HMRC has recently brought together its anti-money laundering expectations into a new Anti-money laundering guidance for supervised businesses manual.
The guidance consolidates both general and sector-specific expectations in one place and covers key areas including:
- firm-wide risk assessments;
- customer due diligence and beneficial ownership;
- source of funds and source of wealth;
- enhanced due diligence;
- politically exposed persons (PEPs);
- ongoing monitoring;
- record-keeping; and
- suspicious activity reports (SARs).
The consistent message throughout is that AML controls must be risk-based, proportionate and properly evidenced.
Why does this matter to firms of solicitors?
Although the manual is aimed primarily at HMRC-supervised businesses, it provides a very clear statement of what a UK AML supervisor expects to see in practice. Much of the language and emphasis closely mirrors the themes that regularly appear in SRA guidance, thematic reviews and enforcement activity.
For law firms, the manual is therefore a useful benchmarking tool when reviewing:
- the quality of the firm-wide risk assessment;
- how source of funds and source of wealth are documented;
- whether enhanced due diligence is clearly justified;
- the effectiveness of ongoing monitoring; and
- whether the audit trail would satisfy a supervisor.
The most important takeaway is not that firms need more paperwork but that they need better evidence that risk assessments genuinely drive the level of due diligence applied.
This is a useful opportunity for firms to step back and ask a simple question:
If the SRA reviewed this file tomorrow, could we clearly demonstrate why the level of CDD, EDD and source of funds enquiries was appropriate for the risk presented?
If the answer is anything less than a confident “yes”, it may be time for a targeted review of the firm’s AML framework.
For firms wishing to read the new manual, HMRC has published it here: HMRC Anti-money laundering guidance for supervised businesses .
