Revised National Risk Assessment of Money Laundering and Terrorist Financing
HM Treasury has published an updated UK National Risk Assessment (NRA) of Money Laundering and Terrorist Financing.
This follows the previous update published in October 2017 and sets out the key money laundering and terrorist financing risks for the UK, how these have changed since the UK’s first NRA was published in 2015, and the action taken since 2015 to address these risks.
Specifically, chapter 10 documents the UK Government’s view of the key money laundering risks associated with legal services.
Key risks
- The risk of legal services being exploited or abused by criminals seeking to launder the proceeds of their crimes is high
- These risks increase when legal professionals fail to carry out their obligations under the money laundering regulations (MLRs) or take a tick box approach to compliance
- Specific services provided which may be most vulnerable to abuse remain conveyancing, Trust and Company Service Provision (TCSP) and the provision of client account facilities. Other areas of risk include sham litigation, notarial services, cryptocurrencies and crowdfunding
- The risk of legal services being used for terrorist financing purposes remains low
- The assessment notes that most legal firms comply with their AML obligations and there has been an improvement in technical compliance. However, it further states “there are a significant minority of Legal Service Providers which do not focus on AML compliance and some still lack an understanding of the risks they face”.
The legal sector risks, findings and trends noted in the new UK National Risk Assessment are generally consistent with the findings of our AML supervisory assurance work, and we welcome the more nuanced tone taken by the government in recognising not all conveyancing or TCSP work warrants a higher money laundering risk rating.
I’d advise firms to now review, and (where necessary) refresh their firm level risk assessments under r.18 of the Money Laundering Regulations. There is a wealth of information available on our website to support firms in this process, and look out for new, fully revised UK legal sector AML guidance which will also be released later this month.
We ourselves are obliged to review and refresh our supervisory Scottish legal sectoral risk assessment , previously published in March 2018 following the publication of the UK national assessment. This process will start shortly, and the document will be made publicly available on our website.
Actions required
- The Society must now review and where necessary update the current version of the Scottish legal sectoral risk assessment (previously published in March 2018) as required under the Money Laundering Regulations, r.17
- Firms themselves must also review and refresh their MLR r.18 firm level risk assessments where necessary in light of the updated document. Find further information and support in this process here
- New UK legal sector guidance will also be released later this month. This will also contain information and support in relation to your r.18 risk assessment.
Anti-money laundering
The fight against money laundering and counter terrorist financing - the role of the legal profession.
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