AML attestation initial findings

Anti-money laundering (AML) attestation – background

As a responsible AML professional body supervisor, we continue to develop a range of tools to assess the risk of our population and of our individual members.

These include thematic reviews, desk-based reviews, specific file audits, the AML Certificate, and our new attestation process. These ensure that we not only supervise effectively, but that we also aid practices in compliance with their obligations through creating focused and relevant materials.

Adopting a risk-based approach allows us to apply modern and effective regulation, balancing the commercial realities and environment in which our members operate with our overarching legal responsibility, to ensure our members are complying with their AML obligations.

The AML attestation process

The AML team launched a new supervisory attestation process in November 2022 and we wish to thank the practices who took part for their cooperation and input during the process.

The attestation document focusses on compliance with the Legal Sector Affinity Group (LSAG) Guidance Key Compliance Principles (KCP), which can be found here.

The attestation process will be an ongoing piece of work, reaching all practices who may not fall under the scope of our full AML inspection process.

Following the review of the first responses, the AML team will now conduct spot checks on a number of practices' underlying AML policies, controls and procedures (PCPs) to verify the information submitted.

In addition to these spot checks, responses will also be cross referenced against the information submitted via the AML Certificate data received.

The first set of documents received has highlighted some areas that require some focus, however. Yet, we are also encouraged by some aspects:

• R.21 requirements appear to be misunderstood.
  • R.21 relates to internal AML controls at a practice, including the appointment a Money Laundering Compliance Officer (MLCO), undertaking independent audits to test the adequacy and effectiveness of PCPs and the completion of employee screening. Should a practice feel this regulation does not apply to them, owing to their size and nature, they should expressly state why in their PCPs. A common misconception appears to be that ‘size and nature’ solely means the physical size of your practice – i.e., number of employees. While this is a factor, consideration should also be given to the points highlighted within LSAG Section 9.1, including the inherent risks documented within your Practice Wide Risk Assessment, the client demographic, the risk-profile, nature and complexity of the work you carry out and the volume of the work.
• We were encouraged that practices are now aware of certain LSAG guidance Key Compliance Principles and are making improvements to their AML PCPs following the attestation completion.
  • Practices have advised us that improvements/enhancements will be made to their ‘beneficial owners, officers and managers’ (BOOMs) procedures (LSAG KCP 1), their discrepancy reporting procedures (LSAG KCP 18) as well as internal record keeping procedures (LSAG KCP 36).

What’s next?

The AML team will shortly contact the next 50 practices chosen to complete the attestation process, giving a five-week period for completion.

For those selected, we look forward to working with you as your supervisor. Your co-operation and participation is required to minimise the AML risks to you, your business, your clients and to the profession as a whole.

Members can contact Dale Trahms in our AML team with any queries at aml@lawscot.org.uk.