Money laundering: all property cases should be assumed to be high risk

High street solicitors must adopt an attitude of suspicion and paranoia to avoid becoming “collateral damage” in police efforts to clamp down on fraud, an anti-money laundering (AML) conference in London heard last week.

Nicola Boulton, a commercial litigation specialist at Byrne & Partners and a member of the Law Society’s money laundering task force, said lawyers had been enlisted by the government in the fight against crime and were stuck with the fact.

“What one needs is a degree of calculated paranoia, cynicism and suspicion,” she said. All solicitors had to develop this way of thinking to avoid being caught in the middle of law enforcment and criminals eager to enjoy the proceeds of their crimes.

As a minimum a firm’s AML measures should include risk assessments of cases, keeping a compliance manual, due diligence forms, staff training and ongoing monitoring, said Ms Boulton.

Risk assessments should involve the firm’s management, its money laundering reporting officer and fee-earners. All property cases should be assumed to be high risk, as should clients who run cash businesses and those with criminal records, she said.

The firm’s compliance manual would include procedures for carrying out risk assessments and actions corresponding to the results, client due diligence, client identification and the rules on beneficial ownership. Guidance on types of money laundering, with examples of the sort of activities criminals get up to, should also be included.

Due diligence/case opening/new client forms are absolutely essential to make sure questions are asked and the answers recorded. Staff should be tutored in filling out the forms correctly.

Training staff is one of the most useful things a firm can do to protect itself, Ms Boulton said. Many AML problems can be prevented by fee-earners knowing what to look for. A starting point is to ensure they have read the compliance manual. Anyone in the firm who deals with money coming into the firm should also be trained to spot problems.

Recording everything a firm does to comply with its AML procedures is vital, she urged: “It doesn’t matter how brilliantly you comply with everything; if you can’t prove you’ve done it, you’re still in trouble. It is just as important to record what you do to comply as it is to actually do it. You have wasted your time and money in complying if you can’t prove it as well.”

Although litigation is not a regulated sector, firms should still retain a healthy suspicion, Ms Boulton said. The litigation may be a sham in order to get cash into the system. If warning signs appear, for instance a client settling too easily, making a protective suspicious activity report to the Serious Organised Crime Agency is “the safe thing to do”, she advised.

Clients who are involved in cash businesses are obvious sources of concern, but such businesses are still commonplace in many communities, she said. Cash is legal tender and many people rely on it. Firms have to take a commercial decision on whether to deal with those businesses. “Ask the questions, write down the answers, show the thought processes. Ask clients where the money comes from. If you ask, people will generally tell you.”


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