A draft of The Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022 has been published. They will require risk assessments and policies, controls and procedures (PCPs) to address proliferation financing risk in addition to AML and counter terrorist financing.
One should resist the initial reaction that this may not impact on law firms: although it will be more relevant to some than others, such as those advising on trade finance, insurance and shipping, all firms in the regulated sector will have to address it. The de-tailed definition of proliferation financing in regulation 6 includes the provision of funds or financial services in connection with weapons, dual-use goods and technology for non-legitimate purposes in contravention of financial sanctions.
The draft also makes provision in relation to cryptoassets and widens the scope of provisions relating to trust or company service providers (TCSPs), including the formation of limited partnerships registered in England & Wales or Northern Ireland and additional customer due diligence requirements. It also widens information and intelligence sharing gateways with regulators including the Solicitors Regulation Authority (SRA) and extends the material discrepancy reporting provisions: firms will be required to report material discrepancies in beneficial ownership arising from ongoing client due diligence obligations. The government intends to provide a list of what is to be regarded as a ‘material discrepancy’.
The FATF has added Gibraltar to its grey list of jurisdictions with strategic deficiencies in its anti money laundering and counter terrorist financing regime and removed Malta.
The Law Society has published two guidance notes, Remote working, client interaction and associated use of AML technology and Impacts of economic instability on money laundering risk. These notes are supplementary to the Legal Sector Affinity Group (LSAG) anti-money laundering guidance for the legal sector and do not supersede it.
Links to the above can be found on www.legalrisk.co.uk/News.
The SRA has sent out questionnaires to firms requesting information on their work within the scope of The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR) to assess the risk of the law firms they supervise. Responses are required by 31 July 2022 from firms within the scope of the MLR; firms no longer in scope must respond accordingly and submit form FA10b to amend their authorisation records.
Finally, press reports indicate that AML controls may be strengthened in the United States, with the fast-tracking of the ENABLERS Act (full title: “Establishing New Authorities for Businesses Laundering and Enabling Risks to Security Act”). This is intended to lead to the imposition of due diligence and reporting requirements and provision for PCPs on lawyers and other gatekeepers, including accountants, financial advisers, art dealers and TCSPs – but, oddly, not real estate agents.
We already provide legal advice to a large number of US firms with UK offices on their AML compliance and audits. We also advise on com-plex reporting issues and legal professional privilege. For further information contact [email protected].
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