Money Laundering: Who Bears the Burden? John Binns writes for Solicitors Journal

Money Laundering: Who Bears the Burden? John Binns writes for Solicitors Journal

BCL partner John Binn’s article ‘Money Laundering: Who Bears the Burden?’ has been published by Solicitors Journal discussing the governments claims that regulated firms should pay to help improve its efforts to tackle money laundering.

Here’s an extract from the article:

Costs upon costs

The cost of Anti-Money Laundering (AML) compliance, in terms of time spent by solicitors and other staff, is, by now, well known to most law firms. But the government’s new plan to help fund its efforts to fight money laundering threatens to impose a new financial burden on top. A number of issues have been raised in the consultation process, with notably different responses from the Law Society and the SRA. So, what will this mean for firms that are already overburdened by these complex issues?

The issues for law firms

By way of background, it is worth bearing in mind that AML issues can arise at law firms via two very different routes, though these overlap substantially in practice. The first route arises from the principal money laundering offences in the Proceeds of Crime Act 2002 (POCA), which involve various forms of dealing with or being concerned in arrangements about ‘criminal property’. The offences are subject to exceptions where the person concerned makes a Suspicious Activity Report (SAR) and requests consent, also known as a Defence Against Money Laundering (DAML). A solicitor who deals with client money, or who otherwise becomes concerned in their financial arrangements, may be effectively compelled to submit a SAR if a suspicion arises, in order to avoid committing a money laundering offence.

The regulated sector

The second route arises from the specific obligation to submit a SAR where there are reasonable grounds to suspect that a client (or someone else) is committing a money laundering offence. Unlike the principal money laundering offences, this obligation applies only in the context of work in the ‘regulated sector’, which includes (among an increasingly broad range of businesses, principally banks and other financial institutions) law firms that provide tax advice, who participate in certain financial or real property transactions, or who act as trust and company service providers (TCSPs). A solicitor who identifies such grounds for suspicion is legally required (with some exceptions, such as where the relevant information is privileged) to submit a SAR, whether or not they also request consent (which would make it a DAML SAR).

Complex requirements

Importantly, this obligation to submit SARs under POCA is supplemented by a raft of additional obligations under money-laundering regulations (MLRs), which are designed to implement EU directives, and include preparing firm-wide risk assessments and conducting due diligence on clients. These obligations apply, in effect, to law firms and sole practitioners where, and to the extent that, they operate in the regulated sector. Taken together, the obligations from POCA and the MLRs impose a strict set of requirements (underpinned by criminal liabilities) that are designed to gather information on suspected money launderers, and to divert them from the UK‘s financial system.

 

This article was originally published by Solicitors Journal 04/02/21. You can read the full version on their website.

John Binns is a partner at BCL specialising in all aspects of business crime, with a particular interest in confiscation, civil recovery and money laundering under the Proceeds of Crime Act 2002 (“POCA”). His business crime experience includes representing suspects, defendants and witnesses in cases invoking allegations of bribery and corruption, fraud (including carbon credits, carousel/MTIC, land-banking, Ponzi and pyramid scheme frauds), insider trading, market abuse, price-fixing, sanctions-busting, and tax evasion. He has coordinated and undertaken corporate investigations and defended in cases brought by BEIS, the FCA, HMRC, NCA, OFT, SFO and others.

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