Most money laundering reporting officers and practice managers will be well aware of the growing and increasingly competitive market in 'compliance solutions' designed for the legal market, not only in the area of anti-money laundering but for all forms of regulatory compliance.
As businesses compete to get you to purchase their latest 'must have' e-solution, the frequency of contact and the sales pitches can become quite extreme.
From time to time solicitors contact the Law Society to share the latest sales pitch they have received, and most recently these have related to e-verification providers.
Do any of the following 'lines' sound familiar to you?
- This service will ensure that you are 100 per cent compliant.
- HM Treasury are about to issue guidance to say that a passport is no longer sufficient for client due diligence checks.
- The SRA are keeping it all very quiet, but by next year they will be requiring everyone to use e-verification checks for client due diligence.
- We are endorsed by the Law Society or others and they say you have to use this product.
So what is fact and what is hopeful sales prattle?
Fact: E-verification is a tool which can assist with meeting your AML obligations, it will not of itself ensure 100 per cent compliance.
A good quality e-verification service will help you to identify:
- if there is a person in existence with the personal details of your client
- if the client's history of living at a property is consistent with what they have told you
- if the person purporting to be your client is actually deceased
- whether your client is a politically exposed person or subject to sanctions, and
- whether the client or the address has county court judgements against them or are associated with previous reports of fraud.
Some e-verification services will also assist with verification of identity documents, particularly for foreign clients, while others will also help identify beneficial owners of corporate entities.
All of this is useful information and helps to paint a picture of the client beyond the mere viewing of a passport. However it does not prove that the person in front of you is the person they say they are. You will still need to consider the information provided in the e-verification report against the information you have from the client and other sources.
Further, identification and verification are only two parts of your client due diligence obligations. You also have to obtain information on the purpose and intended nature of the business relationship and consider whether the source of funds is consistent with your knowledge of the client. An e-verifier cannot assist you to be compliant with these obligations. This is something that only the fee earner can ascertain by actually getting to know the client and taking full and proper instructions.
Fact: The Law Society of England and Wales issues the HM Treasury approved practice note on AML compliance for solicitors in England and Wales
The Law Society's practice note provides detailed information on what to look for when selecting an e-verification provider and when their services may be useful.
The practice note is compiled by the Law Society's Money Laundering Taskforce and the editorial board has no plans to recommend that all firms use e-verification for every client as basic good practice.
We have confirmed with both HM Treasury and the SRA that there are no plans to make e-verification a mandatory requirement for AML compliance. As the Law Society sits on both the Money Laundering Supervisors Forum and the Money Laundering Advisory Committee, we would be in a position to know of any such moves and would be the first to advise solicitors of such a change.
Fact: The Law Society has two preferred e-verification providers, but you are free to use any reputable provider or to chose not to use e-verification services at all.
The Law Society's two preferred e-verification providers, 192business and Accuity, are both aware of the Law Society's position on a solicitor's freedom of choice as to whether they utilise e-verification or not, and have agreed to ensure their marketing is in line with this position. The Law Society selected them as our preferred suppliers because of the quality of their products and because they have provided a preferential pricing structure for Law Society members.
However we have received information in the past that other e-verifiers are suggesting that they have been endorsed by the Law Society, by the SRA, by the Money Laundering Supervisors Forum or other bodies and that there is an expectation that solicitors will use their services. The Law Society takes such association with our name very seriously and will follow up with the relevant organisations where such representations are drawn to our attention.
Keep us up to date
If you are approached by someone trying to sell you AML compliance products or services and they are claiming that there has been a change in the law or the guidance requiring you to use them, you can always check with the Law Society as to the accuracy of those statements.
You can check on the anti-money laundering webpage; contact Practice Advice or email us at antimoneylaundering@lawsociety.org.uk.