In the Media

Society ?dismayed? at refusal to budge on money laundering penalties

PUBLISHED July 20, 2012

Friday 20 July 2012 by Jonathan Rayner

HM Treasury has decided to retain criminal penalties for breaches of anti-money laundering (AML) regulations and not to exempt even the smallest firms from the administrative burden of compliance.

The decisions, published last week in the Treasury's response to a consultation that began in 2009, have 'dismayed' the Law Society, which argued for sanctions that fell short of criminal prosecutions and for a general reduction in form-filling and other administrative chores.

The Treasury accepted, however, the Law Society's representations on what constitutes 'safe custody services' for AML purposes and specifically excluded 'legal professionals storing legal documents' from them. This means solicitors will not be supervised by the Financial Services Authority for AML compliance when storing documents for clients.

It also avoids the potential anomaly of a solicitor not having to obtain client due diligence to write a will, but having to do so to store the completed will.

The Treasury also took note of Law Society concerns around beneficial ownership and the practical challenge for law firms in providing information to banks about funds held in client accounts without explicit consent from the clients. The Treasury has said it is to re-visit this issue at national level if it is not resolved during negotiations in Europe for the fourth money-laundering directive, which is currently being drafted.

A Law Society statement said: '(It) is dismayed that HM Treasury has not taken the opportunity to follow the UK government's own best practice advice on regulation.'

This was a reference to the 2005 Hampton review into reducing the administrative burdens of complying with regulations and proposed introducing risk assessments that would reduce inspections by around one-third and the number of forms sent out by regulators by one-quarter. The 2006 Macrory review made recommendations to help companies be compliant and proposed a variety of sanctions falling short of criminal prosecutions.