Anti Money Laundering AML Update – April 2023

• Two firms have been fined £2,000 each for failing anti-money laundering inspections when the SRA discovered neither had a compliant risk assessment and ‘therefore failed to have sufficient regard for the SRA’s warning notice’.
  
  
• A retired solicitor has been fined £7,500 for using client accounts as banking facilities over decades to handle property management work for Arab clients.
  
  
• An experienced solicitor has been fined £7,501 for failing to react to a series of red flags on two dubious property sales, they admitted to being manifestly incompetent.
  
  
• A partner who ignored a warning letter from the SRA telling him not to use his client account as a banking facility, which he then did, has been fined £10,000.
  
  
• The SRA has fined a firm £5,000 for six years of anti-money laundering failures. The SRA said the firm’s conduct was “a wilful breach of its regulatory obligations which has persisted for more than five years” and had the potential “to cause significant harm to the public interest and to public confidence in the legal profession”. The long-standing and persistent nature of the firm’s failure to comply with the MLRs 2017 indicated that its breaches related to systemic issues within the firm. Its conduct is likely to be repeated in the absence of conditions. This is demonstrated by its failure to ensure compliance since 26 June 2017 despite the engagement and support provided by the SRA to assist it to comply.”

Proliferation Financing

Firms now need to consider their positions in relation to proliferation funding and make appropriate comments in their firm wide risk assessments (FWRA); for most firms this is likely to mean just including a comment that says, “We have considered our position in relation to proliferation funding and have determined that it is not relevant to the work we undertake, and therefore we do not need to take any action in relation to this; we will continue to monitor the position and will assess what, if any, changes we may need to make to our policies, controls and procedures (PCP).”  

SRA Thematic Reviews

The SRA is continuing with its programme of thematic reviews and this includes looking at compliance with the Money Laundering Regulations (MLRs), assessing compliance within firms that are out of scope with the MLRs, and that firms are compliant with sanctions legislation.  

Financial Action Task Force (FATF) Update

The Financial Action Task Force (FATF) has also been busy in key areas, including:

• Changes to the Grey List
  
  
• Suspending membership of the Russian Federation
  
  
• Improving transparency around beneficial ownership

Reporting discrepancies to Companies House

As part of strengthening existing money laundering legislation firms now need to report ‘material’ discrepancies to Companies House; this is aimed at enhancing the accuracy and integrity of the Companies House register. Reporting is an ongoing requirement and although firms are not expected to review information on a 24/7/365 basis they are expected to check information as and when appropriate.

It is worth noting that less than 30 law firms have so far agreed to provide verification services to beneficial owners under the Companies House Register of Overseas Entities regime.

Updated NCA Guidance

The National Crime Agency (NCA) has recently published updated guidance on reporting suspicious activity and all Money Laundering Reporting Officers should review this and take appropriate action, for example, update their firm’s FWRA, provide updated training to staff, update PCPs.

The webinar also provided an update in relation to the use of Chinese funds in UK property transactions and the risks posed by Chinese Underground Banking.