Law firms are being urged to check that they are up-to-date with all the latest developments and legislation regarding money laundering by reading two new pieces of national sector-wide guidance issued on the subject.
Following on from the regular national economy-wide money laundering (and terrorist financing) risk assessment published by the Government in December, the SRA have published a dedicated sectoral risk assessment looking at the specific risks and challenges within legal services.
Published collectively by all legal services supervisors in the UK, the Legal Sector Affinity Group (LSAG) 2020 guidance provides a detailed commentary on now amended regulations (as well as the 2017 regulations) law firms need to be aware of regarding money laundering.
Juliet Oliver, SRA General Counsel, said: ‘Tackling money laundering is a priority for all of us and we know the vast majority of firms are committed to keeping the proceeds of crime out of the profession. These documents offer comprehensive information on some of the better ways to achieve this.
‘Our sectoral risk assessment identifies and discusses the biggest issues and emerging threats currently facing providers of legal services as they look to combat money launderers. It is complemented by the LSAG guidance, which covers all the bases of the 2017 regulations, plus a thorough review of how regulations and expectations on firms have evolved since then.’
The sectoral risk assessment outlines the SRA’s view of the issues facing legal services as they work to tackle the risk of money laundering. It should be used by firms as a basis for creating and updating their own firm-wide risk assessments, against which anti-money laundering policies, processes and training should be implemented. All firms have a legal obligation to have a firm-wide risk assessment. Firms must have regard to the SRA’s sectoral risk assessment, and any updates (which the SRA have stated will be made on a regular basis to keep up to date with emerging risks and trends), when creating and maintaining their own written risk assessment as required by Regulation 18 of the regulations, along with a comprehensive knowledge of their business and clients. As part of their supervision programme, the SRA ask to see firms’ written risk assessments and policies, procedures and controls from time to time.
The LSAG guidance provides an update to previously issued material from 2018 following a thorough review of that content based on developments since then. Key changes in the new publication include:
- Expanded guidance on understanding source of funds and source of wealth
- A new section addressing the need for firms to understand the technology they are using in order to use it effectively
- Clarifications on high-risk sectors, accepting cash into the client account, customer due diligence (CDD) on referrals from another legal practice, timing of CDD/exceptions
- Discrepancy reporting to Companies House, and other relevant registries from new duty/obligations introduced from January 2020, ie material changes to the regulations which are reflected in the guidance.