Financial Conduct Authority (FCA) UK Regulation Sample Exam

What happens if an employee suspects money laundering within their firm?

1. The employee must ignore the suspicion

2. Only management can report it

3. The employee must report it to the relevant authority

4. The employee is penalized for such suspicion

The correct answer is: The employee must report it to the relevant authority

When an employee suspects money laundering within their firm, the correct course of action is to report it to the relevant authority. This response is rooted in regulatory requirements and anti-money laundering (AML) laws that mandate staff to act when they have suspicions of illicit activity. Employees are often designated as "nominated persons" under the Proceeds of Crime Act (POCA) or Money Laundering Regulations, meaning they have a legal obligation to escalate these suspicions through the appropriate channels within their organization. Reporting suspicions is crucial for enabling the firm to conduct further investigations, file a Suspicious Activity Report (SAR) if necessary, and take measures to prevent potential money laundering from occurring. This process not only protects the integrity of the financial system but also safeguards the employee and the firm, as failing to report suspicions could lead to significant penalties and legal consequences for both. In this context, the action of reporting is a key responsibility that underscores the importance of vigilance in preventing financial crime.