The first of these is the obvious one – any firm doing business in the regulated sector under The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 must have a firmwide risk assessment (also referred to as a practice wide risk assessment – PWRA), but a number of firms and individuals have been fined by the Solicitors Regulation Authority (SRA) for not having a compliant one in place, and also for not having compliant policies, controls and procedures (PCPs).
We have assisted many international and other large practices in preparing these, including a thorough review of the firm’s practice through inter-views with key stakeholders. While the Legal Sector Affinity Group guidance suggests that PWRAs should be reviewed every 1-2 years, it also identifies nine other triggers for review, including changes in regulations, guidance, management, practice areas and technology. We are now in a fast-moving era of change: since January 2022 we have posted 16 key documents on our news page relating to AML alone, including changes to legislation and guidance.
The second area of risk for this issue, which necessitates a review of PWRAs, is proliferation financing: The Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022 require all firms in the regulated sector to address this in their PWRA from 1 September 2022. We under-stand that LSAG guidance is expected in due course. In the meantime some assistance can be de-rived from guidance published by the Financial Action Task Force (FATF) and the Royal United Ser-vices Institute; while those relate to risk assessments at a national level, FATF does address the risk posed by Designated Non-Financial Businesses and Professions.
The term ‘proliferation financing’ has a lengthy definition in the regulation, which includes (but is not limited to) the provision of funds or financial services in connection with the possession or use of, chemical, biological, radiological or nuclear weapons and technology (including dual-use technology) and dual-use goods in connection with such weapons.
Lawyers may query how this is relevant to them: it is rather more relevant than may appear at first sight, particularly when one considers that a ransomware cyber attack may be used by rogue states to raise funds for weapons, and sanctions evasion may also be a risk issue. Trade finance, aviation and shipping may be high risk areas.
The National Crime Agency will be launching a new reporting portal for Suspicious Activity Reports soon to replace the existing SARs Online. Note that it will be essential to print or save a pdf of the final screen, which contains all the data entered, as it will not be possible to retrieve a copy afterwards. There will be a warning but no failsafe mechanism. We have raised this as a concern.
‹ Back to Publications