. It may be difficult to determine how the bank can justify making a disclosure since it was made clear by the court in this case that the defendant must think that there is a possibility, which is more than fanciful, that the relevant facts exist. A vague feeling of unease would not suffice. The bank will therefore be taking a risk in umpteen any disclosure, especially this one since it will have to be signaln that the text message was sufficient enough for a disclosure to be made. Furthermore, even if the circumstances do render a disclosure reassert, the banks conclusion may simmer down be challenged which can be pricy and time consuming. In K Ltd v National Wes tminster Bank plc 2007 1 WLR 311 it was noted by the Court that to intervene between a banker and his customer in the performance of the contract of mandate is a serious haphazardness with the free flow of trade. But Parliament has claimed that a limited duty tour is to be tolerated in preference to allowing the undoubted evil of money-laundering to run rife in the commercial community.Therefore, even though such a disclosure may interfere with the relationship between the bank and RR, such deterrent will be unavoidable if it will be likely to keep money laundering from taking place. The bank needs to be clear that an interference of RRs bank note is appropriate on the circumstances, since a frozen bank account for a period of time has in the past been considered a grave injustice in the case of Squirrell Limited v National Westminster Bank plc (Customs and Excise Commissioners intervening 2006 1 WLR 637. Here, the customers property were frozen resulting in the customer bei ng unable to afford the sub judice fees it would cost to challenge the determination. Therefore, if RRs funds were frozen, which subsequently prevented RR from challenging the decision it is unlikely that this would be deemed appropriate by the court. In accordance with this, it has been utter that the test for suspicion is a purely subjective matter (Medroft, 2010 190). The decision as to whether the suspicion is reasonable will therefore depend upon whether Christian actually believed that the transaction was suspicious. If it cannot be found that this is the case, the interference cannot be considered justifiable and a breach of the customers human rights may also be established as in K Ltd.The bank will therefore be required to consider whether reasonable grounds do actually exist, having regard to the elements constituting market abuse offences (Hudson and Hutchinson, 2009 1). There are galore(postnominal) inherent risks that are associated with disclosures and as such, it is vital that the bank is aware of its study rights and obligations. In SHAH the court found that the bank did not act in an counterintuitive manner which is likely to be the case in the newsflash situation. As such, it will most likely be difficult for RR to show that the bank had not acted in good faith. However, it could be argued that there was an unreasonable delay by the bank to make the disclosure under s. 338(2). As a result of this, the bank could be exposed to liability for breach of its duty of care (Medroft, 2010 190). Whether this is acceptable remains an arguable subject still as expressed by Benjamin (2007 62) here the objective is not informed consent to risk but combating crime. Accordingly, it is therefore generally genuine that a banks interference will be justified on public policy grounds. The bank will still be subjected to many risks when making a disclosure, nonetheless, and must therefore consider whether the consequences of making a disclosure can be j ustified (Ellinger et al. 2010 114).In addition, if the bank decides to make a disclosure, they must be careful not to allow the customer to find out as they can be found liable for tipping off. This is another issue that may arise since a customer could become aware that a disclosure has been made simply imputable to the fact that their account has been suspended. It could be said that the bank is in a difficult situation as whatever option it takes, sanctions may still be imposed. As one judge noted in Governer & play along of the Bank of Scotland v A Ltd 2000 Lloyds Rep Bank 271, 287 the bank may commit a criminal offence if it pays or if it refuses to pay. Furthermore, if the bank makes a disclosure based on its suspicions, which later turn out to be unfounded, the bank risks civil liability for breaching its contract with its customer (Ellinger et al 2010 114). This is because the bank will have frozen the customers account which would have prevented payments from being made i n and out of the account. Because the banks have a significant burden imposed upon them when it comes to dealing with money laundering, some exploit has been made to ensure that banks acting in good faith will not face criminal liability. For example, it was held by the court in C v S 1999 2 All ER 343 that it would not unremarkably be an abuse of process to prosecute a bank which was doing no more than obeying a court order for disclosure. Still, it is necessary for the bank to consider all of the risks before considering whether to make a disclosure or not.Overall, it is necessary on the facts for the MLRO of BCD Bank to make a disclosure to NCA since it does appear that the suspicions are reasonable. This is based upon the transaction of ?15 million that was made recently as well as the text message that Christian has received. Whilst the bank would be required to examine the potential issues with disclosing such information and freezing the account of RR this appears necessary and in the public interest. It will most likely prevent money laundering activities from taking place and will ensure that Christian, the MLRO and the bank are complying with their obligations.References Bastable, G., and Yeo, N., (2011). Money Laundering Law and Regulation A applicatory Guide, Oxford University Press.Benjamin, J., (2007). Financial Law. OUP Oxford.Ellinger, E. P., Lomnicka, E., and Hare, C., (2011) Ellingers Modern Banking Law, (Oxford University Press.Ellinger, E. P., Lomnicka, E., and Hare, C., (2010) Ellingers Modern Banking Law. 5th Edition. OUP Oxford.Hislop, D., (2009). Banks, severe acute respiratory syndrome & the Customer 159 New Law Journal 1099, Issue 7380.International Monetary Fund., (2011) Banking and Insurance, Business & Economics.Medcroft, N., (2010). A Bankers Liability for Damages Arising from Compliance with PT 7 POCA 4 Journal of International Banking and Financial Law 227, Issue 4.Medcroft, N., (2009). Refusing to Execute Payment Instruction s Where a Bank Suspects Money Laundering. 4 Journal of International Banking and Financial Law 190, Issue 4.Hudson, D., and Hutchinson, K., (2009). Suspicious legal proceeding Reports Reporting Obligations of Financial Institutions in the UK. Complinet, Accessed 07 June, 2014.CasesC v S 1999 2 All ER 343Governer & Company of the Bank of Scotland v A Ltd 2000 Lloyds Rep Bank 271, 287K Ltd v National Westminster Bank plc 2007 1 WLR 311R (on the application of UMBS Online Ltd 2007 WL 1292620 SHAH and another v HSBC private bank (UK) Ltd (2009) EWHC 79 (QB)Squirrell Limited v National Westminster Bank plc (Customs and Excise Commissioners intervening 2006 1 WLR 637