Money laundering: Banks reporting but solicitors on same transaction not
A director of the National Crime Agency (NCA) has told solicitors that the legal profession is worse than any other financial services sector in reporting money laundering suspicions.
Donald Toon, director of prosperity (economic crime and cybercrime) at the NCA, said solicitors were “absolutely at the front line of the detection mechanism for money laundering” but “something is not working effectively”.
Speaking at yesterday’s Solicitors Regulation Authority (SRA) COLP and COFA conference in Birmingham, an event attended by over 1,000 solicitors, he went on: “There is a question over whether everyone in the legal profession understands the value of what is being asked for.
“You see high-value transactions in a way that no other part of the financial services sector can. Those with the closest relationship in client terms are not reporting to us.”
Mr Toon said that in high-value property transactions or the creation of complex company structures, solicitors were not thinking hard enough about why beneficial ownership was concealed.
“It’s about taking on the responsibility of serving the public, or, if you don’t want to take it on, benefitting the criminals.
“We’re not asking people to go out and tackle gangsters, only to report something where they have a suspicion.”
Mr Toon said that banks produced a “significant number” of good suspicious activity reports (SARs), identifying dubious property transactions in situations where there were no reports from the lawyers.
“We get some very good quality reporting from the legal profession, but we get some that focuses very carefully on the identity, but not at all on the source of the funds – one half of the due diligence.”
He said 420,000 SARs were received by the NCA in the course of the last year, 86% of which were from banks and building societies.
The figure for the total number of SARs from law firms stood at 3,500, a 10% decline on the previous 12 months. Half of them were about the property market.
He said the Criminal Finance Act 2017, some of which was implemented yesterday with the rest to follow in January, would further extend the reach of the authorities.
Mr Toon said he had a series of cases waiting for unexplained wealth orders, which can force people to explain the source of funds, some of them based on SARs from law firms.
He gave two examples of “very good” SARs from solicitors resulting in the restraint of property, and a criminal confiscation order.
“Solicitors are a crucial source of information and intelligence on how criminals hide their assets.
“We have a very, very few who are criminally complicit, some who are careless and others who are unsure about their responsibilities.”
Mr Toon heard a powerful example from a delegate of the practical problems of making a SAR. A solicitor said her client had gone to the High Court to seek an injunction to force the firm to proceed with a property transaction, causing “a huge amount of trouble and expense” and making staff work through the night.
Crispin Passmore, SRA executive director for policy, agreed with Mr Toon that lawyers were behind other financial services sectors on money laundering, but said they were “ahead of other jurisdictions”.
Last week, a government assessment said [1] legal services continued to be at high risk of attracting criminals intent on money laundering, but were not considered to be a target for terrorist financing.