A selection of questions and answers on some popular AML areas compiled by the Practice Advice Service:
Q: We acted for a client in the purchase of a property which completed a few months ago. I was entirely satisfied with the customer due diligence checks conducted on the client and on his source of funds and wealth at the time. I am the Money Laundering Reporting Officer (MLRO) and I have just been served a production order from the police requiring me to deliver up the file on this matter. I am aware of my obligations in complying with the order. However, I have recently read about transferred suspicion and would like to know whether I should now make a report to the National Crime Agency (NCA). What should I do?
A law enforcement agency cannot transfer to you their suspicion that a client is involved in money laundering.
However, once they have advised you that they are investigating a client for a criminal offence where there is a benefit accruing to the client, you have a warning sign that a client may be involved in money laundering. As the MLRO, you should review the file held on the client to assess whether you now have a suspicion of money laundering.
The threshold required by law enforcement agencies to obtain a production order is higher than that required for making a suspicious activity report (SAR) on money laundering. The fact that an order has been served on you should be taken into account in your assessment of the situation now.
There may be reasons why you would still not submit a SAR at this stage, such as the existence of information on the file which demonstrates that the client's funds are from a legitimate source or the information is privileged.
Even if you have now formed a relevant suspicion, you should carefully consider the issue of privilege and what information you are able to provide in any SAR to the NCA.
Lastly, it is important for you to document on your file any further enquiries or checks made and the reasoning behind your ultimate decision.
If you decide to make a SAR, you may wish to consider our guidance on the subject.
For further information, please see the Law Society's Practice Notes on Responding to a financial crime investigation, Legal Professional Privilege and the draft Anti-money laundering guidance for the legal sector.
Alternatively, you can telephone the Law Society’s Anti-money laundering helpline on 020 7320 9544.
Q: I am the COLP of a firm. The SRA is conducting an audit of my firm and has requested a number of files. One of these files contains information relating to a suspicious activity report (SAR) which the firm made to the National Crime Agency (NCA). If the SRA has sight of the SAR, would that tantamount to tipping off?
The Proceeds of Crime Act 2002 (POCA), s333 stipulates that a person does not commit the main tipping off offence if he does not know or suspect that a disclosure is likely to prejudice an investigation (POCA s333(2)(a)). However, certain disclosures are permitted and this includes a disclosure to your supervisory authority (s333D).
For further information, please see Chapter 6 of our Draft anti-money laundering guidance for the legal sector.
Q: I have been asked to act on the sale of a property by someone who says that she has a power of attorney for the owner, who is working abroad. What should I be thinking about in terms of identification in order to comply with the Money Laundering Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 ('the Regulations')?
You should be alert to the possibility that purported agency arrangements can be used to facilitate fraud. Understanding the reason for the agency will assist to mitigate this risk.
First, consider who is the client. On these facts, the owner of the property should be treated as the client, acting by the attorney. Therefore you should carry out customer due diligence (CDD) on the owner as required by Regulation 27. As you will not be meeting the owner, you will need to apply enhanced due diligence pursuant to Regulation 33.
You should also consider obtaining evidence of identity from the attorney, notwithstanding that she is not the client in the transaction.
For further information please see our Draft anti-money laundering guidance for the legal sector.
Q: I am my firm's Money Laundering Reporting Officer (MLRO). I recently submitted a suspicious activity report (SAR) to the National Crime Agency (NCA) on a conveyancing transaction. Consent was eventually given to us for the transaction to proceed, but before we heard back from the NCA, the date for completion had passed. My firm has now been served with a claim in which the client is claiming damages arising from the delay in completion. I have reported the matter to the firm's professional indemnity insurers. Is there any statutory protection that we can rely on in these circumstances?
You may be able to rely upon the provisions of s37 of the Serious Crime Act 2015 (‘the Act’) which came into force on 1 June 2015. This section provides the reporting person or business with statutory protection against civil liability arising from the submission of a SAR, provided the report is made in good faith. The Act amended s338 of the Proceeds of Crime Act 2002 by inserting a new subsection 4A, which provides:
'Where an authorised disclosure is made in good faith, no civil liability arises in respect of the disclosure on the part of the person by or on whose behalf it is made.'
For further information, please see the Home Office Circular.
While every effort has been made to ensure the accuracy of the information in this article, it does not constitute legal advice and cannot be relied upon as such. The Law Society does not accept any responsibility for the liabilities arising as a result of reliance upon the information given.
The article is compiled by the Law Society's Practice Advice Service. Comments relating to the questions should be sent to Mrs Anjali Mouelhi, Solicitor and Technical Lead, Practice Advice, the Law Society, 113 Chancery Lane, London WC2A 1PL.
About the Practice Advice Service
The Law Society's Practice Advice Service is a confidential, telephone-based helpline for solicitors. Our team of solicitors answers questions on a wide variety of subjects, including anti-money laundering (AML), costs, conveyancing, client care and complaints handling.
The service operates Monday-Friday, 09:00-17:00, on 020 7320 5675.