New and updated guidance since our May 2023 Risk Update includes RUSI’s Institutional Proliferation Finance Risk Assessment Guide, National Crime Agency Guidance on submitting better quality Suspicious Activity Reports (SARs), Companies House Guidance on the Register of Overseas Entities: approach to enforcement and SRA Guidance on Proceeds of Crime (of particular relevance to firms outside the AML regulated sector).
The Money Laundering and Terrorist Financing (High-Risk Countries) (Amendment) Regulations 2023 removed Cambodia and Morocco from the list of countries for the purposes of enhanced customer due diligence requirements in regulation 33(3) of The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. No countries were added this time. On a general note, however, failure to pick up additions to the list (as when countries were added twice in 2022) is a point we often encounter when auditing under Regulation 21 of the 2017 Regulations.
The SRA has imposed fines on individuals for failing to comply with their firms’ policies, controls and procedures.
HM Government has published a consultation paper: Reforming anti-money laundering and counter-terrorism financing supervision. This discusses four alternative models –
- Enhancing OPBAS, or ‘OPBAS+’;
- Reducing the number of AML/CTF Professional Body Supervisors (PBSs) – either to two (legal and accountancy), or six (two in each of the three UK jurisdictions);
- Creating a single AML/CTF supervisor for professional services, replacing the current PBSs; or
- Creating a single AML/CTF supervisor for all sectors.
The consultation addresses supervisory effectiveness, leaving the impression that effectiveness is measured in the size of fines, comparing them with the fines levied on large financial institutions which are often many times the size of professional service firms. Successful regulation should mean that firms are compliant, resulting in fewer fines, not more.
Links to the above documents are on www.legalrisk.co.uk/News.
Sticking with the theme of fines, the Government has also published a factsheet on The removal of the statutory cap on financial penalties for the Law Society, as delegated to the Solicitors Regulation Authority, noting that ‘[when] the SRA believe a financial penalty above £25,000 is applicable to a case, the process of referring cases to the [Solicitors Disciplinary Tribunal] is time-consuming and resource intensive due to having to participate in any hearings. One could probably say the same about criminal trials. The point is of concern with the enhanced fining powers of the SRA, acting as prosecutor, judge and jury.
This all emphasises the significance of ensuring compliance before things go wrong. We have been advising on AML law and regulation since before the Money Laundering Regulations 2003 came into force. As well as audits, we advise on risk assessments and policies, controls and procedures, and provide focused training for compliance teams, including new Money Laundering Reporting Officers and Compliance Officers. Firms which have not had an AML audit in the past 18 months should be planning their next audit; a shorter interval may be appropriate if there have been significant changes in the practice.
The Russia (Sanctions) (EU Exit) (Amendment) (No. 3) Regulations 2023, in force from 30 June 2023, introduce a broad prohibition on the provision of non-contentious legal services. The Russia (Sanctions) (EU Exit) Regulations 2019 include consolidated amendments. Links to guidance from HM Government and The Law Society are on www.legalrisk.co.uk/News.
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