Report claims lawyer impunity for AML breaches

A report by the anti-corruption organisation “Spotlight on Corruption” claims that law firms in the UK “face almost zero risk of criminal enforcement if they breach money laundering rules, and very little prospect of meaningful fines”.

The report entitled “A Privileged Profession? How the UK’s legal sector escapes effective supervision for money laundering” claims that reliance on “a fragmented set of nine different professional bodies responsible for self-policing the legal sector’s compliance with UK anti-money laundering (AML) rules” is resulting in uneven and inadequate enforcement of AML breaches.

The report also shows that a government target to strengthen the consistency of supervision for the legal (and accountancy) sector by spring 2021, has been substantially missed.

The report states that whilst new measures in the Economic Crime and Corporate Transparency Bill currently going through Parliament which require legal sector supervisors to help prevent and detect economic crime as part of their regulatory function are a welcome step forward, a step change in how the legal sector is supervised for money laundering is what is urgently needed.

The report from Spotlight on Corruption calls for:

• The Solicitors Regulation Authority (SRA) to be made responsible for policing money laundering across the legal sector, and to be beefed up in order to play this role;
• OPBAS to be super-charged into a “supervisor of supervisors” across all regulated sectors, including the FCA, HMRC and Gambling Commission, and to be able to sanction under-performing supervisors; and
• A new specialist ‘enablers’ cell at the National Crime Agency to ensure that law firms are investigated for criminal breaches of the UK’s Money Laundering Regulations.

Drawing on analysis of from various sources, the Report finds that:

• Non-compliance with AML rules is still a significant issue for lawyers with 60% of firms visited by the Solicitors Regulation Authority (SRA) in 2020/21 failing to fully comply with duties to have adequate AML controls in place.
• The nine professional bodies responsible for supervising the sector for money laundering are engaging in low levels of enforcement and are three times more likely to engage in quiet chats (informal actions) with those breaching the rules, than issue fines and public censures (formal actions). The FCA by contrast takes more formal than informal action.
• Some of these professional bodies are failing to impose any meaningful fines at all.
• The Office for Professional Body Anti-Money Laundering Supervision, OPBAS hasn’t worked as well as it should have done with just 15% of legal and accountancy supervisors it oversees being effective at supervision in 2020/21.

Dr Susan Hawley, Executive Director at Spotlight on Corruption, said:

“The UK has a well-deserved reputation as the laundromat of choice for the world’s kleptocratic regimes. This couldn’t have been achieved without the legal profession – wittingly or unwittingly – playing an essential role. But our research shows that the efforts of professional body supervisors to deal with this long-standing problem are falling far short of where they need to be.

“Even on the vanishingly rare occasions when misconduct is identified, fines are negligible and criminal prosecutions non-existent.

“The government needs to act quickly to strengthen supervision of the legal sector, and across the board, to ensure the UK financial system cannot be exploited by kleptocrats and criminals.”