Frequently asked questions

My firm is concerned that in trying to comply with the Anti-Money Laundering (AML) Regulations we will be incurring additional costs. Can my firm charge the client for checking their identity or if we need to make a report to the Serious Crime Agency (SOCA), can we charge the client for that?

Compliance costs generally fall within a number of categories. The Law Society has considered the costs burden and its conclusions are as follows as applied to non-contentious business:

1. Compliance with Regulation 21 requires 'relevant employees' to be trained so that they are made aware of:

(i) the provisions of the Money Laundering Regulations, Part 7 of the Proceeds of Crime Act (POCA), and sections 18 and 21A of the Terrorism Act 2000; and

(ii) given training in how to recognise and deal with transactions which may be related to money laundering.

The cost of staff training is normally treated as an overhead.

2. Solicitors must comply with the AML Regulations 2007 when they conduct 'relevant business' as defined by Regulation 3(9). When the regulations apply they require solicitors to check the identity of their clients before forming a 'business relationship'. There is no rule/regulation preventing solicitors from charging their clients for checking identity provided the client is informed of the level and method of charging. Charges for identity checking are also subject to the normal constraints, including whether the charge is 'fair and reasonable'. Please see Article 3 of the Solicitors' (Non-Contentious Business) Remuneration Order 1994 (SI 1994/2616).

3. Another requirement of the Money Laundering Regulations (2007) is for firms to employ systems to prevent and forestall money laundering. The Law Society suggests that solicitors approach additional 'know your client' checks on a risk basis. Often solicitors will make such checks without their client's knowledge, and certainly not upon their instructions. There does not appear to be any settled authority on whether solicitors can charge clients for such broader checking.

4. Compliance with POCA and counter terrorism legislation also requires solicitors to make reports to SOCA. It is not possible to charge clients for work which is not in accordance with their instructions.

Our firm is considering becoming a Home Information Pack (HIP) provider. Do the new Money Laundering Regulations 2007 apply to the provision of this service?

No. The new regulations which came into force on 15 December 2007 contain a specific exclusion in reg 4 (1)(f) regarding HIPs, which states: 'these regulations do not apply to …. a person, when he prepares a HIP or a document or information for inclusion in a home information pack.'

Please see the anti-money laundering (AML) practice note, chapter 1.

Does the Law Society have a list of recommended electronic verification companies?

No. The Law Society does not hold such information nor recommend any particular company.

If you choose to rely on a company to carry out electronic verification, it merely confirms someone exists but not the fact that your client is the person who they state to be. You will need to bear in mind that the ultimate responsibility still remains with you. If you decide to use a company, consider the points raised in the anti-money laundering practice note at chapter 4.3.3 and consider if another method of identification would be more appropriate in the circumstances.

Things to consider include:

• does the company have proof of registration with the Information Commissioner's Office to store personal data?
• can they link an applicant to both current and previous circumstances using a range of positive information sources?
• does the company have transparent processes enabling you to know what checks are carried out, the results of the checks and how much certainty they give on the identity of the subject allowing you to capture and store the information used to verify an identity?

You will need to inform the client that electronic verification will take place and consider the issue of consent whether to seek specific consent or if a statement in the terms of business will suffice.

In the Law Society publication, 'Your clients - your business' (October 2007), you will find three precedent clauses regarding money laundering, approved by the Law Society Money Laundering Task Force, which you may wish to include in your client care letter.

Our new firm is preparing its policies and procedures in preparation for the new Money Laundering Regulations that came into force on 15 December. Does the Law Society produce any sample/precedent client care letters?

You may wish to refer to the Law Society publication, 'Your clients - your business' (October 2007). Whilst the publication does not contain sample letters, it does provide solicitors with a client care checklist and includes sample paragraphs which you may wish to use as a basis for your client care letters. It also includes paragraphs on money laundering issues that have been approved by the Law Society Money Laundering Task Force.

I am employed by a public authority. Do the Money Laundering Regulations apply to the activities I conduct?

You will need to refer to the Money Laundering Regulations 2007 which came into force on 15 December 2007. For further information on this, please refer to the Law Society's anti-money laundering practice note.

You will also need to consider whether or not you work in the 'regulated sector' having considered the most recent version of Schedule 9, Part 1 of the Proceeds of Crime Act 2002; it does not include solicitors employed by a public authority.

The Treasury Department has confirmed generally, that certain activities are not covered by the regulations which includes payment on account of costs to a solicitor or payment of a solicitor's bill, provision of legal services, publicly funded work and preparing a Home Information Pack.

If you are unsure whether or not the regulations apply to your work, you may consider seeking legal advice on you particular circumstances or alternatively, take the broadest approach.

I understand that the Money Laundering Regulations 2007 refer to ‘customer due diligence’. What is this?

Regulation 5 says that customer due diligence comprises:

• identifying the client and verifying their identity on the basis of documents, data or information obtained from a reliable and independent source.
• identifying where there is a beneficial owner who is not the customer, the beneficial owner and taking adequate measures, on a risk sensitive basis, to verify his identity so that you are satisfied that you know who the beneficial owner is. This includes understanding the ownership and control structure of a legal person, trust or similar arrangement.
• obtaining information on the purpose and intended nature of the business relationship

Identification of a client or a beneficial owner is simply being told or coming to know a client's identifying details, such as their name and address. Verification is obtaining some evidence which supports this claim of identity.

For further information and definition of beneficial owner, please refer to the Law Society's anti-money laundering practice note, chapter 4.

In light of the Anti-Money Laundering Regulations 2007, what has the Law Society done to assist solicitors in complying with their obligations?

The Law Society has prepared a practice note on anti-money laundering (AML). There are also a number of AML services including:

• The Practice Advice Service (0870 606 2522) which can assist solicitors with navigating the practice note and respond to general queries on AML compliance. It does not provide legal advice or advise on conduct issues, nor does it advise on compliance with the 2003 Regulations.
• The Solicitors Regulation Authority's Professional Ethics Helpline (0870 606 2577) can provide assistance with conduct issues relating to money laundering.
• Anti-Money Laundering Directory - solicitors requiring legal advice on AML compliance can access an online directory of solicitors who practise in this area and are willing to be contacted by other solicitors seeking legal advice.

Is it correct that the Practice Advice Service (PAS) gives solicitors advice on Anti Money Laundering (AML) queries?

The PAS can assist solicitors with navigating the AML practice note and can respond to general queries on AML compliance. It does not provide legal advice or advice on conduct issues.

Solicitors requiring legal advice on anti money laundering compliance can access an online directory of solicitors who practise in this area and are willing to be contacted by other solicitors seeking legal advice. The Professional Ethics Team still provide assistance with conduct issues relating to money laundering.

I act for a buyer in a domestic conveyancing matter and my client has come into the office with £20,000 cash to pay his deposit. Upon questioning the client it appears the money is from his own account but he did not want to pay the £30 bank fee for a bank cheque and hence the cash. Is there a limit on the amount of cash firms can accept from clients?

Large payments made in cash may be a sign of money laundering. Although the Law Society has not set a cash limit, we advise that as a matter of good practice you establish a policy on not accepting cash payments above a certain limit, either at your office, or into your bank account.

The Law Society has steered clear of setting limits because cash tolerance will be different for every firm depending on the type of work done. Please see the Law Society's anti-money laundering practice note, chapter 11 .

Chapter 11 looks at the importance for solicitors to look for warning signs. It is a matter for you when considering all the information at your disposal, whether you feel you have reasonable grounds for suspicion or knowledge of money laundering. Cash in itself is not an indicator of money laundering and should not necessitate an automatic report to the Serious Organised Crime Agency (SOCA) but depending on the circumstances you may need to undertake further checks and customer due diligence to satisfy yourself that there are no grounds for making a report to SOCA.

Anti-money laundering practice note - 22 February 2008

When is ‘customer due diligence’ required for the purpose of complying with the Money Laundering Regulations 2007?

Regulation 7 requires that you conduct customer due diligence when:

• establishing a business relationship
• carrying out an occasional transaction
• you suspect money laundering or terrorist financing
• you doubt the veracity or adequacy of documents, data or information previously obtained for the purposes of customer due diligence.

There is no obligation to conduct customer due diligence in accordance with the regulations for retainers involving non-regulated activities. For details of non-regulated activities please see the Law Society's anti-money laundering practice note, chapter 1.

For further information on customer due diligence, please refer to the anti-money laundering practice note, chapter 4.

I am acting for a buyer in a residential conveyancing transaction. I have just received the contract package from the seller’s solicitor and in the covering letter it states that he ’expects the papers to be returned to his firm on request if the transaction does not proceed to exchange.’ I have never come across this before, is this correct?

Yes, this has been included in the covering letter in case the transaction is aborted. A draft contract, along with the other papers supplied by the seller's solicitor to the buyer's solicitor in the contract package, belongs to the seller until contracts are exchanged. If the transaction is aborted before exchange takes place, the buyer's solicitor should comply with a request by the seller's solicitor to return those papers .

This is notwithstanding any contrary instructions issued by the buyer to his own solicitor. For the avoidance of doubt, it is suggested that the seller's solicitor indicates in his covering letter to the buyer's solicitor that he expects such papers to be returned to him on request if the transaction does not proceed to exchange, just as your seller's solicitor has done. See the Law Society's Conveyancing Handbook 14th Edition which is available from the Law Society Bookshop (telephone 020 7320-5640).

What documents have to be included in a Home Information Pack (HIP)?

Under the Home Information Pack (No 2) Regulations 2007 there is a list of compulsory documents which must be included in a HIP. These are:

• Home Information Pack index - listing the documents contained in the pack
• Energy Performance Certificate
• Sale Statement - giving specified basic information about the property
• Searches - to comply with the provisions of schedule 6 of the Home Information Pack (No 2) Regulations 2007
• Evidence of title
• Leasehold and Commonhold documents where applicable

For further information see the Home Information Pack (No 2) Regulations 2007 and the Law Society publication 'Handling Hips ' which is available free of charge to members of the Property Section (£25.00 to non-members), at www.propertysection.org.uk

I am preparing a Lasting Power of Attorney (LPA) for an elderly client. The form requires the certificate provider to confirm that he or she is acting independently of the donor and in particular is not is not a person listed in the disqualification criteria. Does this mean I am not regarded as independent and so cannot provide the certificate?

The Law Society's view is that Regulation 8(3) of the Lasting Power of Attorney, Enduring Powers of Attorney and Public Guardian Regulations 2007 No.1253 sets out the disqualification criteria. This does not include the person who assisted in the preparation of the LPA. Our interpretation is that as long as the solicitor is not a donee of the LPA, and is not within the disqualification criteria of Regulation 8(3), then they can be the certificate provider. It is also our view that if it had been intended that a solicitor should not perform both roles, it is highly likely that there would have been something to this effect in the regulations.

We therefore interpret the reference to 'independent' person in relation to the categories in Regulation 8(3) as someone who is unconnected with the donor in terms of family relationship and is not a donee of the power or associated as an employee/director/partner/care home staff of a donee of the power, i.e. is independent of the person(s) exercising the power.

Following the Mental Capacity Act 2005 (MCA), is there a prescribed form to be used for a client wishing to make an Advance Decision to refuse treatment?

There is no prescribed form and in fact there are no particular formalities about the format of an Advance Decision. It can be written or verbal unless it deals with life-sustaining treatment, in which case it must be written and specific rules apply.

Chapter 9 of the MCA Code of Practice provides specific guidance on this and it does suggest that a written document may be helpful in all cases to prove that an Advance Decision exists. The Code of Practice can be found on the Office of the Public Guardian website at: www.publicguardian.gov.uk

I am an in-house solicitor for a local authority and have obtained letters of administration for the estate of a deceased person as we are creditors. Are we entitled to our expenses?

Yes. A creditor who obtains a grant may reimburse himself out of the estate for the expense he has been put to in obtaining the grant.