With the Financial Action Task Force (FATF) highlighting the legal sector as being ‘high risk’ for money laundering, it stands to reason that it is also one of the eight risks cited in the SRA’s Risk Outlook 2015/16.
Money laundering is a huge risk affecting a wide range of law firms, and it is easy to see why they are targeted, given the volume of transactions routinely processed.
As the FATF looks more closely at the systems and controls that businesses have in place to detect, report and record suspicious activity, the SRA is also concentrating on firms’ internal systems and controls through its recent programme of visits. Despite generally upbeat feedback from these visits, the SRA has highlighted a small number of concerns, including:
- the quality and frequency of training received,
- the quality and consistency of consumer due diligence,
- risk assessment of individual transactions,
- knowledge of when to report a matter to the National Crime Agency (NCA).
The good news is that money laundering risk can usually be addressed without a hefty price tag. It is more about having a clear and systematic approach and ongoing monitoring of compliance with the firm’s procedure.
Having anti-money laundering controls is a legal obligation, as well as a regulatory requirement. Firms in the regulated sector (i.e. when the MLR2007 apply) are specifically required to:
- have a person nominated to be the money laundering reporting officer (MLRO),
- have a process setting out when and how to report any suspicious activity,
- be able to identify and verify clients (including beneficial owners of a business, etc.),
- train all relevant employees.
Money laundering is treated as a high risk by the SRA and all reports are treated with urgency. Further information can be found in this publication: Cleaning up: law firms and the risk of money laundering.
