Heat is on over money laundering
City professionals are being targeted, but are lawyers really the weak link in the chain of defence against this crime
On Tuesday of this week David Farrer, QC, ran a seminar for the barristers of 7 Bedford Row that focused on money laundering legislation and the changes ahead. One of the topics was the “Risks run by professionals” — that is, lawyers and accountants. No surprise: money laundering is now high on the government’s agenda and City professionals are being targeted as a way of rooting it out.
This was why Keith Bristow, head of the National Crime Agency, highlighted them in his speech to George Washington University in America last week. “The involvement of a small minority of complicit, negligent or unwitting professionals in the financial, legal and accountancy sectors facilitates money laundering,” he said.
So are lawyers really the weak link in the chain of defence against the global evil of money laundering? You would guess so, given the thinking behind what is termed the “professional enablers offence” within the new Serious Crime Bill, which is aimed at people who knowingly participate in an organised crime group.
“While there is no express reference in the bill to those in legal services,” says Peter Binning, of Corker Binning, “the Home Office’s press briefings in advance of its publication make it clear that lawyers and accountants are very much the targets of the new measure.” This is confirmed by recent comments by Home Office minister Karen Bradley who said, “For too long corrupt lawyers, accountants and other professionals have tried to evade justice by hiding behind a veneer of respectability.”
Unsurprisingly, lawyers are not impressed. While they accept that there are “bent” members of the profession, there is a suspicion that lawyers have become the scapegoats of what is a much more complicated problem.
“I think that these claims [that lawyers are significantly implicated in money laundering] are running ahead of the evidence,” says Susannah Cogman, of Herbert Smith Freehills. And Ioannis Alexopoulos, at Bryan Cave, says that, as a libertarian, he is cynical about the timing of these statements given the current political agenda. “Ever-tightening controls create a lot of collateral damage,” he says. “I’d prefer an approach that addresses the real issues such as education and meaningful substantive risk assessment.”
Other commentators agree that there is a need for enhanced education in how to spot possible money laundering, along with higher rates of enforcement by the authorities. And there is doubt whether the new offence will be made to stick. “It is very vague,” Binning says. “In practice I can’t see many prosecutions being brought under it.”
According to Collingwood Thompson, QC, of 7 Bedford Row, part of the suspicion focused on lawyers is due to a misunderstanding of the scope of their professional privileges. Under the Proceeds of Crime Act 2002 (the UK’s primary anti-money laundering legislation) lawyers are prevented from disclosing knowledge of money laundering to the authorities if that knowledge (or suspicion) is based on privileged information. However, not everyone is sympathetic to this time-honoured right, with Transparency International complaining that the Serious Crime Bill “doesn’t stop lawyers looking the other way to money laundering under the protection of legal professional privilege”.
Law firms will say that they take their responsibilities very seriously. Mark Compton is in the financial services regulatory & enforcement practice of Mayer Brown, which, like all firms, has a money laundering reporting officer in London who carries a personal liability for failing to report suspicions or knowledge of money laundering.
Compton explains that the firm has detailed processes for the evaluation of how to act when questions arise over clients’ transactions and new clients are checked rigorously before being taken on. “Failure to report a suspicion has serious repercussions for the firm but, equally, you should not submit reports that have no real basis just to cover yourself or to meet a quota as this can cause more harm than good,” he says. Nonetheless the Law Society advises, “You do not have to have evidence that money laundering is taking place to have suspicion.”
According to Cogman, there are more than 350,000 “suspicious activity reports” made annually to the authorities by a range of regulated bodies and individuals, including 3,610 by lawyers. Some people question whether enough use is made of the potential intelligence that could be gleaned from these reports. This could become an issue next year, she says, given the likelihood that the UK will be subject to a lengthy peer review by the Financial Action Task Force, the global body responsible for setting and monitoring international standards on combating money laundering.
Meanwhile, the EU’s fourth anti-money laundering directive is almost on us. The big change for the UK in 2017 will be the setting up of “ultimate beneficial ownership” registers for both corporate entities and trusts. The lawyers have already expressed their doubts. Expect more controversy ahead.
Read the original article here.
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