Anti money Laundering
The SRA has recently issued its latest Anti Money Laundering (AML) Report which was generally encouraging in that it observed that most law firms visited seemed to display a positive attitude towards compliance in this area and were trying hard to meet their obligations.
It is certainly our experience that our legal clients understand the need for regulation in this area and the possible consequences of non-compliance. Coupled with the increase in targeted attacks on solicitors through cybercrime and other hi-tech methods, it appears that the matter of AML is of increasing importance within the sector.
Whilst the report is largely complementary and finds that most of the firms visited had effective AML compliance frameworks in place, it does give some useful indicators of where some firms are falling down.
AML action points for solicitors
It may now be time for law firms to revisit their AML procedures to ensure they are fully up-to-date.
For instance, here are some questions to consider:
- When were the firm’s AML procedures last reviewed and updated?
- Have there been any mergers or acquisitions since the AML procedures were introduced, and have policies and processes been updated to take into account the change in ownership and have they been effectively communicated to staff?
- Are all staff aware of who the firm’s AML officer is (often the COFA or COLP but could be someone else)?
- Are staff and AML officers up-to-date with reporting procedures within the firm? i.e. some firms still report to SOCA instead of the National Crime Agency (NCA) to whom firms have had to report since the end of 2013.
- Is AML training up-to-date for all staff at varying levels and do training records demonstrate this?
- When performing client due diligence, are adequate checks of source of client’s funds being undertaken? Is documentary evidence of this taken or do you rely on verbal representation from clients?
SRA warns firms against charging for money laundering checks
In regards to client due diligence, the rules state that a firm cannot charge a client for the time spent in their due diligence – some firms apparently have done this. However, in complex cases where time spent on potential client due diligence is high (e.g. the need to obtain overseas due diligence) it may be permissible to agree some element of cost be charged to the client.
We realise there is much debate in this area with some commentators suggesting that a firm should be able to charge for such due diligence as it is a part of the cost of providing legal services.
The SRA also warns firms about AML complacency
Whilst the report is largely positive in tone SRA Chief Executive, Paul Philip, does warn against complacency, commenting: “…I am pleased that the overall picture is positive. But neither we, nor the firms we regulate, can be complacent.”
The Law Society is the named supervisory body for AML but delegate some of their responsibility to the SRA and Philip used this issue in lobbying for full separation from The Law Society due to potential conflicts of interest.
We expect the AML issue will remain in the focus of the sector as it moves to implement the 4th EU Money Laundering directive and the forthcoming inspection regime by the UK Financial Action Task Force.
We will comment further as the matter develops.
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Martin Wilmott acts as lead engagement partner for a wide range of corporate and non-corporate clients in the Doncaster office, especially in the Legal and professional, agricultural, transport, property and construction, manufacturing, healthcare and hospitality sectors. For more information or advice on anything covered in this article please contact Martin on [email protected] or 01302 367 262.