New money laundering rules will threaten business

Half of UK law firms believe the Money Laundering Regulations 2007 will undermine the competitiveness of the UK economy, a new survey shows.
The research by LexisNexis also shows that 52% of law firms believe the new regulations—due to come into force in December—will require additional financial investment and of these, half claim their overall due diligence costs will increase by 10% to 29%. 

Under the new regulations, details of which were released by the government last week, law firms will need to make major changes to how they undertake customer due diligence, in particular, how firms conduct money laundering checks, identify beneficial owners, and perform ongoing monitoring of business relationships.

Although 40% of law firms see no benefits to the new regulations, 68% have started to invest in training resources and 48% have started to invest in personnel to perform due diligence checks.

The regulations will extend supervision to all businesses in the regulated sector to secure greater compliance with anti-money laundering controls and introduce strict tests to ensure money services business, and firms that help set up and manage trusts and companies, are not run for criminal purposes. They will also require extra checks on customers that pose a higher risk of money laundering.

The government says regulatory burdens will be reduced in low risk areas. Firms can make fewer checks in some situations, such as occupational pension funds, while the number of identity checks will be reduced, with firms being able to rely upon checks done by certain other firms, eg solicitors. Greater flexibility will be introduced to record keeping rules so firms can keep only the important details rather than whole documents.

Mark Dunn, head of risk and compliance at LexisNexis, says: “The regulatory authorities are likely to clamp down hard on law firms that do not adhere to the new regulations so companies need to make sure that they don’t run the risk of being penalised.”