At our recent anti-money laundering (AML) conference, Colette Best, director of AML at the SRA, reiterated the SRA’s focus on anti-money laundering in 2020. She outlined some key changes all firms need to be aware of.
Ms Best told delegates that the SRA has set up a programme of checking firms’ AML risk assessments.
The renewed focus on risk assessments is a result of the SRA’s latest Anti-Money Laundering Thematic Review in May 2019, focusing on firms offering trust and company services.
While many firms were fully compliant with their AML obligations, the SRA had substantial concerns about a significant minority and referred 26 firms into its disciplinary processes as an outcome of the review.
In October 2019, the SRA issued a revised warning notice to the profession and announced widespread checks on 7,000 firms that fall under the scope of money laundering regulations.
Following fears that many firms were doing little or nothing to meet their obligations, they went on to announce that firms were or would be contacted about their risk assessments and that in early 2020 the SRA would begin a rolling programme of monthly checks.
As a result, firms should be aware that their risk assessment may be called in.
Fifth Money Laundering Directive (5MLD)
The Fifth Money Laundering Directive (5MLD) is due to be transposed into UK law but, due to the general election, the regulations are not expected to be laid before 10 January.
As a result, solicitors will have limed time to get to grips with new rules on money laundering before the regulations implementing them come into force.
On the bright side the changes introduced by the fifth money laundering directive are much less challenging than those of the recent 2017 Regulations.
Among other provisions, the fifth directive:
- broadens the scope of ‘obliged entities’
- sets out the circumstances under which customer due diligence may be carried out electronically
- requires the reporting of discrepancies in records of beneficial owners
- tightens rules around trusts
- requires the UK to establish a central mechanism allowing the identification of bank account holders and controllers
Approval of beneficial owners
The SRA also announced that the new 5MLD regime would include changes to how they approve beneficial owners, officers and managers (BOOMs).
From 10 January Best said anyone applying to be a beneficial owner will need to have a Disclosure Barring Service (DBS) criminal check. The SRA will be issuing guidance on this but she advised firms to, “make sure you’re prepared to go out and get your checks done”.
Politically exposed persons (PEPS)
Other concerns highlighted were that many firms are not doing enough to address the risks posed by acting for politically exposed persons (PEPs).
While many firms claim they do not act for such clients, there are 39,000 PEPs in the UK and the SRA view is that clearly someone is doing business with them.
“We expect firms to have a clear position,” she said. ”The regulations don’t say you shouldn’t act for PEPs but dealing with them you should take steps to mitigate the risk.”
”For most clients it’s worth asking questions about the source of funds,” she added.