The Solicitors Regulation Authority (SRA) is pressing larger firms on the issue of independent audit under regulation 21 of The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. We have undertaken many of these for US and UK-based international firms and City firms and are used to auditing electronic files so are able to do this remotely.
Given the increasing number of challenges to legal professional privilege in the courts, we believe it is important that being an SRA-regulated law firm ourselves, providing legal advice on our clients’ compliance with the legislation, maximises the prospects of protection from legal professional privilege.
The SRA are asking several firms to provide their policies, controls and procedures. We have advised many firms on these, and on SRA investigations.
An HM Treasury advisory notice on enhanced due diligence in higher risk jurisdictions drew attention to the latest publication by the Financial Action Task Force (FATF). See www.legalrisk.co.uk/news for a link.
The SRA’s supervisory responsibility now extends to tax advice and it will be asking the 7,000 firms it regulates for AML purposes whether they offer tax services. The profession would benefit from guidance from the Legal Sector Affinity Group on what constitutes tax services for these purposes: does it, for example, extend to litigation with HMRC over VAT recovery by an innocent party in a carousel fraud case, or advice to a self-employed personal injury claimant on whether damages should be claimed gross or net of income tax or VAT?
Schedule 9 of the Proceeds of Crime Act 2002, amended by The Money Laundering and Terrorist Financing (Amendment) Regulations 2019, defines business in the regulated sector. By paragraph 1(1)(m) this includes ‘the provision of material aid, or assistance or advice, in connection with the tax affairs of other persons by a firm or sole practitioner, whether provided directly or through a third party, if the firm or sole practitioner by way of business provides (as the case may be) aid, assistance or advice in connection with the tax affairs of other persons’.