As the FT notes this morning:
Lawyers are being urged to do more to reduce the risk of money laundering in the UK as the Solicitors Regulation Authority revealed it has imposed disciplinary measures on a number of firms.
In a recent review of 50 firms designed to test the sector's compliance with new, tougher anti-money laundering regulations, the watchdog found only a third had carried out a mandatory risk assessment of their anti-money laundering procedures or were in the process of implementing one.
It was my friend Professor Atul Shah, who is an occasional guest columnist here, who coined the term 'constructive non-compliance'. By that he meant that a veneer of compliance with regulatory obligations is presented to the world when in practice no such thing is happening with widespread and often even tacit knowledge that this is the case.
Tax havens are, of course, masters at the art of constructive non-compliance. For years now they have been producing vast reams of legislation and regulation that they have no way of, and no will to, enforce. The paperwork is present. The practice falls short.
And this seems to be the case as well in the UK.
It's a sorry state of affairs. And a little surprising. Even I do an annual review of money laundering procedures for my now almost non-existent accountancy practice, dutifully recording it as part of my annual review process. I do not believe these firms cannot know of their obligations to do the same, albeit on a rather larger scale.
This is constructive non-compliance in action. And the article implies that the sanctions are low, even if it does not spell that out explicitly. That is part of the same process.
Welcome to tax haven UK.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
And a little surprising. Even I do an annual review of money laundering procedures for my now almost non-existent accountancy practice, dutifully recording it as part of my annual review process.
that’s interesting, i’d like to do the same. can you show what you do and document? maybe as another blog as an example we can use..
No: such things include client confidential data in my case referring to client acceptance procedures
There is a fair amount of guidance on this sort of thing on the Law Society website. For example, http://www.lawsociety.org.uk/news/stories/money-laundering-regulations-2017-and-policy-update/ and http://www.lawsociety.org.uk/support-services/advice/articles/quick-guide-to-the-money-laundering-regulations-2017/
I dare say similar guidance is available from the accountancy bodies too.
But that’s my point: lots of guidance and little evidence of compliance
This is about the requirement in regulation 18 of the 2017 money laundering regulations for any “relevant person” (not just lawyers, but also accountants, estate agents, casinos, etc) to take “appropriate steps to identify and assess the risks of money laundering and terrorist financing to which its business is subject” and then to document those steps.
When the new regulations were made about 6 months ago, the Law Society said, “firms have had a very limited time in which to prepare for the new regulations”. Clearly some are still behind the curve.
In my experience, most lawyers take their legal obligations, and the risk of regulatory action and/or reputational damage, very seriously indeed. But inevitably, with 140,000 solicitors in practice, there will be some who do not, and (rightly) they should be brought to book.
That FT report quotes the chief executive of the SRA as saying, “We are encouraged that most firms seem to be on top of the issues”.
It would be interesting to hear how well the other categories of “relevant person” are doing to meet their legal obligations.
Agree with the last
Thanks for the credit Richard, but the phrase I used was ‘creative compliance’ which is virtually the same thing that you are meaning – I wrote an Accounting Organisations and Society paper called Creative Compliance in Financial Reporting. Things have moved very far since then and your work and that of the Tax Justice Network have exposed how active this approach is in the fields of tax and accounting. Fundamentally, the commercial culture of the professional law firms and accounting firms has meant that they will willingly use their knowledge of the law to bend it. I have recently written a paper on ‘Systemic Regulatory Arbitrage – The Case of KPMG’ which looks at how a whole global firm applies this method to a wide range of services. https://www.academia.edu/19497525/KPMGS_REGULATORY_ARBITRAGE_CULTURE
Apologies!!!
I worked from memory
Thanks for all your contributions
I seem to recall seeing a Channel 4 programme a couple of months ago which tested this by sending reporters posing as Russian potential buyers to view property in London with background stories that should have rung every bell not only as being a politically exposed person and so prime money laundering risks but that they were up to no good. The estate agents all basically either put their fingers in their ears so they couldn’t hear or suggested ‘someone who may be able to help you’ so as to be able to make the sale.
Tax haven Britain indeed.
I find that surprising. Alarming, even: off-the-shelf documentation for a basic box-ticking exercise in AML has been available for years, for all sizes of legal and accounting firms.
You could say that there’s no ‘one size fits all’ solution, but off-the-shelf means ‘these sizes on our shelf fit well enough for most’; and really, anyone running a specialist firm providing services that need a tailored solution will be well aware of AML already, and well-qualified to do it.
In all probability, well-qualified to do it exactly to the letter of the regulations.
So this looks like deliberate contempt for their regulator.
However, these professionals still need a bank account to run their business, and they still need the services of a bank to transfer cash and assets.
It may well be that banks are at the sharp end of this; and banking regulators will force them to close a company’s account if the partners or directors cannot furnish evidence that Anti Money-Laundering procedures are in operation.