Book review: Solicitors and Money Laundering (4th edition)

The UK has one of the most complex and advanced legal frameworks on anti-money laundering (AML) in the world. Understanding the framework is essential to successful risk-based compliance with the web of obligations in the Proceeds of Crime Act 2002 (POCA), the Terrorism Act 2000 and the Money Laundering Regulations 2017.

Solicitors and Money Laundering is both a detailed guide to the contents of AML legislation and a practical guide for implementing resilient processes and procedures at your firm.

The handbook is divided into two parts. Part I gives comprehensive coverage of the relevant legislation, explains the key concepts in AML and explains how transactional money laundering risks can occur.

Part II moves on to a practical run-through of the policies, controls and procedures you need to put into place to make sure you spot criminals in time, the ‘red flags’ you need to look out for and how and when to report suspicious activity.

Additional materials such as National Crime Agency (NCA) guidance on good quality suspicious activity reports are referenced throughout the book. The Annexes too should not be overlooked, especially Annex C - the Legal Sector Affinity Group’s detailed and practical 2018 AML guidance.

Chapter 1 starts with a high-level run through of legislative history and the concept of ‘money laundering’ and explains how the complex transactions that solicitors are able to perform unwittingly expose them to the risk of money laundering.

Chapters 2 and 3 break down the legislation and case law on the principal offences in POCA. While Bowman and Fels excluded some activities from the scope of s.328, the interpretation commonly given by MLROs to the term ‘arrangement’ remains wide, leading to around three quarters of Suspicious Activity Reports (SARs) submitted by solicitors to the NCA being ‘consent’ or Defence Against Money Laundering (DAML) SARs. Indeed, one of the defences to a principal offence is consent acquired through the making of an authorised disclosure. Chapter 4 logically moves on to tips on how to obtain this defence first-time.

The handbook also covers required disclosures, ie situations in which your SAR only provides intelligence to law enforcement agencies rather than include a request for consent. The failure to disclose offence is discussed in Chapter 6. Here the legislation is broken down term by term; helpful sample scenarios are given, as is an explanation of the defences available to you. Where the authors discuss defences, they give their view of the likely assistance that these may provide to someone accused of a principal offence.

Penalties are described not just for failure to disclose but throughout the book as a helpful reminder of the possible extent of repercussions. But Chapter 5 also makes it clear that you do not need to submit a SAR where the inverse of the circumstances in s.330 of POCA apply: for example, if you cannot identity the person engaged in money laundering, the whereabouts of criminal property or any other information that may help the authorities identify the person or the whereabouts of the property.

Chapter 7 offers welcome advice on tipping off - an area often fraught with difficulty. The Law Commission’s recent consultation on the UK SARs regime recognised the challenges presented by the tipping off offence in the context of the banking sector. The same challenges apply to solicitors - it is rare that the regime hides what is going on from astute criminals, but it leaves solicitors exposed to potential criminal penalties and civil litigation. Nonetheless, the rules are there to prevent prejudicing investigations and in the absence of a fairer, more effective regime, Chapter 7 comes in very handy.

Chapter 8 moves on to an overview of the Money Laundering Regulations 2017, looking at due diligence requirements, risk assessments, record keeping, Policies, Controls and Procedures (PCPs) and training procedures.

Those seeking practical guidance on how to manage the policies you must put into place, as well as policies that simply help make life much easiers (such as procedures on internal disclosures), should turn to Part II, Chapter 9 or the Legal Sector Affinity Group’s AML guidance (Annex C).

The practical part - Part II - of the book also breaks down the process of making a SAR and offers some excellent tips on getting it right. The book is peppered throughout with information on potential triggers for knowledge or suspicion, but Chapter 11 (and Chapter 12 of Appendix C) focuses on these ‘red flags’ in detail.

Unlike some other Law Society publications, this handbook does not provide templates to demonstrate what a sample CDD form, for example, should look like. It describes the regime in detail and lets you decide how to comply in a way that best suits your practice.

The work is not a tick-box guide to compliance. Such a work would be inconsistent with the risk-based nature of the UK’s AML regime.