This summer domestic matters have dominated the AML policy landscape as the Brussels summer recess put paid to any further progress of note on the fourth EU Money Laundering Directive (4MLD).

4MLD

I will provide a brief update on the latest timetable suggested for the passage of 4MLD.

We are expecting that the MEPs working on the directive will be appointed this week or next (the so-called ‘rapporteurs’).

The next stage of negotiations (trilogue) is expected to start at the end of this month or in early October, with the directive to be agreed in Q1 2015 at the latest.

The Law Society, with assistance from the joint Brussels office, is currently arranging a series of meetings with relevant MEPs to explain the importance of pooled client accounts being recognised in 4MLD, alongside several other matters of interest to legal professionals.

UK – multiple agencies set sights on so-called ‘professional enablers’

In the previous edition of the AML newsletter, the government had just announced that it was introducing tough new laws around participation in organised criminal groups. The Serious Crime Bill is aimed at so-called ‘professional enablers’.

These are professionals who, according to the Home Office and law enforcement, currently need only ‘turn a blind eye’ to their association with organised criminals to avoid prosecution.

The Money Laundering Task Force (MLTF) had several issues with the bill as originally drafted and, after several meetings with the civil servants who drafted the bill, we have reached an agreement with the government, in principle, to alter the mens rea which will allay the majority of our concerns with the bill.

We have not yet seen drafts of the amendments to be tabled but I hope to be able to share the updated wording in my next update.

Following on the ‘professional enablers’ theme is another Home Office-led project that is due to launch shortly.

The Home Office and Law Society are working together on a communications initiative aimed at increasing awareness and recognition of the reality and consequences of serious and organised crime and increasing knowledge and understanding of core preventative behaviours.

You will see the content of this campaign across many media channels both within and outside the Law Society over the next six months.

32nd Cambridge International Symposium on Economic Crime

Earlier this month I attended the 32nd Cambridge International Symposium on Economic Crime, which brought together academics, legislators, judiciary, law enforcement and policy experts from across the world to share ideas about the challenges of tackling economic crime.

During the first morning of the symposium, the National Crime Agency’s head of economic crime Donald Toon delivered an address regarding the role professionals have in enabling money laundering and other economic crime.

He said there was a ‘particular problem’ with UK-based legal services operations that he warned ‘stray beyond the boundaries of legality’. ‘It is a small proportion of the industries, but it absolutely has the potential to undermine the position and reputation of a major part of the economy,’ said Mr Toon.

I spoke with Mr Toon after his address and thanked him for accepting our invitation to speak at the Law Society’s AML and Financial Crime Conference on 20 November.

He is likely to face questions from solicitors wondering exactly what the drivers for this focus on the legal sector are, given the absence of any data to support claims of a “particular problem”.

SRA’s launching of a ‘push’ on AML compliance.

The same week, while still at the Symposium, I received a call on Friday evening from the Law Society press office. The Financial Times had contacted them asking for a comment on the SRA’s launching of a ‘push’ on AML compliance.

The chair of the MLTF, Suzie Ogilvie, and I spent Friday night and Saturday morning liaising over a considered response only for the FT to decide not to include it in their article published on the Monday.

This policy update gives us an opportunity to ensure our efforts over that weekend were not in vain.

The following outlines our concerns regarding some of the SRA’s misleading rhetoric on their ‘push’ on AML compliance, touched on recently in the Financial Times, which has so far driven the focus of media attention.

While we applaud the fact that the SRA are now putting resources into AML and agree that any lawyers who are complicit in money laundering should be punished, several published articles have incorrectly implied that increasing regulatory activity is a panacea for preventing professionals from assisting organised criminals, even where this occurs unwittingly.

We firmly believe that the answer to better compliance lies primarily in education and training.

The Law Society is considered a leading example of best practice for the assistance we provide to help lawyers comply with their AML obligations. This is due to our long-established relationships and ongoing engagement with government, law enforcement and other agencies and the large amount of information, guidance and education we offer our members.

For example, our AML practice note – which helps solicitors understand the regulations and their obligations – is approved by HM Treasury and therefore must be regarded by regulators and the courts in AML cases.

In addition, the SRA has asserted that the number of legal sector Suspicious Activity Reports is declining out of line with other sectors. This does not accord with the latest available National Crime Agency (NCA) report (Suspicious Activity Report (SAR) Review 2012 – 2013, Legal Sector, NCA, June 2014) which states that reporting trends in the legal sector are ‘consistent with other sectors’.

In fact, reports in the financial sector have increased, but the downward trend is true of a number of other sectors and, since September 2009, market conditions across many sectors have changed markedly.

As regards the financial sector, it is notable that there have been some recent campaigns by the NCA to target specific threats in the financial sector, which may have impacted reporting volumes. However, until some analysis has been conducted as to why reports are decreasing across the non-financial sector, it should not be automatically assumed that the decrease is a direct result of declining compliance standards.

The Law Society will continue to put significant resources into education and training while positively engaging with law enforcement and government agencies to improve knowledge, compliance and reporting standards by the legal profession.

Where the current focus on the legal profession and its role in ‘enabling’ AML/financial crime will end is unknown. However, solicitors can rest assured that the Law Society’s Money Laundering Task Force will continue to work on their behalf in the interest of ensuring compliance standards remain high across the profession and that regulation is effective and proportionate

Scott Devine is the Law Society’s policy adviser for anti-money laundering

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