Anti-money laundering and client due-diligence
Now more than ever, anti-money laundering (“AML”) is a priority area for the government, law enforcement and regulators.
In 2019, the legal profession was criticised by the National Crime Agency for being slow to act to prevent it being used to facilitate the proceeds of crime being introduced into the United Kingdom’s economy. This criticism, together with the requirements of the 5th Money Laundering Directive, which came into force in January 2020, has made AML (and related area of client due-diligence (“CDD”) the SRA’s primary area of focus for 2020.
The 5th Money Laundering Directive builds on earlier law and places even stricter obligations on many providers of legal services in how they manage their AML procedures. Even if you and your firm already had robust AML and client due diligence procedures in place, you will still need to change your practices depending on your firm’s profile and activities; if you think your systems and processes could be better, now is the time to bring them up to date.
At the very least, every practice must have conducted and documented a full firm-wide risk assessment, even if you consider the AML risks for your practice to be low. Your policies, controls and procedures then need to be tailored to your firm, based on this assessment. They need to be adequate to enable the prevention, detection and reporting of money laundering, and actively maintained.
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You should be ready to demonstrate your compliance with these obligations at short notice. The SRA is not only responding to specific reports in this area but is conducting a thematic review of compliance with the requirements, which means it is actively contacting 7,000 firms to check what they have in place.
The SRA has promised robust enforcement action where obligations are not met. Whether you need an independent review of your risk assessment and policies, help preparing for an SRA inspection or other advice, we can help.