Experts Discuss Anti-Money Laundering And Conveyancing
Since the 2017 Money Laundering Regulations came into force, conveyancers and key stakeholders in the property sector have struggled to prevent property from being purchased with illicit finance.
Over 400 UK properties, worth in excess of £5 billion, have been purchased using suspicious wealth according to a recent report by Transparency International UK.
Furthermore, 293 properties were purchased by politically exposed persons (PEP) from high-corruption, high-risk jurisdictions using funds considered suspicious.
The Solicitors Regulation Authority (SRA) has also highlighted potential failings within many law firms which could explain why so much economic crime proceeds are able to funnel through UK property.
Over the past five years, the SRA has investigated 172 law firms for anti-money laundering non-compliance with 40 solicitors being struck off, voluntarily leaving the roll or suspended in the process.
Having requested 400 SRA regulated law firms send the regulator examples of their compliance with the 2017 Money Laundering Regulations, 21% were deemed to be severely failing in their policies and procedures with risk assessments lacking individuality due to a perceived lack of effort or considerations of risks evident in many cases.
7,000 law firms will now be approached by the regulator to confirm their compliance with more visits scheduled in the year ahead.
Following the recent difficulties in AML compliance, Todays Conveyancer asks why law firms are struggling to stem the flow of illicit financing trickling into property? As regulations increase, adapt and change, why is it so important to fully comply in the future?
Brian Rogers, Regulatory Director and Head of Content & Thought Leadership at Riliance, said:
“We see first-hand from the file reviews we carry out on behalf of firms the reasons why some are failing in their AML obligations; we often see the following breaches:
- Failing to carry out matter-based risk assessments (initial, ongoing, final)
- Failing to obtain appropriate identity documents for clients
- Failing to obtain appropriate source of funds information
- Failing to assess a client’s source of wealth
- Failing to carry out sanctions/PEP checks
“It is no good firms having risk assessment forms on files/case management systems if they are not going to use them!
“The whole point of risk assessments is so firms can try and spot suspicious clients/transactions and then report anything they find to the NCA, where appropriate.
“Failing to ensure staff carry out appropriate risk assessments is asking for trouble; sadly, I suspect the SRA in its latest review of 7,000 firms will find similar issues as we have but will take enforcement action rather than point out the error of their ways like we do!”
Robert Sanderson, Managing Director at the Practical Vision Network including Lawyer Checker, Solve Legal Marketing and The Move Exchange, commented:
“We all agree that money laundering and terrorist financing is abhorrent. So just why is it so difficult to stamp out? If, like me, you’ve been a COLP, COFA or Nominated officer, you will fully understand the challenge:-
“1 – There is little point in trying to introduce a compliance regime in an organisation if you don’t have the active support of the senior management. It’s likely that the senior management will be so focussed on revenue that they view compliance with the Money Laundering Regulation as an irritant and a distraction.
“2 – Building, operating, reviewing and promoting a compliance culture and framework can be a full-time role. You must have sufficient time to devote to it with adequate resources. Firms are constantly challenged to dedicate this resource.
“3 – You must have sufficient seniority to make decisions on reporting and have the authority to access all client files and business information. It’s rare that firms appoint officers with adequate authority to discharge their role.”
Colette Best, SRA Director of Anti-Money Laundering, said:
“Solicitors have a big part to play in stopping criminals from being able to launder money through services they provide. If we can stop crooks from laundering the proceeds of crime, that goes a long way to stopping the crime itself from being attractive. Solicitors act as a gatekeeper to assets that are used to clean the proceeds of crime, and that position of trust brings certain responsibilities.
“Most law firms take the issue seriously – but most is not enough. We expect firms to take a considered and risk-based approach to preventing money laundering.
“We have published a range of support to help law firms identify and record where their money laundering risks are. Knowing where the risks lie, and having in place policies, procedures and controls to mitigate those risks is the bedrock of the money laundering regulations and I would urge all firms to make sure they are up-to-date.
“We are doing everything we can to help to prevent and detect money laundering. This includes both proactive and reactive work, for example, we will be visiting firms as well as responding to information about wrongdoing. The bottom line is that money laundering funds crimes such as people and drug trafficking. We all have a role to play in tackling the problem and we expect firms to take their obligations seriously. Make sure you are doing your bit to be compliant and prevent money laundering.”