Current money laundering provisions are a ‘disproportionate’ burden for solicitors, particularly those at small law firms, the Law Society has said
A Treasury consultation, ‘Improving the effectiveness of the money laundering regulations’, closed this month. Its proposals to reform the Money Laundering Regulations 2017 (MLRs) include clarifying the triggers for due diligence and ‘source of funds’ checks, and changes to the requirements for enhanced due diligence checks and the use of digital identity when customer identity verification is taking place.
Firms are required to take a ‘risk-based approach’ when applying the regulations, carrying out checks in a proportionate manner.
Responding to the consultation, the Law Society urged that any reforms not place unnecessary obligations on the legal profession, and that a balance be struck between data privacy and anti-money laundering (AML) obligations.
Law Society president Nick Emmerson said: ‘The MLRs are aimed at retail banks, which process hundreds of thousands of customer transactions daily.
‘Many of the requirements are disproportionate, unnecessary and difficult to implement in practice for solicitors, particularly for smaller firms that have limited resources. We therefore welcome the opportunity to ensure the MLRs are more proportionate to the risks and emerging threats.
‘Customer due diligence measures in practice are to “know your client”. However, the current sectoral guidance focuses too much on name, address and date of birth. This rarely helps identify potential real risks or provides an adequate profile of the client.
‘The MLRs should make it clearer that where a client is conducting activity outside their socio-economic profile, the solicitor should either update their profile or understand why and how they are involved in the unusual matter.’
