Regulatory and Compliance Training & Consultancy

National Risk Assessment: Key Money Laundering Risks in the Legal Sector

November 2017

The recently published UK National Risk Assessment (NRA) of Money Laundering and Terrorist Financing 2017 identifies the key money laundering risks affecting the legal sector.

The NRA identifies that, “Due to the attractiveness of legal services to criminals and their continued prevalence in high-end money laundering (including some instances of complicity), there is still assessed to be a high risk associated with abuse of legal services in money laundering…….Legal services are not judged to be attractive for terrorist financing, and there is no specific evidence of these services being abused by terrorists, so the terrorist financing risk associated with the sector is assessed to be low.”

The key risk areas impacting on solicitors, and the legal sector more generally, identified in the National Risk Assessment are as follows:

Trust and Company Formation Services

The creation of trusts and companies on behalf of clients is assessed to be the legal service at greatest risk of exploitation. Investigations by law enforcement often feature trusts and companies being used to facilitate high-end money laundering by hiding beneficial ownership, undermining due diligence checks and frustrating law enforcement investigations. This is often used in conjunction with other services, in particular the purchase of property, to facilitate money laundering.

Conveyancing

The involvement of legal professionals in purchasing property is assessed to be another primary risk area for the sector. National Crime Agency (NCA) analysis of Suspicious Activity Reports (SARs) related to the legal sector in 2016 revealed that 50% were linked to the property market. Purchase of property provides an opportunity to launder a substantial sum in a single transaction, is a store of value (and often provides a capital gain) and can also be used to enhance criminal lifestyle. Cases encountered by law enforcement agencies continue to evidence the involvement of legal services (whether unwitting, negligent or complicit) in the purchase of property through overseas companies linked to the proceeds of crime, including high profile fraud and international corruption.

Misuse of Client Accounts

Misuse of client accounts represents a further risk in the legal sector. A major concern revolves around those firms or individual solicitors who, unwittingly or otherwise, provide a banking facility to their clients through their client bank accounts. Rule 14.5 of the SRA Accounts Rules 2011 restricts the types of transactions which are permitted through a client bank account with any receipt, payment or transfer to or from the client account only being allowed if it relates to an underlying legal transaction in respect of which the firm concerned is acting for the client. Solicitors should never allow their client account to be used to facilitate the transmission of money where there is no underlying legal transaction.

Want to know more? Book a place on our 3 hour ‘ Money Laundering Regulations 2017’ webinar for just £95 + VAT which is taking place on Tuesday 5 December 2017. This training course focuses on the application of the Money Laundering Regulations 2017 within the legal sector with consideration of the Law Society's recently published draft anti-money laundering practice note. Do not worry if you cannot make this date, those who have booked this webinar will have access to a recording of it for fourteen days following the webinar. If you would like to attend, please book your place using the link above or call us on 0330 223 5346 or e-mail us at info@lfpro.co.uk.

Alternatively, if you would prefer to attend a classroom based seminar you will find details of our upcoming anti-money laundering courses on our website.

The Money Laundering Regulations 2017 places a legal obligation on firms in the regulated sector to ensure that relevant employees, consultants and other subcontract staff are provided with anti-money training at least every two years. If you would like discuss arranging an in-house anti-money laundering training course please call Richard Lane on 0330 223 5346 or e-mail us at info@lfpro.co.uk.

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