In the Media

Money-laundering report warns of new risks

PUBLISHED May 28, 2012

Monday 28 May 2012 by Catherine Baksi

Criminals using litigation and alternative dispute resolution to launder funds pose increased risks for those in the legal sector charged with anti-money laundering (AML) obligations, the Law Society has warned. It has also highlighted the potential for organised criminals to 'seek to invest in legal practices through the licensing of alternative business structures'.

In their annual report to the Treasury on their AML activities, the Law Society and Solicitors Regulation Authority reveal that six solicitors were struck off and two suspended from practice due to breaches of AML obligations in 2011.

A further eight were fined and two reprimanded, while two non-solicitor conveyancers were prevented from being employed by an SRA-regulated legal practice.

Two other solicitors were refused restoration to the roll due to convictions under the Proceeds of Crime Act and one other was struck off for a conviction under the act.

To put these incidences in context, the report states that as of 31 July 2011 there were 159,524 solicitors on the roll with 121,933 holding practicing certificates, and during the year the Solicitors Disciplinary Tribunal struck off 60 solicitors, suspended 54 and fined 108.

The report says the 'key methodologies and warning signs of money laundering and terrorist financing remain relatively consistent for the legal sector'.

But it notes that increased risks had arisen due to the increased use of litigation and ADL methods to attempt to launder money, and the increase in private funding for property purchases as lenders require higher deposits and home buyers seek funding from friends and family.

The representative and regulatory bodies said they are seeking to mitigate the risks for the supervised community by increasing awareness of the risks associated with property work and ADR. They said they encourage firms to check their online presence and the identity of the legal practice on the other side of a transaction.

The SRA is also undertaking detailed assessments of all ABS applications and tightening the procedures by which legal practices can register or amend their details.

The report says: 'There is strong evidence that the majority of the supervised community take their compliance obligations very seriously and work hard to ensure that not only are they complying but are also seen to be complying with their regulatory obligations.'

It says that some practices take a 'fairly onerous approach to compliance' where a 'slightly more flexible and risk-based' approach may be warranted.