As reported in the August anti-money laundering update,
consultations are taking place across government on standards and
laws which underpin the anti-money laundering regime, here in the
UK and across the world.
We outline our key representations to these consultations below:
HM Treasury consultation on the Money Laundering
Regulations
HM Treasury are currently considering the responses to their
consultation on the Money Laundering Regulations 2007.
Most of the questions within the consultation looked at ensuring
that the government supervisors, such as HM Revenues and Customs
and the Office of Fair Trading had sufficient regulatory powers to
discharge their role. The Law Society has supported the proposal
that they should have the same powers to regulate money service
bureaux, consumer credit financial institutions, estate agents and
trust and company service providers, for money laundering as the
Solicitors Regulation Authority (SRA) has when supervising
solicitors.
The other important and controversial consultation question is
on whether to remove the criminal sanctions for a breach of the
Regulations. The Law Society is encouraging the government to be
more proportionate in their application of the Regulations. We
fully support the retention of the know your customer (KYC)
requirements. However, we have suggested that removing criminal
sanctions for failure to get the right due diligence documents may
help encourage all firms in the regulated sector to take a balanced
approach in applying these requirements to all their clients, most
of whom are law abiding individuals and businesses.
We support strong regulatory sanctions for those who commit
serious breaches of the regulations and possible de-registration
for those who repeatedly refuse to comply with the regulations.
One further reason we have for suggesting the removal of the
criminal sanctions is that a regulated entity who tries to do the
right thing under the regulations, but makes a mistake, will, as
currently drafted have saved money as a result of a 'crime'. This
means they will now be a money launderer and should be subject to
reports to the serious organised crime agency.
FATF consultation on the 40+9 standards
The Financial Action Taskforce (FATF) has completed the second
stage of its public consultation process as it reviews the
international standards which set the framework for anti-money
laundering and counter-terrorist financing regulation. We
anticipate the new standards being released in February 2012. This
phase of the consultation focused extensively on beneficial
ownership requirements.
The Law Society supports the continuation of the existing
beneficial ownership requirements at FATF level, albeit with an
increased focus on the existing risk based approach. We have
strongly encouraged FATF to take steps to ensure that non-compliant
or partially complaint countries, follow the UK's example and
require all states to have basic company registers and to properly
regulate trust and company service providers.
The Law Society has strongly argued against requirements for all
nominee shareholdings and all trusts to be listed on a public
register. We believe there are many legitimate and lawful reasons
why shares may be held by nominees and for people to make use of
trusts in their private financial arrangements. The current
evidence provided by FATF of the occasional criminal abuse of
trusts and nominee shareholdings is not sufficient as to warrant
such a wholesale violation of the fundamental right to privacy as
the proposals would achieve.
FSA consultation on the Financial Crime Guide
The Law Society has generally welcomed the draft Financial Crime
Guide published by the Financial Services Authority (FSA). We
believe that the inclusion of questions which firms should ask
themselves in assessing their own policies and procedures will
greatly assist in embedding the risk-based approach to compliance.
This in turn should help firms to develop cost effective and
proportionate responses to the risks that they actually face from
financial crime.