Extensive guidance and publications have been produced since our January Risk Update. These include guidance on Suspicious Activity Reports (SARs) from the National Crime Agency (NCA) and The Law Society, an Updated NCA guidance note: Requesting a defence from the NCA under POCA and TACT, and the NCA SARs Annual Report 2022.
The Financial Action Task Force (FATF) published a Report of the outcomes from the FATF Plenary in Paris, 22-24 February 2023, with South Africa and Nigeria added to the ‘grey list’ of jurisdictions subject to increased monitoring, Guidance on Beneficial Ownership of Legal Persons, and a report on Countering Ransomware Financing.
The Legal Sector Affinity Group (LSAG) published an Advisory Notice – Chinese underground banking and funds from China. The advisory notice states that ‘[misleading] the Chinese authorities about the reasons for a currency transfer is not a crime in the UK’, though it may cause doubts about the legitimacy of the source of funds.
The Advisory Notice goes on to advise that ‘Legal sector supervisors would not necessarily expect firms to make SARs where the only issue is that the purpose of the transaction was misrepresented to the Chinese government. We would, however, expect proper source of funds and/or wealth checks to support a decision not to submit a SAR.’
If we have a concern, it arises from our experience of investigations by the Solicitors Regulation Authority (SRA) resulting in recommendations of disciplinary action with the benefit of hindsight and reliance on guidance published after the events in question. We have assisted solicitors in this situation with the benefit of our experience of advising on AML issues over 20 years, and extensive material providing objective evidence of the standards of practice applicable in earlier years, including authoritative publications and training materials and audit of a large number of firms.
Several firms and individuals have been fined by the SRA and Solicitors Disciplinary Tribunal for failing to have a Practice Wide Risk Assessment (PWRA) and other AML breaches. We have assisted firms in preparing their PWRAs. The SRA is continuing with its inspection of firms for AML compliance.
Finally on AML – a reminder that discrepancy reporting under The Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022 extends to the Register of Overseas Entities at Companies House from 1 April 2023.
Links to all the above publications and the Regulations are on www.legalrisk.co.uk/News.
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