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The global AML landscape is diverse and the legal industry must keep pace with developing rules and regulations in order to meet their compliance obligations.
Why Lawyers and Conveyancers Need AML/CTF?
Besides participating in advisory and legal services, lawyers and law firms act on behalf of their clients. Any registered legal firm, conveyancing firm or practitioner, or certified legal practitioner is required to enforce anti-money laundering and counter-terrorism (AML/CTF) measures in place if they partake in the following activities:
Function as a formation agent, sign into legal arrangements, or act on your client's behalf
Perform conveyancing transactions
Operate as nominee director or trustee, or give registered office or company address
Handle the funds, securities of a client or another asset firms
Risk exposure
The nature of legal activities is one of confidentiality, and they may involve large financial transactions and acts on behalf of clients that disguise their goal or source of funding. As a professional facilitator, the lawyer or law firm lends respectability to such actions, thereby facilitating the laundering of criminal funds. Criminals frequently hire attorneys to offer banking facilities or to mislead conveyancers with false information or documentation, subjecting attorneys and conveyancers to money laundering risks.
Compliance Measures
Legal and conveyancing professionals are required to record physical cash receipts or transactions exceeding the regime's prescribed threshold, regardless of any confidentiality agreements or any breach of client confidence. KYC, client due diligence, monitoring, record keeping, and reporting of unusual transactions, particularly involving foreign currencies, tax evasions, transactions with virtual currency exchanges if illegal under the regime, transactions with sanctioned enterprises or countries, trading in unlawful goods, or activities that pose risks of ML/TF, are all components of AML compliance. The ability to use the skills of legal professionals for manipulating transactions and concealing any illicit activity or financial crime, allows clients to evade taxes and regulations. This exposes the legal fraternity and legal firms to ML/TF by being facilitators or acting on behalf of their client. Confidentiality contracts, the fear of losing business, advocacy before courts and tribunals, or representing clients in disputes, are the biggest gaps in compliance in the legal sector.
Gaps in Compliance
Clients are able to avoid taxes and regulations by utilising the skills of legal specialists to manipulate transactions and conceal any unlawful activity or financial crime. As facilitators or representatives of their client, this exposes the legal community and legal businesses to ML/TF. The largest compliance gaps in the legal industry include confidentiality contracts, the fear of losing business, advocacy before courts and tribunals, and representing clients in disputes.
Establish Compliance
It is expected for lawyers, conveyancers, and legal firms to establish risk-based compliance program framework. They are further expected to:
- Perform a risk-based assessment of exposure by client type, insurance policy, service channel, operating country, premium size, client relationship changes, and manner of refund or payout.
- Develop strategies and controls to reduce and mitigate risks.
- Create an AML/CTF program. This includes customer identification, beneficial ownership examination, ongoing monitoring, and reporting, in accordance with applicable legislation.
- Establish a risk-based strategy for ongoing customer, transaction, and business relationship monitoring. This involves minimising risks associated commercial ties for reputation management.
Maintain your Compliance Program
As per the regulations of your regulatory body, it is necessary to establish and maintain your compliance program. Penalties for non-compliance may be monetary or criminal in nature.
Constant compliance entails:
Constant compliance entails:
- Inclusion of an ethical officer in the hiring process, teaching employees on the risks involved and keeping them up to date on AML/CTF regulations.
- Carrying out enhanced due diligence (EDD) when signing up for cash-out/cash-in bets, a credit extension, significant cash transactions, or complicated transactions.
- Continuous surveillance of transactions for questionable activity, overseas operations, or transactions with sanctioned individuals or nations.
- Collecting client information from all touchpoints and keeping records.
- Submitting compliance reports, suspicious transaction reports (STRs), and other duties as specified by a relevant regulator.
- Periodically reviewing your risk assessments and compliance programme with outside audits.
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