Anti Money Laundering: Solicitors Firm FIned for AML Breach
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Clarkes Law Firm in Telford have recently been fined £2,000 plus legal costs in the sum of £1,350 by the SRA for having inadequate controls in place to prevent money laundering and terrorist financing. Some of the main anti money laundering (AML) issues highlighted by the SRA included:
- The firm did not have a compliant AML firm-wide risk assessment until February 2022, even though they had declared that they had an assessment in place 2 years prior.
- Compliant AML policies, controls and procedures were not put in place by the firm. Some of these issues included inadequate training to staff, an absence of source of funds and out of date guidance.
- The original risk assessment did not consider the firm’s transactions or delivery channels, which are required by the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs 2017).
Although the SRA stated that the firm “showed a disregard for statutory and regulatory obligations and had the potential to cause harm by facilitating dubious transactions that could have led to money laundering (and/or terrorist financing),” they further stated that, following a remedy to the breaches, “there was no evidence of harm to consumers or third parties. There was now “a lower risk of repetition.”
Anti Money Laundering- Solicitors Duties
Money laundering is a criminal offence which puts firms at risk of becoming a target due to the vast amounts of money they handle on a daily basis. Money laundering is not a victimless crime as it is usually responsible for the funding of other crimes including drug trafficking and the financing of terrorism. The UK anti money laundering (AML) rules are in place to prevent money laundering within all businesses.
New anti money laundering solicitor rules for law firms in England and Wales came into effect on 10th January 2020 with the introduction of The Money Laundering and Terrorist Financing (Amendment) Regulations 2019. These regulations provide an update to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017).
The new anti money laundering regulations provide strict rules and guidelines which all law firms and businesses in the financial services industries should adhere to in order to prevent financial crime. The prevention of money laundering and counter terrorism are now a top priority for law enforcement, so the new AML rules should be of utmost importance to all businesses at risk of being used to launder money.
As the legal industry is a regulated sector, it is now a legal requirement for solicitors to carry out risk assessments to avoid the risk of money laundering when dealing with clients.
It is essential that all law firms have a vetting process in place to check for money laundering risks when taking on new clients. Any high risks or warning signs should be reported to am manager or the appropriate person within the business.
The AML rules require that a Money Laundering Reporting Officer (MLRO) should be appointed within a law firm. This is usually a senior member of the firm who has access to all files so that they can effectively design AML compliance systems and processes. All file handlers within the firm should be aware of the warning signs and they should know who to report suspicious activity to.
How LPS can help solicitors with AML compliance
To assist with the compliance of the new AML rules, Legal Practice Support’s Proclaim Development team has created a wide range of solutions to ensure a strong anti-money laundering processes can be implemented for all case types within the Proclaim software itself. We have set up the following to ensure compliance of AML is made as easy as possible for your law firm:
LPS have developed an anti-money laundering process to ensure all new clients are vetted for money laundering risks. This process can be set up to form part of any case type. As firms are required by legislation to have a risk assessment in place, it is therefore of paramount importance that you have fully compliant processes in place.
Following the AML rules and the guidance set out by the SRA, the process created by Legal Practice Support requires any new client to have been fully risk assessed. There is also a requirement within the process for warning signs of money laundering to be checked and for all ID documentation to have been provided from the outset.
Any high risks, or warnings signs identified are then flagged to the relevant person within the business. From here, instructions can either be approved, rejected, or further information requested.
To ensure compliance with the AML rules, a single report can be provided to offer a summary of Management Information. This will ensure that full money laundering checks are completed by all staff. The report will flag all cases that have not had checks completed, or those with which there are outstanding Manager approvals. This ensures no case is left un-audited, and that there is no way of cases ‘slipping through the net’. This ensures a fully compliant anti-money laundering process is in place for all cases.
Suspicious Activity Reports (SAR)
Suspicious Activity Reports inform the National Crime Agency of any known or suspected criminal activity such as money laundering or financing terrorism Submitting an SAR will protect your firm against the risk of laundering the proceeds of crime.
Proclaim can be useful with SAR’s as it can be developed to provide the ability to prepare SAR’s to authorities when required by your law firm.
If you would like to discuss how to incorporate rigorous anti-money laundering processes into your Proclaim system, or to discuss general Proclaim development, please do not hesitate to contact email@example.com for further information.
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