B9: Examples of Breaches
Examples of the type of behaviour which may be considered as breaches of this rule by virtue of recklessness would include:
- A reckless disregard for compliance with Rule B9 and the money laundering regulations resulting in general non-compliance with fundamental requirements across the practice unit’s activities.
EXAMPLE: A firm which had previously focused on immigration advisory work decides to expand into conveyancing with a focus on overseas clients with complex transaction funding arrangements. The firm proceeds to complete a high volume of complex transactions involving overseas funding without ensuring that the firm has adequate PCPs in place covering fundamental AML requirements (risk assessment, due diligence, source of funds & wealth) and providing no AML training to existing staff with little experience of working on in-scope services.
- A reckless disregard for compliance with Rule B9 and the money laundering regulations on transactions which clearly represent very high levels of risk of money laundering.
EXAMPLE: The solicitor is aware that the client has a previous conviction for involvement in serious organised crime and money laundering. The client asks the solicitor to act on a series of property transactions. The proposed transactions clearly exhibit a number of “red flags” such as multiple unexplained funders and proposals for distribution of free proceeds to third parties with no apparent relationship to the transactions. Despite the client’s background and the identified “red flags” the solicitor proceeds to allocate low risk ratings to the transactions and conducts no enhanced due diligence on them (RECKLESS).
EXAMPLE: A solicitor has some new clients who are not met face to face. Passport photos for three different clients appear to have photographs of the same person. While other passport details differ, the dates of birth appear to be for people much older than suggested in the passports (allowing for the age of the passports). The solicitor is aware of these anomalies but proceeds without challenging the clients, carrying our any further checks or considering whether to submit suspicious activity reports.
- A reckless disregard towards the implementation of significant recommended improvements provided by the Law Society of Scotland acting as the AML Supervisor, resulting in continued significant non-compliance and enhanced risk of money laundering.
EXAMPLE: A busy conveyancing firm is presented with a LSS AML inspection report making clear that there are fundamental shortcomings in AML PCPs and/or their application in practice. During an interview with a panel of AMLSC members, the firm accepts all of these findings and states they will address them as a priority. A LSS follow up inspection one year later finds that the firm has taken no action despite their previous statement. In the intervening period, the firm has completed a high volume of conveyancing transactions without appropriate PCPs in place leading to breaches of the AML regulations on the bulk of their transaction activity.
Examples of the type of behaviour which may be considered as breaches of this rule by virtue of dishonesty would include:
- Attempts to mislead the Law Society of Scotland through the knowing provision of false information during a Law Society of Scotland AML inspection. (Eg; Due diligence material gathered post transaction completion which is presented as having been gathered at an earlier stage).
EXAMPLE: Falsely confirming on AML Certificates submitted over several years that the firm is fully compliant with the requirements of the MLRs and LSAG guidance, despite being aware through file checks that there are significant gaps in the firm’s PCPs and AML compliance on individual transactions.
- Placing of falsified due diligence material on files.
EXAMPLE: Falsifying the dates of documented risk assessments to suggest that they were conducted at an appropriate stage of the client relationship when they were completed after completing the transaction.
- Taking steps to add falsified due diligence material to files.
EXAMPLE: Altering printed reports produced by AML software to change a reported risk rating or to show matched client details instead of the systems reported mismatch.