How professional enablers facilitate money laundering – and how to spot the warning signs
Money laundering enables criminal activities such as drug trafficking, terrorism and modern slavery to continue and spread.
Legal professionals are on the front line of anti-money laundering (AML) efforts, because they are at a high risk of being exploited by people seeking to legitimise illicit proceeds.
The term ‘professional enabler’, introduced in the Economic Crime Plan 2023 to 2026, highlights the critical role that regulated professionals can play in either preventing or facilitating financial crime.
What is a professional enabler?
A professional enabler is an individual or organisation whose actions – whether deliberate or negligent – allow criminal activity to thrive.
These actions can involve failing to conduct adequate due diligence, turning a blind eye to suspicious behaviour or not fully complying with AML regulations.
Tackling this issue is vital in the fight against financial crime. The Economic Crime Plan 2023 to 2026 calls on professionals to embrace their AML responsibilities to safeguard their practice and reduce the risk of being unknowingly exploited by criminals.
How professional enablers facilitate money laundering
Money laundering refers to activities that involve concealing, transferring or legitimising the proceeds of crime.
The proceeds of crime are referred to as ‘criminal property’, and any reduction in liabilities gained through criminal activity – such as unpaid taxes – is also considered criminal proceeds.
For example, if a client reduces their tax liability by misreporting income, the saved amount becomes criminal proceeds, and using it constitutes money laundering.
Identifying the risks
Below are some tasks that legal professionals routinely undertake that could make them complicit in money laundering.
High-risk services
Conveyancing, establishing trusts and companies and managing client accounts are considered the most vulnerable areas for money laundering.
This is due to the large sums of money involved and the ability to obscure ownership.
Poor client due diligence (CDD)
Although identity checks are carried out for new clients, these checks are only a fraction of overall CDD.
Failure to identify, verify and risk-assess clients, including beneficial owners, can give potential money launderers the power to use legal services without raising suspicion.
Complex or suspicious transactions
Using complex legal arrangements to move funds through multiple entities can obscure the source of illicit funds.
Being asked to hold or transfer a client’s funds for no clear reason can serve the same purpose.
Cash or crypto transactions
Large cash transactions related to legal services can be a warning sign of money laundering activity as it’s harder to trace origin of the funds.
Similarly, using cryptoassets for payments, while not always suspicious, makes it difficult to identify the beneficial owner.
Failing to implement robust AML procedures – or choosing to ignore the warning signs – can result in playing a significant role in enabling money laundering schemes.
Preventing unwitting enablers
Embedding AML measures into standard operating practices ensures legal compliance and strengthens the ability to identify and respond to potential threats.
The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 provide clear guidelines for compliance.
These include having:
- training in place to equip all staff to detect, prevent and report suspicious activity
- an up-to-date, tailored, business-wide risk assessment
- up-to-date, customised AML policies, controls and procedures that reflect a firm’s risk
- comprehensive client due diligence, including client and relevant matter risk assessments
The Economic Crime Plan 2023 to 2026 recommends using technology, such as automated client verification systems, to improve AML measures.
While technology can aid due diligence, firms must ensure that staff are trained to use these tools and can interpret the results correctly.
Don’t be the weak link
Professional enablers are a weak link in the fight against money laundering. By failing to act responsibly, they allow criminals to exploit gaps in the system and bring illicit funds into the economy.
Avoiding this requires vigilance and a commitment to upholding the integrity of the sector.
The Economic Crime Plan 2023 to 2026 highlights the need for professionals to play an active role in combating financial crime. This is by strengthening compliance frameworks, increasing collaboration with regulatory bodies and reporting and addressing suspicious activities promptly.
The focus on professional enablers is a reminder that regulated professionals have a duty to uphold ethical and legal standards. Taking these responsibilities seriously is key to disrupting financial crime networks.
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AMLCC is a Law Society partner offering AML compliance, risk management and education tools for the legal sector.
Richard Simms, managing director of AMLCC, is a chartered accountant and leading authority on anti-money laundering. A sought-after speaker at AML events worldwide, he is at the forefront of changes in guidance and legislation impacting the legal and other Designated Non-Financial Businesses and Professions (DNFBP) sectors.