Who bears the burden of Money Laundering? John Binns writes for Inside Conveyancing

Who bears the burden of Money Laundering? John Binns writes for Inside Conveyancing

BCL partner John Binns’ article ‘Money-Laundering: Who bears the burden and how would it work?’ has been published by Inside Conveyancing.

Here’s an extract from the article:

The government says that regulated firms should pay to help improve its efforts to tackle money-laundering, but is this really fair, and how would it work in practice?

Costs upon costs

The cost of Anti-Money-Laundering (AML) compliance, in terms of time spent by conveyancers, estate agents and others, is, by now, well known. 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 conveyancers and estate agents

By way of background, it is worth bearing in mind how AML issues can arise for conveyancers. The principal money-laundering offences in the Proceeds of Crime Act 2002 (POCA) 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). There is also an obligation to submit a SAR where there are reasonable grounds to suspect that a client is committing a money-laundering offence, which applies only in the context of work in the ‘regulated sector’, including law firms that participate in certain real property transactions, estate agents, and others. This obligation is supplemented by a raft of additional obligations under money-laundering regulations (MLRs), which include preparing firm-wide risk assessments and conducting due diligence on clients.

The government’s approach

The government’s approach to tackling economic crime, including money-laundering, is complex and beset with issues. While proclaiming the value of involvement from the private sector, particularly the banks, it has consistently underfunded the state institutions that are charged with investigating economic crime. Its Economic Crime Plan for 2019-22 promised, among other things, a ‘sustainable resourcing model for economic crime reform’. Part of that model, it later transpired, was a plan to collect £100 million a year by imposing a financial levy on businesses, including law firms and estate agents, that operate in the regulated sector. A consultation paper in July last year asserted the government’s belief that ‘it is fair that those whose business activities are exposed to money-laundering risk pay towards the costs associated with responding to and mitigating those risks’, and claimed that the regulated sector ‘stands to benefit directly from certain specific improvements set out in the Economic Crime Plan’, including reforming SARs.

The Law Society and SRA responses

In its response to the consultation, the Law Society strongly opposed the asserted principle behind the AML levy, pointing out that law firms already play an important role in tackling money-laundering, and that the benefits of tackling money-laundering would be felt by society as a whole. The SRA, in contrast, strongly supported the idea, even opposing the government’s suggestion that smaller firms should be exempted from the levy. The idea of the exemption was, it said, contrary to the ‘risk-based approach’ for the levy, under which ‘firms undertaking work with the highest risk of being used by money launderers should pay more than lower risk firms’.

This article was originally published by Inside Conveyancing on 11/01/21. You can read the full version on their website.

John Binns is a specialist in proceeds of crime laws, cannabis regulation, sanctions, and tax investigations. He has extensive experience in financial crime, which also involves bribery and corruption, extradition, Interpol, fraud, market abuse, and the conduct of related civil proceedings. He is a prolific writer and speaker on a variety of topics.