Call for evidence: UK AML regulatory and…
We responded to HM Treasury's call for evidence on the effectiveness of the UK's anti-money laundering regulatory and supervisory regime.
After many months of anticipation, the UK’s third National Risk Assessment (NRA) was published on 17 December 2020.
There was nothing unexpected in the NRA around the risk and threats impacting the legal profession.
For the legal profession, the head risk scores remain unchanged with money laundering high and terrorism financing low.
There was a significant positive change from the negative rhetoric in the 2015 and 2017 NRAs, where the legal profession (notably solicitors) had been labelled as “professional enablers”.
Legal service providers (LSP) offer a wide range of services. The services most at risk of exploitation by criminals and corrupt elites for money laundering purposes continue to be:
Other associated risks across the international front included:
Overseas threats to the UK around illicit finance flows include:
The NRA found that most legal service providers comply with their anti-money laundering (AML) obligations and supervisors have found an improvement in their technical compliance with the Money Laundering Regulations.
However, there is more work to be done, as supervisors are finding that a significant minority of legal service providers do not prioritise AML compliance and still lack an understanding of the risks.
The main non-compliance trends in legal service providers observed by supervisors are:
The main observation in the NRA was a failure to:
This increases the risk of legal services being exploited by criminals as there are insufficient controls in place.
There have been significant improvements in the capacity and capability of the legal sector supervisors.
Changes to the Money Laundering Regulations 2017 have boosted supervisors’ capability to tackle non-compliance.
The low level of SARs from the legal sector was also subject of continued comment. However, the NCA acknowledged the work by the sector in engaging with UK Financial Intelligence Unit to improve quality and reporting levels.