Moot Point - In House Lawyers and AML

Recruitment Consultant Nicola Hook talks AML

Government regulations put in place to help combat money laundering and other related criminal activities were of course in existence before the 9/11 terrorist attacks in New York however this date serves as a turning point for increased awareness and vigilance in a growing number and type of criminal activity including money-laundering. Senior Recruitment Consultant, Nicola Hook, discusses Anti Money Laundering legislation.

Broadening of Definition

Defined as the process by which ‘dirty’ money or money obtained through criminal activity is ‘cleaned’ by filtering it through a legitimate source or business so to reduce or eliminate suspicion. The term originated as a result of Mafia organisations in the 1930s United States commonly using launderettes as the business of choice for this process. Anti-money laundering regulations exist to help regulated businesses ensure they do not fall foul of money laundering practices. Ensuring compliance with the regulations is a legal requirement as non-compliance can have catastrophic knock-on effects not only for the firm in question but for their clients, suppliers and other third parties as well as the wider economy. Failure to comply can lead to criminal sanctions; if found to be in breach you could find yourself facing up to fourteen years in prison along with a hefty fine.

"The AML regulations (comprising the Proceeds of Crime Act 2002, Terrorism Act 2000, Money Laundering Regulations 2007 and all amending legislation) are an essential toolkit for all Lawyers In-House or Private Practice due to their far reaching implications". Lara Oyesanya, Barclays Bank.

Regulated

Since the initial 1991 Money Laundering Directive which made money laundering a criminal offence, evolving terrorist methods have meant the regulations have been tightened and revised several times resulting in the Money Laundering Regulations 2003 which then led to the current regulations, the Money Laundering Regulations 2007. Among other alterations a key revision has been the business sectors to which the regulations now apply known as those that fall into the ‘regulated sector’. No longer the sole proviso of banks and financial institutions (auditors, tax advisors, accountants and institutions offering credit etc.) the rules now also apply to among others estate agents, casinos and crucially for our purposes independent legal professionals - essentially any business where financial or property transactions are involved.

Awareness

However, before you write off ‘independent’ (or by broad definition ‘private practice’) legal professionals as irrelevant to yourself as In-house Counsel, think again. The line between who is classed as being in the regulated sector and those in the non-regulated sector may not be as clear as first might appear and could possibly even change depending on the work you deal with. It is the responsibility of each firm or practitioner to know whether they fall into the category of regulated or non-regulated sector depending on the services you offer. Circumstances vary greatly so do check. Vigilance is needed even if you are not in the regulated sector but are dealing with an individual or body that is though such alliances shouldn't be a cause for concern per se in terms of ensuring compliance - you could find yourself being assessed as part of your client’s checks. An example of such an alliance could be as a result of a Solicitor who naturally works in confidence on a client’s behalf working in turn with an auditor whose job it is to be transparent and to leave no stone unturned. In turn those in the regulated sector dealing with the non-regulated sector need to be aware that ‘tipping off’ is also a crime.

“Ignorance is not an excuse. Whether you find yourself In-House or Private Practice - the key is to educate yourself and to continue educating yourself because you can never know enough” Taibah Rehman, Green Switch Solutions.

It Could Be You

Even if you are convinced that you are not in the regulated sector and that the AML Regulations do not apply to you it would be prudent for all In-house legal professionals to at a minimum have awareness of them and to keep abreast of developments in legislation. The on-going crackdown on terrorist and criminal activity means that future revisions could well lead to other legal practice areas or even full industries also becoming liable to ensure compliance.

 “The many legal and financial regulators are applying huge resources to reducing money-laundering. One of the tools they will use will be to make examples of people and organisations. People who comply but still do not stop money-laundering will be in difficult positions. People who don’t comply or try to comply will be in much, much worse positions. Make sure you are one of the former not the latter. Get specific advice on what you should be doing in your organisation in your sector – general advice may not be worth much to you! The financial and reputational penalties even before you look at questions of liberty are too high to contemplate”. Simon McCrum, Managing Partner - Darbys Solicitors LLP.

Nicola Hook | Recruitment Consultant | In-House

nicola@douglas-scott.co.uk