Anti Money Laundering Update Autumn 2023

Recent AML developments

The new National Crime Agency (NCA) suspicious activity reporting portal (SAR Portal) went live on 18 September 2023, enhancing the process for regulated entities to make reports and requests for defences against money laundering (DAML); regulated entities should register to use the Portal now so they can lodge reports quickly as and when they are required. The NCA provides a very good user guide on how to use the Portal. The only thing the Portal still can’t do is report back whether a DAML has been given; this still relies on an email communication.

The Economic Crime Bill is likely to come into force in the next three months and will cover issues such as:

Failure to prevent fraud
Companies House reforms
Amendments to the Proceeds of Crime Act

Firms that operate in the EU arena need to keep an eye on the EU AML Reforms, which will cover issues such as:

New regulations
New 6th Money Laundering Directive
New EU AML regulator

SRA Update

The Solicitors Regulation Authority recently ran a webinar, and these are the key issues covered:

SRA Teams
- AML Policy
- AML Proactive Supervision
- AML Investigation
Issues found at firm level
- Lack of controls
- Inadequate firm wide risk assessments and policies, controls and procedures
- Failing to train and supervise staff
- Not paying sufficient regard to warning notices and guidance
- PCPs not communicated to staff
- AML training records must be maintained
Issues found at client and file level
- Inadequacy of customer due diligence measures
- Lack of appropriate risk assessments and taking a tick box approach
- Lack of evidence to show what has been considered/done
- Lack of appropriate identification of clients (sanctions/PEPs)
- Failure to check source of funds at all/appropriately
- Checks falling through gaps between fee earners and compliance teams

Related Content: Firm Wide Risk Assessment (FWRA) Best Practice

SRA AML Questions

The SRA provides some useful information on its website, but we thought it would be useful to cover some of the key questions it answers for those that have not seen them yet; our update webinar goes into more detail with a view to putting them into a practical context:

Is an AML ‘manager’ the same as a manager in the SRA glossary?
What is a beneficial owner?
- Some of the guidance provided by the SRA and the Legal Sector Affinity Group (LSAG) contains errors and is to be updated as it is showing ‘25% or more of shares’ rather than ‘more than 25% of shares’.
Can I stray into scope of the regulations?
Can a firm pass on the costs of AML checks?
Are source of funds checks always required?
Can a firm trust the results of online checks?
What is screening?
What is the difference between client and matter risk assessments?
Can a low-risk client have a high-risk matter?
Do I need to do AML checks on all my clients (in and out of scope)?
How far back do I need to check when checking source of funds?
Can I accept crypto assets as payment? Does crypto pose a money laundering risk?

Reliance

During the webinar we carried out two polls looking at the use of ‘Reliance’, where regulated entities can rely on others to complete their client due diligence (CDD); here are the results:

Do you currently outsource any of your CDD under a ‘Reliance’ agreement?
- Yes: 7.1%
- No: 81.55%
- Unsure: 11.3%
If you don’t currently outsource any of your CDD would you do so if liability for it was removed from you?
- Yes: 30.3%
- No: 40.6%
- Unsure: 29.0%

It is clear that while liability for CDD remains with the entity relying on it, we are unlikely to see Reliance being widely used, especially when so many entities supervised by HM Revenue & Customs that could be relied on remain non-compliant with the Money Laundering Regulations. Many entities seem to work on the basis that ‘if you want a job doing properly, you may as well do it yourself’!

At the end of the webinar we answered a number of questions lodged by attendees, so it is worth viewing the update to the end.