HM Treasury has published its tenth AML report “Anti-money laundering and countering the financing of terrorism: supervision report 2020-2022”, which, unlike previous reports this time deals with supervisory and enforcement data from 2020-2021 and 2021-2022 period rather than just for a single year. Click HERE to go to the text of the report.
The underlying message from the report is that, whilst the Financial Action Task Force (FATF) found the UK’s AML/CFT regime to be one of the strongest of over one hundred countries it assessed, that nevertheless the UK’s supervision regime was only moderately effective. In particular, significant weaknesses were found in the risk-based approach to supervision taken by all UK AML/CFT supervisors other than the Gambling Commission.
In relation to the activity within the ambit of the Professional Body Supervisors (PBS), the area most relevant to law firms, the most common breaches identified were:
- Inadequate documented policies and procedures;
- Inadequate CDD procedures;
- Inadequate EDD procedures;
- No ongoing CDD monitoring;
- No periodic review of compliance with MLRs;
- Inadequate firm-wide risk assessment;
- No or inadequate staff training on AML compliance;
- Inadequate record keeping;
- Use of third-party policies that were not adequately tailored to the specific firm’s individual risk profile; and
- Inadequate resource allocated to AML compliance.
It was also noted that non-compliance and poor AML procedures were most common in smaller firms and sole practitioners, who often failed to understand the importance of having adequate AML controls in place. A long-standing relationship between a client and a business leading to insufficient checks was also noted by many PBSs as being a common theme identified in non-compliant members of their supervised population.
These findings mirror the experiences that the SRA has been finding in its own checks with many firms not putting in place adequate risk assessments, failing to carry adequate CDD and generally not placing sufficient importance on processes and controls.
For more information about how Infolegal can assist your firm with its AML compliance, go to our anti-money laundering section on this website or contact us on 0203 371 1064 or email us at firstname.lastname@example.org. In addition, Infolegal Director Matt Moore, who has provided training and advice on this topic ever since it first became a live compliance concern for law firms following the coming into force of the Proceeds of Crime Act 2002 and the early version of the Money Laundering Regulations 2003, and who has also written a number of books on the subject, is pleased to provide advice if required and has conducted a number of AML audit reviews for larger member firms in particular or those that are facing SRA monitoring visits. Please contact him at email@example.com if this might be of interest to you.