Anti-Money Laundering (AML) Update – July 2022
The Access Legal July 2022 AML Update webinar covered a number of topics, including:
Keep reading for a breakdown and the key takeaways, or watch the AML update webinar on demand.
AML Updates July 2022
Chinese funds update
The National Crime Agency (NCA) has still not published guidance around what firms should do when clients want to use funds coming from China in UK property transactions, however the Legal Sector Affinity Group (LSAG) has said it will produce guidance in due course.
SRA Thematic Review Report
The Solicitors Regulation Authority recently published its report into visits it made to 69 firms to assess firms’ levels of AML compliance/. Key areas of concern were:
- Policies, controls and procedures
- 55% need improvement
- 33% did not follow these in practice
- 55% need improvement
- Firm Wide Risk Assessments
- There was a lack of information covering:
- High risk third countries
- Clients seeking anonymity
- Reliance arrangements
- High risk third countries
- Employee screening
- 49 of the firms visited need to improve their ongoing screening arrangements
- There was a lack of information covering:
The above observations raise some real concerns and could create real problems for the firms that are currently failing, including regulatory enforcement action and PII insurers viewing such firms as too high a risk to cover.
The Legal Sector Affinity Group (LSAG) guidance has been updated, and approved by HM Treasury; firms must familiarize themselves and their staff with the key changes that include:
- Updated content around the verification of the identities of beneficial owners
- Redirecting away from the old EU High Risk Third Country lists towards the UK’s own list
- Small clarifications to the section on Legal Professional Privilege
- Clarification on what is not “an arrangement” under the Proceeds of Crime Act and further clarification on the “adequate consideration” defence
LSAG also issue advisory notes which firms should take note of, in particular:
- Remote Working – client interaction and associated use of AML technology
- Impacts of economic instability
Client Risk Assessments
LSAG guidance provides good insights into what firms need to cover in these initial and ongoing assessments, especially the obligation to record a risk assessment for every client they act for.
Fundamental to any client risk assessment is consideration of the client’s financial circumstances, business profile and source of wealth which should align with the background and wider profile of the client. In addition, firms should consider negative or adverse press/media coverage, geographical, PEPs and sanctions risks.
Matter Risk Assessments
LSAG guidance is again the place to go to look at what is required in this area, including focusing on the specific risk factors apparent beyond the client risks already identified; assessments should document the circumstances and the identified risks.
Matter risk assessments must be recorded and signed (manually or digitally) by the persons undertaking them.
Other important legal topics covered in the webinar
We also covered other areas that are of interest to firms:
- Handling clients following the submission of a suspicious activity report
- Safeguarding against sanctions breaches
- Returning dirty money to clients or third parties
- Update on the Economic Crime (Transparency and Enforcement) Act 2022
You can get full details on the topics covered, and the Q&A session, by listening to the recording of the update.
