Rebecca Atkinson outlines what checks firms need to do to screen their own staff for anti-money laundering purposes

The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (AML regulations) requires regulated firms to screen ‘relevant employees’ before they start working for or with the regulated firm. Further, screening must occur during the relevant person’s work for or with the firm.

What do the AML regulations say about screening?

Regulation 21(2) sets out that

(a) “screening” means an assessment of—

(i) the skills, knowledge and expertise of the individual to carry out their functions effectively;

(ii) the conduct and integrity of the individual;

 Who is a ‘relevant employee’?

Regulation 21(2) sets out that

(b) a relevant employee is an employee whose work is—

(i) relevant to the relevant person’s compliance with any requirement in these Regulations, or

(ii) otherwise capable of contributing to the—

(aa) identification or mitigation of the risks of money laundering and terrorist financing to which the relevant person’s business is subject, or

(bb) prevention or detection of money laundering and terrorist financing in relation to the relevant person’s business.

Therefore, those who have a role to play in the identification, mitigation, detection and prevention of money laundering need to be screened before they begin their role and during their appointment.

What methods can be used?

Before appointment

There are many checks that can be conducted prior to a person undertaking a role in a regulated firm including the following:

  • Check that the individual has undertaken AML training by asking them to show relevant certificates or confirmations.
  • Ensure a solicitor has a practising certificate with no endorsements, that they have no disciplinary record and if the person is not a solicitor checking with the SRA that there is no order against them which sets out that they cannot work at a law firm without SRA permission (known as a section 43 Order). These checks can be done either by email or via the SRA ‘Check A Solicitor’s Record’ search.
  • Request disclosure by the individual of any complaints, claims or SRA investigations, concluded or ongoing.
  • Take up references from prior employers.
  • Conduct a credit check.
  • Conduct a criminal record check (note that consent needs to be provided by the person and has to be ‘freely given’).
  • Check on adverse media via Google and social media.

During an appointment

Checks during an appointment could include these:

  • Check the individual’s SRA record by using the SRA’s ‘Check A Solicitor’s Record’ search function.
  • Make an annual declaration to confirm that there is nothing to make the firm aware of what would affect the firm or the SRA’s assessment of integrity of the individual. Be aware however that any person who lacks integrity could well lie on such a declaration and therefore there is only so much weight that can be given to it.
  • Check on adverse media via Google and social media.
  • Conduct a review of the AML training that the person has undertaken including appraisals.

Note that it’s possible to conduct a criminal record check during appointment. However, as outlined above consent by the individual needs to be ‘freely given’ and the fact that the individual is in an employee/employer relationship may put pressure on them to agree (and not therefore ‘freely given’ consent).

Are all your people ‘relevant employees’?

These screening checks need to be conducted on those who play a role in identification, mitigation, detection and prevention of money laundering.

However, not all those who play this role will be ‘employees’. Partners are not employees and neither are consultants. It cannot be the case that the AML Regulations only require screening on those who are employees in the strictest sense and the wording ‘relevant employees’ should therefore be widely interpreted.

Thought needs to be given as to what level of screening to undertake for each type of role and its role holder. Below is a list of roles that some individuals may have in a law firm and whether screening should or should not be necessary:

Solicitors/licenced conveyancers/legal executives/other lawyers whether employees, partners or consultants and secretaries/admin assistants etc-—these individuals should be screened prior to and during appointment. Even if the individual technically practices law in an area which is not regulated (litigation for example), they should have screening conducted as they still have a role to play in detecting and preventing money laundering.

Other business services whether they be employees or consultants in support areas such as IT, Finance, HR, Facilities, Risk & Compliance, Business Development etc—this will depend on whether they are seen to have a role in detecting and preventing money laundering in the firm. It is very likely that Finance and Risk & Compliance will do but that HR and Business Development may not, for example. A belt and braces approach would be to conduct screening in any event.

Discreet project-based consultants—this would depend on the nature of the consultant’s work and whether they had a role in detecting and preventing money laundering.

Remember that all screening should be completed before the individual takes post and not after. This means that individuals cannot accept a role on a Monday and expect to start that week or even the week after.

 Rebecca Atkinson is the author of the recently published Financial Crime: A Compliance Manual, published by the Law Society. Order here.