Money laundering fines reach record high

Money Laundering Regulations should not place disproportionate obligations on the legal profession

The Law Society have said that HM Treasury should ensure that changes to the Money Laundering Regulations (MLRs) should not place disproportionate and unnecessary obligations on the legal profession.

In response to a consultation on the effectiveness of the MLRs, the Law Society’s key concerns are: Any reforms to the MLRs should not place disproportionate and unnecessary obligations on the legal profession, there needs to be a balance between data privacy and anti-money laundering (AML) obligations and the MLRs could have a stronger emphasis on managing specific risks and client and matter profiling

Law Society president Nick Emmerson said: “Solicitors play an important role in combating money laundering and remain fully committed to tackling illicit finance.

“The Law Society fully supports the goals of a robust and proactive AML regime, including proportionate and risk-based MLRs being reinforced by appropriate guidance. However, the current MLRs do not achieve this and changes are needed to accomplish this goal.

“The MLRs are aimed at retail banks, which process hundreds of thousands of customer transactions daily.

“Many of the requirements are disproportionate, unnecessary and difficult to implement in practice for solicitors, particularly for smaller firms that have limited resources. We therefore welcome the opportunity to ensure the MLRs are more proportionate to the risks and emerging threats.”

On the balance between data privacy and AML, Nick Emmerson added: “We welcome plans to remove barriers to the adoption of new technologies, such as digital identification.

“We are, however, concerned on the widescale processing of personal data for compliance.

“There needs to be a balance between data privacy and AML obligations, a balance which at times can be incorrectly weighted in the latter’s favour.”

On managing specific risks, Nick Emmerson said: “Client and matter profiling have a stronger emphasis in the reformed MLRs.

“Customer due diligence measures in practice are to ‘know your client.’ However, the current sectoral guidance focuses too much on name, address and date of birth. This rarely helps identify potential real risks or provides an adequate profile of the client.

“The MLRs should make it clearer that where a client is conducting activity outside their socio-economic profile, the solicitor should either update their profile or understand why and how they are involved in the unusual matter.”

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