Excessive regulation or a necessary evil?

The law states that you should "regularly" train all employees relating to the law and risks in regards to money laundering and terrorist financing ( Regulation 21 of the Money Laundering Regulations 2007). Compliance with Anti-Money Laundering Regulations is still one of the greatest challenges for solicitors in the UK today. Whilst you may think it is excessive regulation or red tape, identifying and verifying a client’s identity is an essential requirement under current Anti-Money Laundering (AML) legislation and, as a regulated firm, legal professionals must employ a risk-based approach to their due diligence processes.

Not complying with AML puts you at risk of committing criminal offences. See below for a summary of the offences and the relevant penalties. In addition to the principal offences, you could also be charged with offences of conspiracy, attempt, counselling, aiding, abetting or procuring a principal offence, depending on the circumstances.

Section Description Penalty

327 Conceals, disguises, converts, transfers    On summary conviction

              or removes criminal property      up to six months              328        Arrangements regarding criminal property     imprisonment or a fine or                                                                                 both

329      Acquires, uses or has possession of             On indictment — up to 14                  criminal property                                      years imprisonment or a fine                                                                             or both

330 Failure to disclose knowledge, suspicion or    On summary conviction —              reasonable grounds for suspicion of money     up to six months                         laundering — regulated sector                         imprisonment or a fine or                                                                                  both                                    331    Failure to disclose knowledge, suspicion or  reasonable grounds for suspicion of money                                                        laundering — nominated officer in the                                                                regulated sector

332    Failure to disclose knowledge or suspicion of     On indictment — up to five          of money laundering — nominated officer             years imprisonment or a            in non-regulated sector                                fine or both

333 Tipping off — before 26 December 2007 On summary conviction —                                                                                 up to six months                                                                                             imprisonment or a fine or                                                                                 both 

333A Tipping off — regulated sector On summary conviction –                                                                                 up to three months                                                                                         imprisonment or a fine                                                                                     not exceeding level 5 or                                                                                   both.

                                                                                On conviction on                                                                                             indictment- up to two                                                                                       years imprisonment or a                                                                                 fine or both. 

342 Prejudicing an investigation                          On indictment — up to five                                                                                 years imprisonment or a                                                                                 fine or both

Many traditional identity checking methods can be costly, inefficient, insubstantial and time-consuming and they can also cause additional headaches from the enhanced due diligence requirements for increased risk or absent clients. Checking someone’s passport or driving licence does not rule out the threat that these could be very clever forgeries. It will also not indicate whether your client is a Politically Exposed Person (PEP), or if they appear on Sanctions lists. In order to remove some of these practical difficulties, enhance existing customer due diligence or corroborate manual checks, electronic verification can help to verify the identity of individuals, organisations or other forms of non-beneficial owners online. Many lenders still require photographic identification but leading electronic verification services such as AML Search can incorporate this information into the electronic check, with the system automatically adjusting the level of risk according to the type of document uploaded. In the current economic climate, electronic verification is a simple and effective solution that can reduce the burden, time and costs of compliance, enhancing your client’s experience and protecting you and your firm from risk. For more information about AML Search from STL Group see here

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