AML risk asessment review

A recent Law Society review has highlighted that a number of firms are yet to carry out risk assessments in line with new anti -money laundering requirements.

All law firms which carry out work within the scope of the Money Laundering Regulations 2017 (MLRs), are now required to identify and assess the risks of money laundering and terrorist financing that may affect them. The contents of the risk assessment are key to determining how the firm will apply a risk-based approach to its compliance with the MLRs as reflected in its policies and procedures, for example regarding due diligence.

Ian Messer, Director of Financial Compliance at the Law Society of Scotland, said: “All firms working within the scope of the Money Laundering Regulations are now required to carry out risk assessments.

“However, while our recent review found that some firms had prepared their practice unit risk assessments already, it was clear more work is required to increase awareness of this essential requirement.

“The review has confirmed the value of the materials we have published to help our members comply with AML requirements. We will continue to promote these and work to improve awareness among our members on the requirement to complete practice unit risk assessments through our ongoing inspection activity and the new AML Certificate to be launched in October 2018, which will require firms to upload their risk assessment.”

The Society’s AML roadshows are also highlighting the new requirement, along with articles and information on our website for firms to refer to, including a practice unit risk assessment template. Law firm inspections also now check for completion of practice unit risk assessments.

As part of the review, 45 firms were asked to provide their practice unit risk assessments. The results from the review have highlighted that:

• A significant number of firms required additional time before they could provide a practice unit risk assessment. In some cases, the practice unit risk assessment had not been prepared earlier and was being prepared following a request as part of the review.
• A quarter of firms initially appeared not to realise the practice unit risk assessment was separate from and additional to general AML policies and procedures documents or transactional risk assessment templates. Practice unit risk assessments were sent once the error was identified and further time was allowed for completion, suggesting a lack of awareness of the requirement.
• More than 50% of firms which completed risk assessments had used the practice unit risk assessment template on our website. While firms should ensure that the template is suitable for their requirements, this figure confirms that this type of material offers value to the profession.

Firms which took part in the review will receive individual feedback on their documents.