Asking yourself and your client this question is one of the most effective measures you can take to protect yourself from money laundering.
When you should ask questions
Clients who are seeking to launder funds will often undertake unusual transactions and will try to avoid answering questions about them. The transaction may be:
- unusual for your firm
- unusual for your understanding of a client in their position, or
- unusual for the type of retainer they are undertaking.
This may not in itself be enough to give rise to a suspicion of money laundering, but it is a warning sign that needs to be followed up.
Rather than making assumptions and inferences based on your experience with non-laundering clients, actually asking the client for information is the first step in responding to a warning sign.
It is the answers given by your client, and more importantly the way in which they give you those answers, which will help you to assess whether your warning sign gives rise to a suspicion or not.
Consider the following scenarios which illustrate when asking questions about a retainer would be important:
- Your firm is asked by a new client from Switzerland to sue a debtor in Edinburgh . Your firm is in Norwich, does not usually undertake debt recovery work, has no expertise in Scottish law and no other clients in Switzerland .
- Your firm has acquired five new clients, all of whom are Nigerian politicians. You are a small firm with no previous profile in Nigeria .
- Your firm is approached by a Californian attorney to bank US treasury cheques for their American client and then use the funds to purchase property in Spain. The client was a referral from a long standing existing client, but the firm has no experience in conveyancing law in Spain and no contacts with a Spanish firm.
- Your firm is undertaking the purchase of a commercial property for a small business client. Part way through the transaction the client advised that a friend would be putting in 30% of the purchase price. When asked why, they say that it is because of their friendship.
The benefits of asking questions
Asking your client why they have come to your firm, or why the transaction is being undertaken in a certain way, does not have to be an accusation or a cause for tension between you and your client.
Rule 1 of the Solicitors' Code of Conduct requires that you act in the best interests of the client. The more you understand your client and the reasoning behind your instructions, the better you will be able to represent their interests.
The answers you receive to your questions may be useful for more than just money laundering prevention. They may open up further areas of legal advice that your client requires but did not know they needed to ask for.
The answer to the question ‘why did you choose this firm?', can help you better understand how potential clients are finding you and help you create a more targeted marketing strategy.
As with all anti-money laundering compliance, make sure you keep a record. If you have cause to ask questions about a retainer, then you should document those questions, the answers and why you are satisfied with those answers.
If you are not satisfied, raise the matter with your money laundering reporting officer. Look at what further information or evidence you can ask for to help your MLRO to decide whether they have a disclosable suspicion or not.