rblog

The results are in

By Phil Saich on 14 October 2014

Almost as hotly contested and eagerly anticipated as the outcome of the Scottish independence referendum - but not quite as important as the Sunday shows for Strictly and X Factor - the results of our poll are finally in!

We have already identified a number of issues around current priority risks (identified in the Risk Outlook 2014/15) to explore further and have addressed these with supporting papers. But we wanted to know what other subjects were high on your list and asked you to vote on five topics you would like to know more about.

Without further delay, the current priority risk that the majority (29%) of you voted for was money laundering.

Money laundering: spotlight on law firms

Money laundering is the process of making money or assets obtained by criminal means appear legitimate. Money laundering also includes money used to fund terrorism, however it is obtained.

It is estimated that between £23bn and £57bn is laundered through the UK every year1. We know law firms are targeted by criminals because they bring legitimacy to transactions, and without effective controls and safeguards, millions or even billions of pounds could be laundered through law firms in England and Wales each year.

In 2013, the Financial Action Task Force (FATF), an independent inter-governmental body which develops and promotes policies to combat money laundering and terrorist financing, produced a report highlighting the vulnerabilities of the legal profession. Whilst their research was not specific to the UK, it identified that law firms are attractive targets for those wishing to launder the proceeds of crime or otherwise disguise improper transfers of money.

We have already been focused on guarding against money laundering and to ensure firms are set up to deal with increased attempts from criminal gangs in light of FATF research, we have stepped up our efforts to ensure that firms do not become embroiled in money laundering activity and are compliant with relevant regulations.

Engagement and education

Over the coming months we will be engaging with firms to ensure robust systems and controls are in place to guard against solicitor involvement in money laundering. A key focus of our engagement activity will be around education, prevention and protection. We will offer support to firms on anti-money laundering compliance, testing policies and feeding back findings to senior management.

We are working closely with the National Crime Agency (NCA) and the Home Office to ensure a consistent, coordinated approach to tackling the issue.

1. Frequently Asked Questions relating to money laundering, Financial Services Authority (now FCA & PRA), 2013

Coming soon

In the spring of 2016, the UK will be subject to a FATF Mutual Evaluation. This will involve the evaluation team meeting with representatives of the private sector (which may include law firms) to assess organisations' anti-money laundering and counter-terrorist financing systems and their effectiveness. Given the timeliness of their 2013 report about the legal sector, we anticipate that FATF is likely to test their findings during this evaluation.

As part of our autumn update to the Risk Outlook 2014/15 in November, we will be publishing an accompanying paper on money laundering. In this, we will be discussing different forms of money laundering and providing you with information on how you can identify and control the risk. This will include case studies on firms that have taken a positive approach when their firms were at risk. It will also set out why we see money laundering as such a key priority risk, for example, because of the damage it causes to public confidence in legal service provision.

Remember, while there is a requirement in the Code of Conduct to guard against money laundering, this is not just a regulatory issue. Law firms are required by law to take appropriate safeguards against becoming involved in money laundering activity.

More polls to come!

As the result of the poll was so close, this suggests there is an appetite to learn more about almost all of the risks we identified as our current priorities in the 2014/15 Outlook. Whilst we have concentrated on money laundering today, we will share our analysis and understanding of the other priority risks in due course.

We will be updating our polls on a regular basis and reporting back to you on the topics you want to learn more about, so don’t miss out on the opportunity to have your say!

I hope you found this brief update useful. Please take the time to read the autumn update of the Risk Outlook 2014/15 and accompanying paper on money laundering when it comes out in November.

Phil Saich is a Risk Coordinator at the Solicitors Regulation Authority.