Law firms await advice over beefed up money laundering rules

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Jun 26, 2017
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The new regulations require businesses to carry out stricter checks any time money changes hands

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Solicitor regulators were to scramble out guidance to law firm leaders today on how they could be caught by strengthened money laundering regulations from Whitehall.

The Solicitors Regulation Authority said that it would produce updated advice as soon as possible after the Treasury published the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 on Friday.

Officials at the regulator acknowledged that practice managers had been given little advance notice to implement the updated requirements, and that therefore it would “take a proportionate and pragmatic approach as firms take steps to comply with the new requirements”.

In a statement, Treasury officials said that the updated rules were mostly targeted at banks, estate agents, accountants and payment firms. They would “have to carry out stringent and targeted checks to make sure that money changing hands is from a legitimate source and will not be used to fund terror acts”.

But law firm partners could also be in the frame. Jonathan Grimes, a partner at Kingsley Napley, a London law firm that specialises in white collar crime, said that while the new regulations did not change the regime for reporting money laundering suspicions, “the introduction of enhanced customer due diligence in a wider range of circumstances may indirectly bring about an increase in circumstances where a report is required”.

The reforms bring a “risk-based approach” regarding corporate and individual clients “rather than a box-ticking exercise”, according to an analysis from the law firm.

“Firms must ensure that the policies and procedures they set in place are commensurate to the risks they face. Revamped provisions in terms of know-your-client are set out with detailed customer due diligence provisions.”

The firm pointed out that the beefed up rules would put obligations on senior managers “in terms of being responsible for a firm’s compliance with the regulations – at home and abroad. Sanctions will apply to individuals as well as firms.”

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