Legislate to help legal regulators deal with sanctions busters, Raab told

Raab: Urged to “put matters beyond doubt”

The Legal Services Board (LSB) has told the government that “there is a strong case for legislating” to ensure legal regulators have the powers to stop lawyers breaking sanctions imposed by the UK.

In a letter to justice secretary Dominic Raab, LSB chair Dr Helen Phillips said it would “undoubtedly be helpful” for the government “to put matters beyond doubt” for regulators on issues such as information sharing, their “broader powers” and their remit to enforce the sanctions regime.

Mr Raab, the deputy prime minister and Lord Chancellor, wrote to the LSB earlier this month about the legal sector’s efforts to enforce the sanctions regime imposed following the invasion of Ukraine.

Noting that the legal profession had come under “significant scrutiny”, Mr Raab said: “There has been criticism of firms and chambers for acting on behalf of clients linked to Russia.

“I have and will continue to defend the rights of all – including those subject to sanctions – to access legal advice.

“But I expect legal professionals to operate to the highest ethical standards and to demonstrate this to the public. Thankfully, I am confident that the overwhelming majority do so.”

Describing the legal sector as “critical” to an effective sanctions regime, Mr Raab said he was “keen to hear” from the LSB on how it planned to strengthen enforcement and compliance and how government could support it.

“We must continue to act visibly on this issue to maintain confidence in the sector and the wider legal system, and to ensure we are standing strong with Ukraine.”

Ms Phillips replied that, while existing legislation provided “both a mandate and a range of powers” to ensure the legal services sector played its part, there were “a number of areas in which it would undoubtedly be helpful to put matters beyond doubt”.

On information sharing, she listed types of information that should be shared between legal regulators, the Office of Financial Sanctions Implementation (OFSI) and authorities such as the National Crime Agency.

This included information about law firms and lawyers who had obtained licenses from OFSI to be paid legal fees by sanctioned entities, license breaches and whether legal fees were ‘reasonable’, a requirement of the scheme.

Also on the list were “issues with poor reporting”, for example in terms of money laundering suspicious activity reports.

Ms Phillips said “a great deal” could be achieved through existing legislation. “However, there is a strong case for legislating to put beyond doubt the ability of the various parties to share this information.”

She said the LSB had “collated” requests from legal regulators for greater powers to enforce sanctions, including greater fining powers, greater powers to require information from firms about sanctions as well as “legislation to require source of funds/wealth checks (beyond existing limited circumstances)”.

Ms Phillips said that while it was clear that the Legal Services Act “strongly implies a remit for the legal services regulators” in the area of sanctions, it would “again be helpful to put the matter beyond doubt”.

She said the LSB knew from experience “since the war in Ukraine began that some businesses and professionals have been challenging this view, giving rise to operational difficulties in enforcing the regime”.

In a paper on the issue for the LSB’s board meeting yesterday, chief executive Matthew Hill said that, following a roundtable event last month and “full returns” from legal regulators, some “key themes” had emerged.

Sanctions-related messaging tended to be “drowned out” by that relating to money laundering, while the ‘UK nexus’ of the sanctions regime could be overlooked, with “an over-reliance on such factors as the absence of Russian business addresses as an indicator of risk”.

Regulators took a wide range of approaches to “every dimension of activity” and assessments of risk were under-developed.

On compliance, Mr Hill said limited information on “actual compliance” was combined with low licensing numbers, meaning that “possibly widespread non-compliance must remain a significant concern”.

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