The Law Society has called for the European Commission to
maintain the flexibility of the risk-based approach in anti-money
laundering and counter-terrorist financing (AML/CTF) compliance as
they develop a 4th European Money Laundering Directive.
The Law Society has encouraged the Commission to:
- reinforce the protection of legal professional privilege and
professional secrecy
- retain the flexibility of a risk-based approach to due
diligence, especially for pooled client accounts held by
solicitors
- take a proportionate and practical approach to transparency of
corporate entities and legal arrangements
- support the involvement of professional bodies in supervising
compliance with obligations, and
- ensure that amendments to data protection requirements do not
put firms at risk of being abused by criminals for the purposes of
money laundering.
HM Treasury has also published its response to the Commission's
consultation. They echo many of the Law Society's concerns around
the need to retain flexibility of the risk-based approach,
proportionality in corporate transparency initiatives and
practicality in balancing competing interests in new data
protection provisions.
The Commission is expecting to publish the text of a draft 4th
Directive and accompanying impact assessment in October 2012. Any
amendments are likely to be incorporated into UK law by the end of
2014.
The Law Society will continue to make representations on behalf
of the profession, encouraging effectiveness and proportionality in
proposed measures, throughout the development of the 4th
Directive.
Read the
Law Society's submission
On a related issue, the UK government has decided not to opt in
to the draft European directive on the freezing and confiscation of
the proceeds of crime.
The UK's reasoning for not opting in at this stage is based on
the fact that the UK's regime goes beyond the minimum standards
proposed in the draft directive and that the proposals would
significantly restrict the operation of the UK's civil recovery
regime.
James Brokenshire MP, in addressing the House of Commons on
this decision on 12 June 2012, advised that in 2011-12 UK law
enforcement agencies froze or recovered more than 1 billion
of criminal assets. Non-conviction based confiscation powers under
the civil recovery regime amounted for 20 million of those
recovered assets.
He indicated that the UK will continue to contribute to
negotiations on the proposed directive as the government is
committed to promoting enhanced cross-jurisdictional recovery of
criminal assets. The UK government may exercise their right to opt
in at a later stage, should their key areas of concern be
addressed.