Key to ensuring compliance is reading guidance issued by the Solicitors Regulation Authority (SRA) and the Legal Sector Affinity Group (LSAG); although the LSAG has published a key changes document, it will be a few months yet before its full guidance is approved for release by HM Treasury.
Most law firms are unlikely to come within the scope of many of the changes, however, those that are part of a wider business structure (Alternative Business Structure, Multi-Disciplinary Partnership, etc.) may want to look at these more closely. These changes cover areas such as:
- Letting agents dealing with high rental leases
- Crypto asset exchange providers
- Art market activity
- Financial institutions paying out on life insurance policies
- Credit institutions and providers of safe custody services.
If you provide tax advice you will need to assess whether this is by way of “material” or “incidental” aid if it is the former you will need to review your position in relation to how you should comply with the regulations; hopefully, the LSAG guidance will shed more light on this.
Where you fall within the requirements of 5AMLD you will need to update your policies, controls and procedures; this is not just a requirement of 5AMLD but also of the SRA in terms of being able to evidence under the Standards & Regulations why you have taken certain action/decisions.
Training, as ever, forms a key part of AML compliance, so ensure you provide all staff with training on 5AMLD where it is appropriate. An additional training requirement applies to “relevant agents”, but it is unclear what this will cover (locums, consultants, temporary staff, etc.); the test that should be applied is whether their work is relevant to the AML compliance of your firm, but this should be assessed on a risk-basis.
There are a number of changes relating to the due diligence of beneficial owners, including those in law firms (owners, partners, members, etc.), so make sure you look at these areas closely.
The regulations provide for situations where you may not be able to carry out/complete appropriate due diligence on beneficial owners, but it is key that if these apply to you that you maintain detailed notes about what you have done and why you have done it; again, this is not only an AML requirement but also an SRA one as well.
Electronic ID verification from a compliant service provider will be deemed to be obtained from a reliable and independent source as long as the provider can provide assurances that the system can confirm the identity of the person being checked.
Any discrepancies found in the Companies House (CH) Registers must be reported via the CH portal as soon as possible.
There are new requirements for Enhanced Due Diligence (EDD), particularly in relation to complex and unusually large transactions, and where either party is established in a high-risk third country; this is another area of your firm-wide risk assessment that will need to be reviewed, and where appropriate changes made to policies, controls and procedures.
Interesting findings on 5AMLD
During the survey we carried out a number of polls, the answers to which you may find enlightening:
- Have you updated your firm-wide risk assessment and policies?
- Yes – 59.5%
- No – 16.5%
- Unsure – 24%
- Have you provided training to all your staff and relevant agents covering changes to the ML Regulations?
- Yes – 52.5
- No – 29%
- Unsure – 18.5%
- Have you/your COLP been contacted by the SRA since making your firm’s AML declaration?
- Yes – 5%
- No – 68%
- Unsure – 27%
The poll data for the first two questions suggests that some firms may find themselves in trouble should the SRA decide to contact them further as part of its ongoing thematic review!
Key steps to take
- Update your AML/CFT risk assessment
- Update your AML/CFT policies
- Train staff and agents as appropriate
- Review compliance via risk-based file audits
- Ensure the firm’s COLP is up to date with the firm’s AML procedures
Included within our eLearning – Governance, Risk and Compliance catalogue we can offer full Anti-Money Laundering training courses specifically for fee earners, support staff and international staff. We also have refresher training for those already trained in AML but need to understand recent developments in Money Laundering regulations including the 5AMLD. The Access Group can also provide you with software, services and training designed to make the job of complying with the expanding list of regulations easier for firms.