AML – what you need to know
It is thought that the scale of money laundering affecting the UK annually is in the hundreds of billions of pounds. Unfortunately, legal professionals are at risk of being targeted for their skills and services to hold or transfer money because of the perceived legitimacy this offers.
The Money Laundering, Terrorist Financing and Transfer of Funds (Information on Payer) Regulations 2017 (known as Money Laundering Regulations 2017) set the rules for enforcement of the anti-money laundering legislation. They were updated by the Money Laundering and Terrorist Financing (Amendment) Regulations 2019
They require all independent legal professionals that provide legal or notarial services and/or trust and company services to be supervised for compliance by one of the specified professional bodies (also known as anti-money laundering supervisory authorities) or by HMRC.
It is vital that you understand your regulatory and legal obligations including the Criminal Finances Act 2017, the Proceeds of Crime Act 2002 and the Money Laundering Regulations 2017. The penalties for aiding a money launderer range from fines to imprisonment, depending on the severity of the offence.
Depending on the revenue of your business you may be required to pay the Economic Crime Levy.
The following sections will help you understand how to deal with the risks of being targeted for money laundering. These include:
- Do I need to be supervised? / who can supervise you
- Guidance and Sectoral Risk Assessments
- How to report suspicious activity and whistleblowing
- How to spot risks
- How to do a risk assessment
- Templates to help with policies and procedures
- Changes to the way you work and AML considerations
- Economic Crime Levy
Russian Financial Sanctions – your AML responsibilities
Following the UK Government imposing sanctions on Russia, you all have a vital role to play in ensuring all measures and restrictions are complied with.
Breaching the financial sanctions requirements can result in criminal prosecution or a fine by OFSI. Our Code of Conduct requires all firms and individuals that we regulate to keep up to comply with the law and regulations relating to their work. Therefore, we would take disciplinary action should we see evidence of serious non-compliance.
Your firm must have appropriate policies in place to ensure you comply with sanctions legislation, including carrying out regular and appropriate checks of sanctions lists, and we expect to see this evidenced.
Firms must also make a report to the Office of Financial Sanctions Implementation (OFSI) if they suspect a customer is a designated person under the financial sanctions regime. You have responsibilities under this regime to safeguard the UK and protect the reputation of the legal services industry.
The situation in Ukraine is very fast moving and this has meant that there have been frequent additions to the sanctions lists. The sanctions lists are frequently updated, so you need to check them regularly. Remember to re-check the lists for updates before a transaction completes.
- Russia Guidance
- Russia: list of persons named in relation to financial and investment restrictions
- The Office of Financial Sanctions Implementation (OFSI)
If your firm is using an electronic verification system for customer due diligence and sanctions checks, check they are refreshing sanctions lists with sufficient frequency. You can sign up to an email alert.
As always, you must take a risk-based approach to preventing money laundering, meaning you must understand the risks of how your business may be used to launder money and take steps to appropriately mitigate those risks.
We take compliance with the money laundering regulations, sanctions regime and duties in litigation very seriously. We will continue to follow up on where we hear about allegations of wrongdoing and take action where we find evidence of misconduct.
Additional AML resources:
The Joint Money Laundering Steering Group provides comprehensive Guidance on Anti-Money Laundering procedures for the financial services sector, which provides a valuable resource for the rest of the regulated sector
The Financial Action Task Force (FATF) is an inter-governmental body whose purpose is the development and promotion of national and international policies to combat money laundering and terrorist financing. Its 40 Recommendations are backed by mutual evaluations of its member countries.
CILEx Regulation is a member of the Legal Sector
Intelligence Sharing Expert Working Group (ISEWG).