Money laundering is one of the nine priority risks for the legal profession in the Solicitors Regulation Authority Annual Risk Outlook and an SRA review in October 2019 showed that a fifth of law firms fail on money laundering compliance.
How can law firms quickly and easily fulfil obligations?
To understand the changes and their associated impact it is helpful to recap the requirements of the 4th Money Laundering Directive (4MLD).
In summary 4MLD key requirements impacting law firms included, but were not limited to:
- The need to assess the potential risks related to a customer, both at inception and ongoing during the relationship through appropriate and evidenced Customer Due Diligence (CDD) checks;
- Where a transaction is being undertaken for an absent 3rd party, the need to verify the beneficial owners of corporate entities, trusts and individuals. Each country was to create a central registry of beneficial owner information and in the UK this is the Persons of Significant Control Register set up in 2016;
- The need to screen for Politically Exposed Persons (PEPs) to include persons who hold prominent positions in their home country. The directive stated that PEPs must be monitored for a minimum period of 12 months after leaving office. Additional 4MLD mandated changes were connected to record keeping and reducing transactional value limits requiring CDD checks.
