Firms which fall within the changed, wider definition to ‘tax advisers’ need to notify the Solicitors Regulation Authority (SRA) before 10 January 2021 if they have not already done so. A link to the SRA Tax Adviser Guidance can be found on www.legalrisk.co.uk/News, and contains details of the process.
Under regulation 3 of the Money Laundering and Transfer of Funds (Information) (Amendment) (EU Exit) Regulations 2019, the definition of a ‘third country’ is a country outside the UK, as opposed to the previous definition of one outside the EEA. So, for example, the provision of nominee directors or shareholders for a European client or the formation of companies in Europe would be relevant to enhanced due diligence under regulation 33 of The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.
The SRA continues to inspect firms and in some cases led to referral for formal investigation.
A number of themes emerge from their inspection of policies, controls and procedures, staff interviews and file review. These include the requirement (where applicable) for independent audit, screening, firmwide risk assessments (including evidence of the process by which they were produced), matter risk assessments, and treatment of Politically Exposed Persons (PEPs) and other higher risk clients and matters. File reviews have identified issues such as inadequate customer due diligence, insufficient investigation into source of funds (including their origin) and source of wealth.
Independent audit has been raised as an action item even with a provincial practice with fewer than ten partners. In many cases training, even from well-known online providers, has not fulfilled key statutory requirements. The quality of training is important because customer due diligence and ongoing monitoring cannot be the function of the risk and compliance team alone: the role of client-facing staff is critical.
We have audited many leading UK and US based firms and advised on responses to SRA action. We also provide training for compliance teams as well as fee earners and support staff.
Revised guidance from the Legal Sector Affinity Group (LSAG) is expected imminently and it is anticipated that it will be published in advance of obtaining HM Treasury approval. We will provide a link to it on our website when it is available.
Given the partial overlap in issues raised, firms will also want to consider the integration of their AML processes with DAC6/Mandatory Disclosure Regime (MDR) compliance (as to which see further below)
In the United States, The Corporate Transparency Act provides for a new US federal reporting requirement for beneficial owners of companies formed or operating in the USA (with several exceptions).
A wide collection of legislation, cases, guidance and other documents can be found on www.legalrisk.co.uk/AML. An SRA report on AML visits is on www.legalrisk.co.uk/News.
The UK is no longer implementing EU sanctions. All sanctions regimes will now be implemented through UK regulations.
‹ Back to Publications