Anti-Money Laundering regime must ensure legal sector expertise is retained

The Law Society of England and Wales has today (13 October) responded to the Treasury’s consultation on Anti-Money Laundering (AML) and Counter Terrorism Financing (CTF), warning that the government must ensure legal sector specific expertise is retained.

“The solicitors’ profession is fully committed to tackling illicit finance and money laundering. This is demonstrated by the significant resources allocated to complying with its AML and financial crime obligations,” said Law Society of England and Wales president Nick Emmerson.

“The AML regime is highly complex and it is vital for representative bodies, such as the Law Society, to be able to help draft and contribute to legal sector-wide guidance.

“We are concerned that in the current proposals, legal sector specific expertise could be lost, meaning the AML supervisory regime would be less, rather than more, effective in the short to medium term.”

On the proposed Professional Body Supervisor (PBS) consolidation model, Nick Emmerson said: “We support this model, but only for England and Wales. PBS consolidation has the potential of simplifying the complex regulatory landscape, making it easier to navigate and bringing more consistent levels of supervision.

“The model also supports the preservation of the independence of the legal profession from the government.”

On the Office for Professional Body Anti-Money Laundering Supervision plus model (OPBAS+), Nick Emmerson said: “Giving OPBAS additional powers is unlikely to address the ongoing failings of the current supervisory regime, particularly around fragmentation and lack of consistency.

“There must be a greater focus on the overall effectiveness of the regime and outcomes, rather than tick-box compliance which satisfy overly prescriptive requirements.”

On sanctions, Nick Emmerson said: “The legal sector plays an important role in ensuring an effective sanctions regime, both in providing advice to clients on their compliance with the regime, and in ensuring that lawyers work in accordance with sanctions.

“We are not aware of any evidence from either law enforcement or the Office of Financial Sanctions Implementation of any failings across the legal profession in sanctions compliance.

“As such, there is no justification to increase the role of AML/CTF supervisors in monitoring firms’ sanctions controls and finance.

“Law firms should consider their own risk appetite and how to address their sanctions risk, which could be extremely limited.”

Nick Emmerson concluded: “Reforming the supervisory regime will play an important role in achieving an effective AML regime, but it will only go so far without addressing the wider regulations which underpin the regime.

“A significant proportion of the money-laundering regulations (MLRs) are relevant to the financial sector. Consequently, the MLRs are onerous and difficult to put into practice across the legal profession.

“The upcoming consultation on MLRs will provide an opportunity to address some of the challenges with the MLR obligations.”

Notes to editors

Read the Treasury’s consultation on reforming anti-money laundering and counter-terrorism financing supervision

The Law Society’s full consultation response is available upon request.

About the Law Society

The Law Society is the independent professional body that works globally to support and represent solicitors, promoting the highest professional standards, the public interest and the rule of law.

Press office contact: Naomi Jeffreys | 020 8049 3928