UK: TRUST AND COMPANY SERVICE PROVIDERS (TCSP) AND MONEY LAUNDERING RISKS

The Solicitors Regulatory Authority has published a Thematic Review which says that the credibility of solicitors and the services they offer makes them an attractive target for criminals, who want to launder their gains – and hence, solicitors have a vital role – and opportunity – to help tackle the problem.  Therefore, the SRA has produced this document to highlight relevant money laundering and terrorist financing risks that it considers relevant to those firms and individuals it supervises.  It says that trusts and companies are attractive to money launderers because individuals can:

  • obscure the beneficial ownership and control of assets and wealth;
  • create and control multiple legal entities at a relatively low cost;
  • create complex and opaque structures;
  • operate across multiple jurisdictions; and
  • avoid tax or duties.

The SRA says that, in July 2018, its Risk Outlook highlighted its growing concern about the risks and challenges posed to the profession by those looking to launder the proceeds of crime and finance terrorism; and it explored this further in an Autumn update, where the concern was raised as a priority risk.  In 2018, it reviewed 59 law firms in England and Wales that told the SRA that they carried out trust and company service provider (TCSP) work.  The report summarises what was found, and builds on 2 previous money laundering reviews in 2016 and 2017.  The findings included –

  • most law firms who carry out TCSP work are adequately meeting their obligations to tackle money laundering – but a “significant minority” are not doing enough, with some falling seriously short;
  • a risk assessment is required in legislation and should be the backbone of a firm’s AML approach – but the SRA found that too many firms’ approach was inadequate;
  • concerns included inadequate processes to manage risks around politically exposed persons (PEP) – an issue in around a quarter of firms; and some firms are also not doing ongoing customer due diligence (CDD);
  • only 10 firms had submitted SAR in the last 2 years – which tallies with concerns raised by the NCA that generally law firms are not being proactive enough in looking to identify and then report suspicious activity; and
  • it has referred 26 firms into its disciplinary processes.

Following the review, the SRA is setting up a new dedicated AML team, with increased resource to monitor and ensure compliance in the area.

https://www.sra.org.uk/sra/how-we-work/reports/aml-thematic-review.page

Author: raytodd2017

Chartered Legal Executive and former senior manager with Isle of Man Customs and Excise, where I was (amongst other things) Sanctions Officer (for UN/EU sanctions), Export Licensing Officer and Manager of the Legal-Library & Collectorate Support Section

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: