Money laundering is a crime which puts law firms at high risk of becoming a target due to their credibility. It 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.
There have been some major changes to UK anti money laundering (AML) rules which 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 AML regulations provide strict rules and guidelines which all financial institutions and businesses 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 for money laundering and terrorist financing.
How can Law Firms Ensure Compliance with the New AML Rules?
The SRA has recently targeted hundreds of law firms and more than 40 solicitors were struck off or suspended in the last five years for failing to have adequate anti-laundering checks in place. As the AML rules impose strict sanctions for businesses who do not comply with The Money Laundering and Terrorist Financing (Amendment) Regulations 2019, it is within the interest of everyone that all Solicitors introduce or update existing policies for identifying, monitoring and reporting suspicions of money laundering.
There are many ways in which a law firm can ensure that they comply with the new AML rules. It is 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 can Proclaim Help?
To assist with the compliance of the new AML rules, Legal Practice Support’s Proclaim Development team has created a process to ensure a strong anti-money laundering process 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:
Vetting Process
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 mandatorily 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 mandatorily 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.
Reporting
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 unaudited, 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.
How can Legal Practice Support Help?
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 enquiries@legalpracticesupport.co.uk for further information.
James Denby is Head of Proclaim Development at Legal Practice Support and possesses in excess of eight years’ experience, both in-house and as an external consultant, in developing legal case management systems. James is also uniquely in the position of having worked as a Senior Manager within a law firm, and as having conducted his own caseload as an experienced Paralegal. As a seasoned Proclaim Developer, James understands the requirements of any IT system/workflow/task from the view of the user, as well as from an IT perspective.