AML regulations need greater clarity for legal sector

Money Laundering Regulations need greater clarity for the legal sector and a re-focus on key ways to mitigate underlying risk in order to strengthen the UK’s anti-money laundering (AML) system, the Law Society of Scotland has said.

Responding to proposals in the HM Treasury consultation on improving the effectiveness of Money Laundering Regulations, the Law Society urged the government to address gaps in guidance for matters of critical importance to the legal sector, such as source of funds/wealth checks.

It added that the government should review provisions around the use of digital identity, high-risk factors and enhanced due diligence checks to ensure that the Money Laundering Regulations remain fit-for purpose.

In addition, the Law Society was clear that Pooled Client Accounts are a fundamental part of the conveyancing system and any changes to the approach taken to mitigate money laundering risk in this area needs careful consideration.

Graham Mackenzie, Head of AML at the Law Society of Scotland, said: “We fully support the opportunity to add clarity and focus to the Money Laundering Regulations to improve their effectiveness and ensure all regulated professionals can implement controls in a proportionate, holistic and risk-based manner.

“The Money Laundering Regulations were originally created primarily with the financial sector in mind, resulting in law firms having to interpret and apply regulations to processes and situations they were not designed for and which are unique to the legal sector. This consultation is a chance to rectify those issues, to ensure law firms can fully meet their AML obligations with confidence.

“It is also an opportunity to strengthen the AML regime by allowing stronger information sharing and co-ordination across sectors and public bodies, reshaping the application of enhanced due diligence to areas of greatest inherent risk, and focusing the regulated sectors’ efforts towards controls that add the greatest value, such as source of funds and source of wealth checking.”

Read the Law Society of Scotland's full response here.