Tackling money laundering Risk update: Tackling money laundering Colette Best, Policy Manager

Money Laundering: Why do we care?

Why do we care?

It’s not about compliance It is about … Stopping terrorism Preventing drug trafficking, illegal arms dealing, child exploitation and other crimes from being profitable Maintaining the integrity of the profession Keeping your firm and staff safe This is why preventing money laundering should be important to firms. The title of the presentation you’ve been given is misleading – firms should care less about compliance than doing the right thing

Where’s the risk? Product and services Clients Transactions Delivery channel Geographical Product and services risk (trust and company work; conveyancing; client account) Client risk (politically exposed persons; cash; customers seeking anonymity) Transaction risk (large transactions; e-currencies; unusual or new transactions; transactions facilitating anonymity) Delivery channel risk (remote clients; payments to/from third parties; combining services) Geographical risk (sanctions; corruption; non-equivalent AML standards).

Some things we have seen Fraudulent property investment schemes Funds and clients from high risk jurisdictions Funds paid into client accounts from unknown third parties No underlying legal service or purpose for transaction False and misleading information recorded in client files Facilitating fraud Tax evasion     The SRA is required to have an MLRO to report any suspicion of money laundering or terrorist financing to the NCA Any concerns that anyone in the SRA has gets reported to the MLRO through an internal SAR (suspicious activity report form) and she then makes a decision about whether to make a SAR to the NCA or not, or whether to investigate further. The MLRO is the person at the NCA that sees all the latest trends.

What are your obligations? Know your risk Have a plan Train your staff Identify customers, their source of funds and wealth Monitor business relationships Report suspicious activity Keep records

Our perspective on AML compliance Are we nearly there yet? Our perspective on AML compliance

How are firms getting on? Intelligence from: Thematic reviews Surveys Enforcement action External agencies Concerns Levels of compliance with regulations Submitting suspicious activity reports (SARs) Risk assessment AML thematic review considered the implementation of the 2017 Regulations 50 firms (25 large, 25 small/medium) involved Generally positive results, but some areas of concern Referral of six firms to disciplinary Full report available online Future thematic reviews in 2018 on conveyancing and trust and company services work

Example: Firm’s risk assessment What we are looking for What isn’t enough Takes a considered and thoughtful approach to identifying and identifying risk Reflects who your client is Understands the risks from services Considers your firm’s transactions and delivery channels Considers geographical risk Not written down Not kept up-to-date Doesn’t consider the national and the SRA’s risk assessment

SRA focus for 2019 Remains a high priority Focus on firms’ risk assessments and suspicious activity reports Warning notice coming soon AML thematic reviews Investigating AML-related cases Focus on high end conveyancing - (prime and cash purchasers)

What’s next? Implementation of the 5th Money Laundering Directive Possible changes from the Financial Action Taskforce Review An increased government focus on sanctions and preventing economic crime A new suspicious activity reporting regime 5MLD – likely to see a policy consultation towards the end of 2018 and consultation on legislation early 2019. Legislation comes into force late 2019/ early 2020. Don’t expect big changes, more of a tidying up of bits left over from 4MLD implemented through the 2017 money laundering regulations. Will bring an increased focus on independent AML supervision, possible changes to criminality checks for beneficial owners, officers and managers and requirement for supervisors to publish an annual report. For the regulated sector it will mean more importance place on transparency of ownership, particularly in trusts. We are expecting the results of the FATF review imminently. If FATF have found issues with the way the UK supervises then we will need to make changes as a result. Early indications from HMT are positive but the review tends to lump in all the accountancy and legal supervisors so there might be changes required across the board. The new National Economic Crime Centre has been set up with £48bn funding to tackle money laundering and wider issues, so there will be increased scrutiny by government in this area. We know that the Office of Financial Sanctions Implementation (OFSI) is increasingly interested in the legal profession. The Law Commission has recently consulted on changes to the SARs regime and there is a NCA project underway to improve the IT infrastructure for reporting.

Help is available Risk Outlook, national risk assessment, sectoral risk assessment Warning notices Thematic review findings Legal sector guidance Professional ethics helpline and webchat

More information www.sra.org.uk/antimoneylaundering