Do money launderers have holidays off? 5 red flags for smaller firms to look out for
It is that time of year again, we are all feeling festive, thinking of relaxing at home over the Christmas period with mince pies, chocolate and turkey! But what are the criminals looking forward to?
Reduced numbers of staff in law firms, less focus on transactions while we’re recovering from the Christmas party, or hoping to slip through your checks in the very busy period when people want to be in their new house before Christmas.
It is very difficult to predict how a money launderer might target your firm, but here are 5 red flags you should be on the lookout for.
1 Clients with no obvious reason to instruct you
We always ask clients 'Where did you hear about us?' We know that many clients come as a result of a recommendation from a former client or an introducer of work. Some firms market for new clients, but if you get a new client, who has come to you without any obvious connection, ask yourself why. Is it because the client is targeting your firm because they think you won’t spot that they are laundering money?
2 Secretive clients
Firms should have client due diligence procedures designed to 'know your client'. A client who is reluctant to share information with you, may be a red flag for money laundering. Most organisations will ask for some sort of identification, and in some cases financial history. A person who refuses to provide this information may be trying to hide that they are impersonating someone else, or that they have illegitimate funds they do not want you to discover. You should consider whether their refusal is at all suspicious, and if so, consider reporting to your money laundering reporting officer.
3 Too much information
Conversely a client who provides all the information you need without being asked may also be a red flag. A criminal wanting to launder money through your firm is likely to know what information you will ask for. In order to rush the matter through they may provide this information unprompted. Unless your client is a frequent user of legal services, it may be unusual for them to know what you need, and if it is volunteered you should consider whether this is suspicious.
4 Third party funding
Using third party funds in a matter is becoming more and more common as the value of property increases. It is quite often the client’s parents who are gifting the money to the client, but be careful, criminals try to launder money through third party funding because they think you will only carry out due diligence on the client, and not a third party. If you have a third party funder, you should consider the risk of money laundering and whether you should conduct any checks on them and the source of the monies.
5 Last minute changes to funding
Where we do see criminals trying to launder money through solicitors firms, particularly in conveyancing transactions, they will often try and get around checks by changing the source of the funding at the last minute. This doesn’t give the lawyer time to do proper due diligence on the funds before completion.
When getting ready to complete a transaction, it is useful to revisit your client due diligence documents and check that the money you have received is from the source you were expecting. If not, you should make enquiries and consider whether you are suspicious that this is money laundering.
Criminals don’t stop over Christmas, so neither should your AML procedures. Check out our red flags for money laundering . You can also get support from our dedicated free and confidential AML practice advice line staffed by solicitors on 020 7320 9544.
Views expressed in our blogs are those of the authors and do not necessarily reflect those of the Law Society