Dirty Money Matters to Lawyers
Why is it that dirty money matters to lawyers? If you are a lawyer, it is something that should be at the forefront of your mind.
Dirty money matters to lawyers because it is the proceeds of crime, very often serious crime, and it is now recognised that the best way of helping to prevent serious crime is to cut off the flow of funds to criminals. If they cannot use their dirty money, it loses its utility.
It is easy to dissociate ourselves from the deaths of 39 migrants whose bodies were recovered from refrigerated compartment of a lorry, the wider flow of human trafficking and slavery, terrorist financing, drug trafficking, political corruption or the illegal slaughter of protected animals for their tusks or other body parts.
You may wonder, if you are a member of a smallish provincial firm of solicitors, why this should concern you. It is because you are precisely the sort of outfit that professional money launderers target to clean their ill-gotten gains. So when you are asked to act in a large property transaction which is usually the preserve of much larger firms, or set up a big trust or incorporate a company where the true owners are not known to you, your antennae should be aroused.
Law enforcers know that they will never completely stamp out the flow of illicit funds. But the message which is becoming increasingly clear is this: Lock up the Gatekeepers. The gatekeepers are solicitors, accountants, bankers and others who are able, unwittingly or by turning a blind eye, to assist in the cleansing of dirty money.
Solicitors know that they must not use their client accounts as a banking facility and that there must be an underlying legal transaction. But it happens nevertheless, and many solicitors are not yet wise to the Money Laundering Regulations despite warning notices from the Solicitors Regulation Authority (SRA). A recent anti-money launder (AML) assessment carried out by the SRA revealed that of the 400 firms sampled, 21% were non-compliant with the existing rules. It has published an updated warning notice, guidance and assessment template to help firms comply. This month the regulator is writing to firms seeking confirmation that a compliant risk assessment is in place, and it will commence a monthly sampling exercise. New Money Laundering Regulations will come into force on 10 January 2020 and the SRA is making firms aware.
It is a legal requirement for firms to protect themselves from money laundering (ML) with a firm-wide risk assessment. That risk assessment should give you a comprehensive view of your services, clients and delivery channels so that you can determine how you are exposed. Make sure that you and your firm are properly trained and know how to make suspicious activity reports (SARs) to the National Crime Agency where appropriate. You must carry out due diligence checks and keep them up to date because circumstances may have changed since you were last instructed. You also need to know when enhanced due diligence is necessary and whether your client is a politically exposed person (PEP).
In the last two years solicitors appearing before the Solicitors Disciplinary Tribunal have been struck off for accounting irregularities for misusing client accounts (where dishonesty has been proved), and suspensions and fines of up to £25,000 have been imposed in addition to huge costs orders. As money laundering (which runs into billions of pounds in the UK alone) and terrorist financing increases, the law is getting tougher and law enforcers and regulators are becoming stricter.
The law requires gatekeepers to keep their gates firmly shut or suffer the loss of their professional status and the possibility of gaol.
Most lawyers I know entered the legal profession to make a difference. This is an area where we can all make a huge difference. We can really help to make the world a better place by keeping our client accounts secure, conducting proper due diligence on our clients and driving criminals from our front doors.
So in 2020 join the fight against the evil predicate crimes that produce the dirty money which must be laundered before it can be used to fund further crimes. We can make a difference. Dirty money matters to lawyers and it matters to all of us.