Author:Paddy Oliver

Do Australian law firms face money laundering risks? Of course.

Do Australian law firms face money laundering risks? Of course.

However as there is no published or publicly available “risk assessment of ML/TF in the legal profession” for Australia, one has to rely on overseas information for guidance. After all, similar common law jurisdictions with similar law firm structures and lawyer mindsets should have similar general ML/TF risk profiles (leaving aside local variations: perhaps Russian oligarchs for the UK, outlaw motorcycle gangs for Australia).

The recent UK 2017 National Risk Assessment stated that:

“Legal services remain attractive to criminals due to the credibility and respectability they can convey, helping to distance funds from their illicit source and integrate them into the legitimate economy.”

Might Australian criminals think differently? They may not.

The National Risk Assessment rated the legal profession as:

“high risk of being used for money laundering, although low risk of being used for terrorist financing. In particular, the risk assessment identifies solicitors as being at a high risk of money laundering because of the range of high risk services they may offer.

Criminals may use a combination of legal services to add layers of complexity to a transaction. They may also use Chinese Walls (or information barriers) within a law firm, or several legal firms to separate instructions which, taken together, might raise suspicion.”

Again, might Australian criminals think differently? Again, they may not.

Legal Professional Privilege

In relation to legal professional privilege / client legal privilege the Risk Assessment:

“raised instances of lawyers falsely claiming legal professional privilege as posing a risk to the law enforcement response to preventing money laundering.”

The National Risk Assessment went on to say:

“The government recognises that legal professional privilege is a vital part of the UK’s legal system and that ensuring that it is applied correctly in all circumstances is important in mitigating money laundering risk.”

Whilst LPP/CLP is may be different across jurisdictions the fundamentals are the same. Might Australian criminals want the protection of LPP/CLP like their UK counterparts?

What does the Solicitors Regulatory Authority have to say on the National Risk Assessment?

The Solicitors Regulatory Authority (SRA) is the regulator for lawyers in England & Wales and is the responsible for the supervision of AML in England & Wales. The SRA states that:

“… we take our responsibilities very seriously. We owe a duty to society at large, and to protect the integrity of the legal sector through tackling professional enablers of money laundering. If the UK legal sector is to remain a trusted profession, we must work to identify those who would willingly help money launderers, and inform and educate those who might be unwittingly used by criminals.”

Words of caution from the SRA.

What are the ML risk areas?

Not unsurprisingly the National Risk Assessment identified the following legal services as posing the the highest ML risk:

  • Trust and company formation
  • Conveyancing
  • Client accounts services (trust accounts)

The SRA agrees “based on our supervisory work and analysis, we agree that these services pose the highest risk.”

As Australian law firm provide similar services might Australian criminals want to purchase these types of services as well?

ML, and to a lessor degree terrorist financing, is a current risk to Australian law firms. It is good risk and reputation management to consider these risks now, not waiting for the Anti-Money Laundering & Counter-Terrorism Financing Act, 2006 to apply.

Lexcel and AML Experts have advised lawyers and law firms, and other regulated entities on ML/TF risks and AML compliance.

Paddy Oliver, Managing Director, Lexcel Consulting
Lawyer, Legal Risk Consultant, AUSTRAC Authorised Auditor
03 9636 3632
0431 174 124
poliver@lexcel.com.au
www.lexcel.com.au
Reduce your risk | Your firm deserves high quality risk and AML advice

 

If you like this post please share it with your network. Other posts, which are hopefully just as informative / interesting / amusing / controversial can be found on my blog at http://www.lexcel.com.au/blog/

Feel free to contact me on +61 (0)431 174 124 or +61 (0)3 96363632 or poliver@lexcel.com.au

Paddy Oliver

Managing Director

Lexcel Consulting

www.lexcel.com.au

+61 431 174 124

+61 3 96363632

Lexcel | Law Firms Redesigned

Lexcel is a boutique consulting firm focussed on adding value to law firm management and in-house counsel across strategy, pricing, and management.

AML Lessons for lawyers from Auckland

New Zealand lawyers face AML obligations from 1 July 2018, accountants later in the year. Perhaps there Australian colleagues will over the next decade.

I was fortunate enough to be on the speaking panel for the Thompson Reuters AML Conference last week in Auckland. Over 70 lawyers, accountants, and other interested people attend this conference to hear from the New Zealand Police FIU, the Department of Internal Affairs (the supervisor), and several AML subject matter experts.

When implementing AML obligations into professional services firms, especially law firms, there are many issues not faced by other professions, and certainly not faced by financial business. So care must be taken to understand these issues when advising lawyers on designing and implementing AML programs. It is not enough to say that Phase 1 (or Tranche 1) organisations did it this way or faced these problems.

When talking to lawyers about implement AML programmes it is important to understand how law firms actually operate, the particular dynamic of a law firm, the risk issues faced, and the legal ethicals. As a former practising lawyer and someone who has advised lawyers on both risk management, AML programs, and legal ethics around AML I am fortunate enough to understand these tricky issues. Also, the challenges of actually implementing change in a law firm.

So, some topics that I was able to assist with at the conference over and above the basic AML issues:

  • Linking the ML/TF Risk assessment on a client to general risk management
  • Can / should a firm price for client risk – financial or ML?
  • When should KYC/ CDD be carried out – before or after a conflicts search
  • Who pays for electronic verification – client or law firm?
  • How do you deal with documenting a suspicious matter / activity report
  • Who owns the documents on a client file?
  • Can / should you withdraw if you make a SMR/SAR?
  • Does the firm change retainer letters, its costs disclosure?
  • Does the firm change its Terms & Conditions?
  • How to process map
  • How to plan a project
  • How to deal with a regulator / supervisor visit

Implementing AML obligations in any business is difficult. The degree of difficulty is higher in professional services firms, especially lawyers.

If you like this post please share it with your network. Other posts, which are hopefully just as informative / interesting / amusing / controversial can be found on my blog at http://www.lexcel.com.au/blog/

Feel free to contact me on +61 (0)431 174 124 or +61 (0)3 96363632 or poliver@lexcel.com.au

Paddy Oliver

Managing Director

Lexcel Consulting

www.lexcel.com.au

+61 431 174 124

+61 3 96363632

Lexcel | Law Firms Redesigned

Lexcel is a boutique consulting firm focussed on adding value to law firm management and in-house counsel across strategy, pricing, and management.

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