New Zealand lawyers face AML obligations from 1 July 2018, accountants later in the year. Perhaps their Australian colleagues will over the next decade.
I was fortunate enough to be on the speaking panel for the Thompson Reuters AML Conference last week in Auckland. Over 70 lawyers, accountants, and other interested people attend this conference to hear from the New Zealand Police FIU, the Department of Internal Affairs (the supervisor), and several AML subject matter experts.
The recent UK 2017 National Risk Assessment stated that:
"Legal services remain attractive to criminals due to the credibility and respectability they can convey, helping to distance funds from their illicit source and integrate them into the legitimate economy."
Might Australian criminals think differently? They may not.
The National Risk Assessment rated the legal profession as:
"high risk of being used for money laundering, although low risk of being used for terrorist financing. In particular, the risk assessment identifies solicitors as being at a high risk of money laundering because of the range of high risk services they may offer.
Criminals may use a combination of legal services to add layers of complexity to a transaction. They may also use Chinese Walls (or information barriers) within a law firm, or several legal firms to separate instructions which, taken together, might raise suspicion."
Again, might Australian criminals think differently? Again, they may not.
Legal Professional Privilege
In relation to legal professional privilege / client legal privilege the Risk Assessment:
"raised instances of lawyers falsely claiming legal professional privilege as posing a risk to the law enforcement response to preventing money laundering."
The National Risk Assessment went on to say:
"The government recognises that legal professional privilege is a vital part of the UK’s legal system and that ensuring that it is applied correctly in all circumstances is important in mitigating money laundering risk."
Whilst LPP/CLP is may be different across jurisdictions the fundamentals are the same. Might Australian criminals want the protection of LPP/CLP like their UK counterparts?
What does the Solicitors Regulatory Authority have to say on the National Risk Assessment?
The Solicitors Regulatory Authority (SRA) is the regulator for lawyers in England & Wales and is the responsible for the supervision of AML in England & Wales. The SRA states that:
"...we take our responsibilities very seriously. We owe a duty to society at large, and to protect the integrity of the legal sector through tackling professional enablers of money laundering. If the UK legal sector is to remain a trusted profession, we must work to identify those who would willingly help money launderers, and inform and educate those who might be unwittingly used by criminals."
Words of caution from the SRA.
What are the ML risk areas?
Not unsurprisingly the National Risk Assessment identified the following legal services as posing the highest ML risk:
- Trust and company formation
- Client accounts services (trust accounts)
The SRA agrees "based on our supervisory work and analysis, we agree that these services pose the highest risk."
As Australian law firm provide similar services might Australian criminals want to purchase these types of services as well?
ML, and to a lessor degree terrorist financing, is a current risk to Australian law firms. It is good risk and reputation management to consider these risks now, not waiting for the Anti-Money Laundering & Counter-Terrorism Financing Act, 2006 to apply.
Lexcel and AML Experts have advised lawyers and law firms, and other regulated entities on ML/TF risks and AML compliance.