Monday 11 February 2013

The fourth European money laundering directive, published last week, is likely to impose significant but ineffective burdens on solicitors over the 'vexing issue' of identifying beneficial owners, the Law Society has warned.

The directive proposes a new requirement for all companies, legal entities and trustees to hold up-to-date information on their beneficial owners, with subsidiaries kept updated daily on share-ownership changes across entire company groups.

However, the Law Society said that such due diligence is unlikely to make much difference to the fight against financial crime, because criminals have proved themselves adept at using corporate vehicles as a way of laundering funds.

Sue Mawdsley, of Liverpool risk management law firm Legal Risk, questioned the practicality of the measure. 'How are solicitors to get the names of beneficial owners in those offshore jurisdictions which owe their very existence to not giving out information?' she asked.

Other proposals in the draft directive, which still has to go before the European parliament (pictured) and Council of Ministers, include requiring every law firm to have written anti-money laundering (AML) risk assessments, policies and procedures. Most law firms already have these in the form of written audit trails.

Another proposal is to bring all cash payments of €75,000 or more within the scope of the AML laws. The previous upper limit was €15,000, which some stakeholders deemed too high.

The Law Society says that it will be 'looking carefully' at provisions to ensure that 'the simplification measures do not actually result in an increase in red tape and compliance activity'.

For the Law Society's response in full see the website.