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The Law Society’s Practice Advice Service is a team of experienced solicitors who have all worked in private practice. They help members with questions about practice and procedure on a wide variety of subjects, including anti-money laundering, costs, conveyancing, client care and complaints handling.
The Practice Advice Service helpline is confidential and available Monday to Friday 09:00-17:00 on 020 7320 5675.
Below is a selection of recent compliance questions.
Notaries are subject to the Money Laundering Regulations 2007 as they provide legal or notarial services within the meaning of Reg.3(9). For anti-money laundering purposes, you are able to deal with a notary in the same way as if the buyer was represented by a solicitor. Please see Chapter 1 of the Law Society’s Law Society’s practice note on anti-money laundering.
If your firm has a policy that original identity documents must be photocopied, you should explain this to the client before your meeting and agree with him the method by which you will return the originals, perhaps by sending them by recorded delivery the following day.
If the client does not want you to take the original documents away, you are permitted by Regulation 19 to retain ‘references’ to the evidence of the client’s identity.
Paragraph 3.8.1 of the Law Society’s practice note on anti-money laundering suggests that the type of details it would be useful to record might include:
In this situation, you might wish to take photographs of the material on your mobile phone and print these out when you return to the office. You must ensure that the details such as the picture and passport number are clear in the photographs.
For further information, please see Chapter 3 of the Law Society’s practice note on anti-money laundering.
You should not pay the cheque into your client account until further checks are carried out. If you are not your firm’s Money Laundering Reporting Officer (MLRO), you should discuss this with the MLRO immediately. There are a number of warning signs of sham litigation and this may be an attempt to launder money through your client account.
While Bowman v Fels  EWCA Civ 226 held that conducting litigation is not entering into an arrangement contrary to section 328 of the Proceeds of Crime Act 2002 (POCA), this does not extend to sham litigation.
You will need to consider whether it is ethically appropriate to continue with the retainer. Consider seeking further information by searching the names of the parties on the internet as sometimes that will link to information about known sham litigation methodologies.
Your MLRO will be able to access the Law Society’s anti-money laundering forum which is a secure site controlled by the Law Society. It contains information about current known methodologies.
With regard to whether a report to the National Crime Agency (NCA) is necessary, your MLRO will need to consider whether you hold the existing proceeds of crime. Technically, a ‘stolen cheque’ is criminal property whereas a ‘fraudulent cheque’ is an instrument of crime rather than criminal property, unless funds have been drawn down against the cheque. You may not know which type of cheque you have and it may be prudent for the MLRO to consider making a Suspicious Activity Report (SAR) to the NCA under section 332 of POCA.
The NCA will not be able to advise you as to whether the cheque is a ‘stolen’ or ‘fraudulent’ instrument nor advise you about what to do with the cheque. If it is a stolen cheque, you would need consent from the NCA to do anything with it or indeed to hold onto it.
The firm may also wish to make a separate crime report directly to the police, as a SAR is not a crime report. You may wish to hold the cheque on file as evidence of a crime or potential crime.
For further information, please see the Law Society’s practice note on anti-money laundering.
Outcome 10.6 of the SRA Code of Conduct 2011 states that ‘you must co-operate fully with the SRA and the Legal Ombudsman at all times including in relation to any investigation about a claim for redress against you.’
In order to avoid any allegations of taking action which might be deemed to have prejudiced the position of your insurer, it would be advisable to bring the contents of Outcome 10.6 to the attention of your professional indemnity insurer and seek authority from them to answer the queries raised in the Ombudsman’s letter. As it may take some time for your insurer to consider the matter, it would be prudent to seek an extension of time from LeO in order to provide a detailed response to their letter.
While every effort has been made to ensure the accuracy of the information in this article, it does not constitute legal advice and cannot be relied upon as such. The Law Society does not accept any responsibility for liabilities arising as a result of reliance upon the information given.
This article is compiled by the Law Society’s Practice Advice Service. Comments relating to the questions should be sent to Mrs Anjali Mouelhi, solicitor and technical lead, Practice Advice, The Law Society, 113 Chancery Lane, London WC2A 1PL.