The Impact of Money Laundering Regulations on the Legal Sector
The legal sector in England and Wales is a common target for money laundering, with large sums of money being exchanged on a daily basis. This makes it a prime opportunity for unlawful professionals and clients looking to exploit the system. One area where these risks are particularly prominent is in probate, where actions can be taken by employees and clients to cheat the system.
In order to combat this issue, all solicitors have a duty under the Code of Conduct to ensure that their firm has sufficient safeguards and systems in place to comply with anti-money laundering legislation. The Fourth Anti-Money Laundering Directive, which was brought into UK law last year, aims to reduce and prevent money laundering offenses.
Emily Deane, Technical Counsel of STEP, highlighted the importance of the Directive in light of recent global events such as the Paris attacks in 2015 and the Panama Papers leak. The Directive aims to update and enhance the EU’s anti-money laundering and terrorist financing laws.
One key aspect of the Directive is the ‘risk-based’ approach, which sets out that a higher duty of care is owed when there is a higher risk of money laundering. This includes conducting due diligence on trust beneficiaries, trustees, and anyone included in the expression of wishes.
Charlotte Ponder, Legal Director at Countrywide Tax and Trust Solutions Ltd, emphasized the need for greater consistency and a more proportionate approach in implementing anti-money laundering measures. She highlighted the challenges faced by clients in assigning life policies into Trust and called for a more streamlined process.
The regulations also aim to prevent anonymous trusts from funding criminal purposes by establishing a register of all tax-generating express trusts in the UK. This places an additional burden on trust beneficiaries and trustees on an administrative level.
Overall, collaborative efforts between the Government and professionals are crucial in taking preventative measures against money laundering in the legal sector. The introduction of regulations like the Fourth Anti-Money Laundering Directive is a step in the right direction, but more needs to be done to combat this ongoing issue.
