Site Title

United Kingdom

Last updated: 14/08/2008

CENTRAL AUTHORITY FOR REPORTING

The UK’s financial intelligence unit lies within the Serious Organised Crime Agency (SOCA). SOCA was created by virtue of the Serious Organised Crime and Police Act 2005 and assumed its responsibilities on 1st April 2006.

ANTI-MONEY LAUNDERING REGULATOR(S)

This is determined by the relevant business sector. For lawyers in England & Wales it is the Solicitors Regulation Authority, the regulatory body of the Law Society of England & Wales. For Lawyers in Scotland, it is the Law Society of Scotland.

HAS THE THIRD EU MONEY LAUNDERING DIRECTIVE BEEN IMPLEMENTED? IF NOT, WHEN IS IT EXPECTED TO BE IMPLEMENTED?

Yes – where not already in place under the Proceeds of Crime Act 2002 (‘POCA’), the remaining parts of the Third Directive were implemented by the Money Laundering Regulations 2007 and, for tipping off offences, by POCA (Amendment Regulations) 2007.

LIST THE LAWS REGARDING ANTI-MONEY LAUNDERING, INDICATING WHICH LAWS ARE APPLICABLE TO LAWYERS

ARE VISITING LAWYERS SUBJECT TO LOCAL LAWS REGARDING ANTI-MONEY LAUNDERING, AND, IF SO, TO WHAT EXTENT?

As with any criminal statute, visiting lawyers are subject to POCA. However, Section 330 of POCA does provide several exceptions to reporting obligations that may affect a visiting lawyer from outside of the jurisdiction, including a “reasonable excuse” for not reporting, information acquired under legally “privileged circumstances,” and an exception dealing with lack of knowledge and training.

LIST ANY MONEY LAUNDERING GUIDANCE FOR LAWYERS (FOR EXAMPLE, LAW SOCIETY OR BAR ASSOCIATION GUIDELINES) CURRENTLY IN PLACE

IS THE LAW SOCIETY/BAR ASSOCIATION INVOLVED IN SUPERVISING OR ENFORCING COMPLIANCE WITH ANTI-MONEY LAUNDERING REGULATIONS?

Solicitors Regulation Authority enforces the obligations.

DESCRIBE CLIENT DUE DILIGENCE REQUIREMENTS, INCLUDING WHEN IT MUST BE UNDERTAKEN BY LAWYERS

According to Regulation 7 of the 2007 Money Laundering Regulations, a lawyer must apply due diligence measures when he/she:

  1. Establishes a business relationship;
  2. Carries out an occasional transaction;
  3. Suspects money laundering or terrorist financing; or
  4. Has doubts about the legitimacy or adequacy of documents and information obtained for purposes of identification.

Client due diligence includes identifying clients and where applicable beneficial owners of clients and where the risk warrants it verifying their identities

DOES YOUR COUNTRY FOLLOW A RISK-BASED APPROACH TO CLIENT DUE DILIGENCE BY LAWYERS?

Yes. A Lawyer may determine the extent of due diligence measures to take based upon the type of customer, business relationship, product or transaction, however there are prescriptive obligations for enhanced due diligence.

ARE THERE ENHANCED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, POLITICALLY EXPOSED PERSONS?

According to Regulation 14 of the 2007 Money Laundering Regulations, enhanced due diligence measures must be applied by lawyers where the client has not been physically present for identification purposes, where the transaction involves a politically exposed person, or any other situation which by its nature presents a heightened risk of money laundering or terrorist financing. The precise enhanced measures required vary depending on the situation encountered.

ARE THERE SIMPLIFIED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, LISTED COMPANIES?

Simplified due diligence measures may be applied where there exist reasonable grounds to believe that:

  1. The client is a credit or financial institution which is subject to the requirements of the Third Money Laundering Directive or is situated in a non-European Economic Area (“EEA”) state which imposes equivalent requirements
  2. The client is a company with securities listed on a regulated market
  3. The client is an independent legal professional and the product is an account of pooled monies, so long as the state where the account resides maintains international standards on requirements for combating money laundering and terrorist financing and the identities of account beneficiaries are ascertainable upon request from the depository institution
  4. The client is a public authority in the U.K. or is an authority entrusted with public functions under the guise of the European Union or the European Community
***List is not exclusive***

ARE LAWYERS PERMITTED TO RELY ON THIRD PARTY DUE DILIGENCE? IF YES, PLEASE DESCRIBE.

Yes. See Section 4.3.4 of the Practice Note.

In May 2008, HM Treasury (UK) announced a list of countries from outside of the European Economic Area which it considers to have anti-money laundering laws equivalent to the Third EU Money Laundering Directive. UK solicitors should find the list useful in applying the simplified due diligence provisions provided for in the Third EU Money Laundering Directive. On 8 August 2008, the UK Joint Money Laundering Steering Group released revised guidance on equivalent countries that is more expansive than the May guidance. It was prepared in consultation with HM Treasury (UK) and can be accessed here.

WHEN IS A LAWYER UNDER AN OBLIGATION TO REPORT SUSPICIOUS TRANSACTIONS?

As soon as any person has knowledge or a suspicion of terrorist financing or money laundering he/she must notify the firm’s nominated officer, who must determine whether to make a Suspicious Transaction Report (SAR) to SOCA.

Sections 327-329 of POCA define several offences for money laundering transactions. If a lawyer is proposing to enter into and facilitate a money laundering transaction, then in order to have a defence, the lawyer must apply for ‘consent’ under section 335 to SOCA

Section 330 creates an offence for a failure to report knowledge or suspicion (based on objective evidence) of money laundering. Lawyers have a defence if the information came in ‘privileged circumstances’ which is defined by POCA. There is also a ‘reasonable excuse’ defence for not making a disclosure however there is no current judicial authority for what constitutes this and it should be relied on with extreme caution.

DOES ATTORNEY/CLIENT PRIVILEGE AND/OR DUTIES OF CONFIDENTIALITY PROVIDE A DEFENCE OR PARTIAL/TOTAL EXCEPTION TO THE REQUIREMENT TO REPORT SUSPICIOUS TRANSACTIONS?

Section 330 of POCA specifically defines “privileged circumstances” and its applicability as an excuse for not reporting suspicious activity. Under this section, “privileged circumstances” covers information communicated to a lawyer by a client in connection with the lawyer providing legal advice, by a person seeking legal advice, or in connection with legal proceedings or contemplated legal proceedings. Communications cannot be subject to legal professional privilege if they are created with the intention of furthering a criminal purpose. It is irrelevant whether the intention is that of the lawyer, client, or any other third party.

DOES LOCAL LAW PROVIDE ANY CRIMINAL AND/OR CIVIL INDEMNITY TO A LAWYER WHO HAS REPORTED A SUSPICIOUS TRANSACTION?

No information available.

ONCE A SUSPICIOUS TRANSACTION REPORT HAS BEEN FILED, IS A LAWYER ALLOWED TO PROCEED WITH THE LEGAL ADVICE/TRANSACTION, AND, IF SO, MUST CONSENT FROM AUTHORITIES BE OBTAINED FIRST?

Lawyers may proceed under section 335 of POCA once they have consent from SOCA.

IS THERE A TIPPING-OFF PROHIBITION? IF YES, PLEASE DESCRIBE.

Yes. For Lawyers (and others in the regulated sector) according to section 333A of POCA, it is an offence for a person who knows or suspects that an authorised disclosure has been made to make a disclosure likely to prejudice any investigation into the matter. Note the offence may only be committed after
a disclosure has been made to SOCA and it is likely to prejudice an investigation. There is also a limited defence for lawyers under 333D whereby an offence will not be committed where a lawyer makes a disclosure to a client with the intention of dissuading the client from engaging in conduct amounting to an offence.

In addition, section 342 creates an offence where a person knows or suspects that an investigation is being or is about to be conducted and knows or suspects that disclosing the information about that investigation would likely prejudice the investigation.

DESCRIBE ANY RESTRICTIONS ON ACCEPTING A NEW CLIENT

If a lawyer is unable to apply the due diligence measures required by the regulations, he/she may not enter into a business relationship with that client.

ARE THERE ONGOING MONITORING REQUIREMENTS FOR EXISTING CLIENTS? IF YES, PLEASE DESCRIBE

Lawyers must conduct ongoing monitoring of all business relationships. Such monitoring includes scrutiny of transactions undertaken throughout the relationship and maintenance of documents and information obtained for identification and verification for a period not shorter than five years from the completion of a particular transaction or the termination of a relationship. See Practice Note section 4.4.

DESCRIBE ANY OTHER WAYS IN WHICH LAWYERS ARE AFFECTED BY ANTI-MONEY LAUNDERING LEGISLATION

No information available.

HAVE LAWYERS IN YOUR JURISDICTION BEEN IMPLICATED IN MONEY LAUNDERING, INCLUDING ANY TYPE OF COMPLAINT, ARREST OR PROSECUTION?

R v Griffiths [2006] All ER (D) 19 (Sep) – Lawyer convicted of failing to disclose suspicious real estate transaction where he should have known that the subject property was likely from the proceeds of crime because it was grossly undervalued.

HAS THE FINANCIAL ACTION TASK FORCE (FATF) CONDUCTED A MUTUAL EVALUATION OF THIS COUNTRY, AND, IF SO, WHAT WERE THE FINDINGS CONCERNING LAWYERS’ COMPLIANCE WITH THE FATF 40+9 RECOMMENDATIONS?

The most recent mutual evaluation of the U.K. by FATF was conducted in June 2007 (prior to the implementation of the Money Laundering Regulations 2007).

With respect to legal professionals specifically, the June 2007 evaluation assessed the UK money laundering and terrorist financing supervisory system as “generally adequate.”


Information provided by:

Chris McNeil
Head of Money Laundering Compliance
Freshfields Bruckhaus Deringer
65 Fleet Street
London EC4Y 1HS

e-mango online business solutionsPowered by e-mango