Current AML regime “does little to prevent money laundering”
Changes to the money laundering regulations should focus on increasing the effectiveness of efforts to tackle money laundering through a more risk-based and proportionate approach, said the Law Society of England and Wales in response to HM Treasury’s (HMT) call for evidence.
The Call for Evidence is now closed and will consider the overall effectiveness of the UK’s anti-money laundering (AML), regulatory and supervisory regimes.
“The legal profession plays an important role in the fight against economic crime and takes its anti-money laundering responsibilities very seriously,”
said Law Society president I. Stephanie Boyce.
“While we welcome HMT’s commitment to making the AML regime proportionate and effective, the current regime does not promote a risk-based approach and instead drives ‘tick box’ compliance to satisfy overly prescriptive requirements, which is a particular challenge for small firms.”
The Law Society believes the current AML regime places disproportionate compliance obligations on the legal profession, saying the activity prescribed “does little to prevent money laundering.”
The current regime is incredibly fragmented. In Wills and Probate, for example, each participant in the process must complete client due diligence which includes source of funds check, which has led to one compliance specialist to call for greater collaboration between parties.
I. Stephanie Boyce added:
“At its centre, the UK AML regime should be effective at reducing money laundering and terrorist financing. It must be built on an evidenced-based assessment of the risks and what works to mitigate those risks.
“A risk-based approach will be most effective, as it requires regulated persons to focus more fully on those clients and situations which present the greatest risk, rather than conducting a less rigorous, but nonetheless onerous and costly, assessment across a broader range of matters which is not effective in tackling money laundering.
“The current regime’s ‘tick box’ method undermines the effectiveness and proportionality of the measures and drives up costs for legal services consumers. We look forward to helping develop and apply a regime that is both proportionate and effective in tackling economic crime and is workable for our members.”