AML round up: April 2024

The ever-increasing importance and visibility of anti-money laundering (AML) and other economic crime issues at international, domestic and sectoral level means that it's vital for solicitors to be aware of the latest developments.

This AML round-up covers all the latest news and developments for the legal sector since our last round up in July 2023, including what the AML team has been up to, an introduction to our new team member, and LSAG, HM Treasury and National Crime Agency updates.

Stewart is ex-military, having served in the British Army Intelligence Corps for 22 years. Since his army days, Stewart has worked in Corporate Security, Financial Services with Credit Suisse and HSBC, predominantly in financial crime, assurance and operational risk. Stewart also has an LLB in Law.

Stewart’s appointment reflects our desire to become even more focused and intelligence-based in our supervisory assurance work.

Through 2023, the AML team delivered presentations to three faculties across Scotland and screened the video ‘All Too Familiar’, a thought-provoking film that depicts how money laundering can manifest in typical, rea- life business scenarios. The video will become available shortly through our Members' Area for practices to use for their internal AML training.

Our AML Risk Managers, Jenni Rodgers and Dale Trahms, participated in numerous insight days run by the Society covering all things AML for school pupils, LLB/Diploma students and graduates. During the insight day, students hear from four departments within the Law Society, getting an insight into their work and then have a chance to undertake a task relating to each department. The insight day is designed for students to learn more about the Law Society and its work within the legal industry.

Jenni and Graham MacKenzie attended Glasgow University to deliver a presentation to Diploma students about AML in the legal sector, risks and professional obligations. Dale and Jenni also attended Strathclyde University in January 2024 to give them an insight into AML. Diploma students are the future of the profession and we look to share the AML message at an early stage.

Graham, Jenni and Dale visited the Solicitors Regulation Authority in Birmingham in October 2023. During this visit, both professional body supervisors discussed their experiences and shared supervisory best practice.

This is an ongoing piece of work reaching all practices in scope of the Money Laundering Regulations, focusing on compliance with the Legal Sector Affinity Group (LSAG) Guidance Key Compliance Principals (KCP). The third tranche of the AML Supervisory attestations has recently started.

Our third thematic review will focus on Suspicious Activity Reports (SAR) and begin in May 2024. More details will be announced shortly on our website.

Have you seen our AML Spotlight blog series on key topics and concerns? Catch up below.

And make sure to keep an eye out for our next AML blog focussing on AML-related training.

We will soon publish a ‘How to' guide to assist practices in preparing for any one of our AML inspections, with a detailed breakdown of the process followed for each one.

An addendum to the 2023 version of LSAG's guidance was published in December 2023, the addendum contains important legislative updates, along with changes in LSAG position and supervisory interpretation and expectations.

On 22 January 2024, HM Treasury amended the definition of 'high-risk third countries. It removed Schedule 3ZA, which contained the list in the Money Laundering Regulations 2017.

Instead of referring to a separate schedule, regulation 33(3)(a) now defines a high-risk third country as:

"a country named on either of the following lists published by the Financial Action Task Force (FATF) as they have effect from time to time

1. high-risk jurisdictions subject to a call for action
2. jurisdictions under increased monitoring".

These lists are updated three times a year, on the final day of each FATF plenary meeting, held every February, June and October.

The lists are available on the FATF website. Practices must review and update their own PCPs in light of changes to these lists.

On 10 January 2024, the UK government announced changes with regards to the treatment of PEPs entrusted with prominent public functions in the UK, known as domestic PEPs.

The next AML and Financial Crime Conference will take place in August 2024, exploring all the latest developments in AML and financial crime with experts in the field. Further details of the agenda will be announced nearer the time.

The UK Government launched a major consultation in March focused on the effectiveness of the money laundering regulations, along with a survey regarding the cost of AML compliance. The consultation and survey close on Sunday, 9 June 2024.

Companies House has introduced the first set of changes under the act on 4 March 2024. The act gives Companies House the power to play a more significant role in disrupting economic crime and supporting economic growth.

Find out more information in the short videos below:

• Economic Crime and Corporate Transparency Act 2023: the story so far
• What you need to know about changes to UK company law

The National Crime Agency’s latest addition of SARs in Action was published in March 2024. You can find this and previous editions of the magazine on the NCA website, along with other relevant SAR Guidance.

In particular, we would like to highlight SARs in Action - Money Mules Special Addition page 19, which provides a sense checker to assist in submitting better quality SARs.

In September 2023, the National Crime Agency published new SAR Portal Guidance for those submitting Suspicious Activity Reports.

March 2024 saw the old SAR online system discontinued. All future SARs should be created and submitted via the new SAR Portal.

In November 2023, the Financial Action Task Force (FATF) published a new document on the Misuse of Citizenship and Residency by Investment Programmes.

• Leading firm fined £101,000 for anti-money laundering failures
  • The firm was fined for failing to act over money laundering red flags on three property transactions.
• Solicitor escapes imprisonment and handed suspended sentence after ‘tipping off’ client over SFO investigation
• Solicitor fined £15,000 fine for failing to conduct proper client due diligence
• AML fine for firm that facilitated vendor fraud
  • In this case the firm failed to verify its client’s identification documents and then did not act upon the ‘refer’ decision in an AML report. As a result the firm had a hand in facilitating in vendor fraud.
• ‘Tranche two’ anti-money laundering rules require action from lawyers
  • Tranche 2 reforms of the Australian AML/CTF regime have continued to progress and remain an ongoing primary focus of lawmakers and regulators in Australia. Tranche 1 comprised the Anti-Money Laundering and Counter Terrorist Financing Act 2006 (Cth) (the AML/CTF Act), which was passed in December 2006, while Tranche 2 comprises a set of regulations that will simplify and modernise the Australian AML/CTF system and bring it in line with the FATF's recommendations and other countries, including the UK, Canada and New Zealand.
• HM Treasury has recently advised of its intention to update the UKs Money Laundering/Terrorist Financing (ML/CTF) and Proliferation Finance (PF) National Risk Assessments (NRA). HMRC published the first NRA in 2015, with the most recent ML/TF NRA published in 2020 and first PF NRA published in 2021. This NRA will be jointly led by the Home Office and HM Treasury, but will depend on support from across the AML system, both in the public and private sector.