legal sector AML rules

Legal sector continually abusing AML rules – report

A campaign group has formed a report claiming that law firms are continually abusing and showing “significant levels of non-compliance” with anti-money laundering rules.

Spotlight on Corruption are a campaign group who have published a report entitled “A privileged profession?” whereby they claim the legal sector receive special dispensation regarding anti-money laundering laws.

The report claims “significant areas of work” undertaken by those in the legal sector fall outside AML rules. The report also said:

“The legal sector is largely left to itself to decide for itself whether activity undertaken falls within scope of the AML regulations or not.”

The campaign group also allege that this activity is protected under the Proceeds of Crime Act 2002 which gives firms “a free pass to accept payment from the proceeds of a crime” which “opens the possibility of legal services being used to launder dirty money and skews incentives for legal professionals”.

The report claims the legal sector enjoys a “privileged” position which it is abusing. It stated:

“In particular, there is a real risk that privilege can be asserted to avoid reporting suspicion or knowledge of money laundering based on information that is not, properly speaking, protected by privilege.”

The report has called for stricter measures to be imposed on firms found to be in breach of AML rules.

The report highlights the fact the SRA’s average fine for AML breaches for 2019/20 was £11,906 which they claim, “compares poorly with the average for HMRC in that year of £61,700 and for the Gambling Commission of £3.35 million”.

The Solicitors Disciplinary Tribunal (SDT), who are responsible for assessing whether firms have broken AML rules and what fines they must pay, have come under criticism from the campaign group for giving firms “an overly generous interpretation of “mitigating circumstances”.

The report also claimed the SDT was targeting smaller firms for breaking AML rules as it noted none of the largest 25 firms (by revenue) have been fined in the last three years for AML breaches.

This report comes as MPs discuss proposals in the Economic Crime and Transparency Bill to give the SRA the power to impose unlimited fines those found to be involved in economic crimes.

A Law Society spokesperson responded to the report, as they said:

“The Law Society and legal sector share the UK government’s determination to combat economic crime. Solicitors play a key role in the UK’s anti-money laundering (AML) and economic crime regime. They act as gatekeepers to the financial system.

Solicitors in the UK are subject to some of the strictest AML obligations of lawyers anywhere in the world and spend significant amounts of time and money on compliance.”

However, it was revealed earlier this year that five hundred regulated UK businesses across the legal, property and finance and banking sectors were questioned in May on a range of AML compliance issues.

Almost half (47%) admitted to not changing their approach to monitoring existing customers since the war in Ukraine began. In addition to this, almost a quarter (23%) of the firms which did monitor existing clients said they did so only annually or every six months.

An astonishing 77% of the property firms who responded said they had either not changed the way they monitored existing clients or even reduced checks on them.

The report concludes that a nation-wide organisation hold firms to account, which Spotlight on Corruption claim should be the SRA because of its size, neutrality, and record of enforcing action against firms.

Read more stories

Join over 6,000 wills and probate practitioners – Check back daily for all the latest news, views, insights and best practice and sign up to our e-newsletter to receive our weekly round up every Friday morning. 

You’ll receive the latest updates, analysis, and best practice straight to your inbox.

Features