Product In Focus – Anti-Money Laundering due diligence
In the first of Estatesearch’s new Product In Focus series, we look at Anti-Money Laundering due diligence and why you need to conduct an AML Search when administering a Deceased’s estate.
70% of firms are at risk by not conducting an Anti-Money Laundering Search on the Deceased when administering an estate
An online poll revealed that 70% of respondents do not carry out an Anti-Money Laundering (AML) search on the Deceased during estate administration; putting themselves at risk of being used to launder money.
The United Nations estimates that 2-5% of the world’s GDP has been laundered. The UK government suggests that given that London is one of the world’s largest financial centres, it is highly likely that hundreds of billions of pounds are laundered in the UK annually. The COVID-19 pandemic has seen a shift from the use of cash toward e-payments and online banking, causing a change in the methods used to launder money. The UK government states that it is likely these methods will continue after all COVID-19 restrictions have been lifted. Given this shift, law firms can be a prime target for money laundering due to large sums of money being moved online. Firms must be aware of their AML obligations so that they can protect their clients and themselves from fraud.
What are the current regulations for AML?
AML regulations are a European Union (EU) directive which includes Customer Due Diligence (CDD) and Politically Exposed Persons (PEP) checks. The Money Laundering and Terrorist Financing Regulation 2019 implemented the EU Fifth Money Laundering Directive in the UK which aims to put a set of processes and rules in place to prevent money laundering and organised crime.
In addition, the Directive seeks to protect those who may have accidentally involved themselves in these illegal situations. The current Solicitors Regulation Authority (SRA) guidance, recommends that Solicitors should carry out checks such as CDD, PEP and Sanctions as these are the consolidated list of individuals and organisations under the financial factions within the HM Treasury Office for Financial Sanctions Implementation.
What is the importance of carrying out an AML search on the Deceased during the Estate Administration due diligence process?
The SRA suggests that criminals are taking advantage of the disruption caused by the pandemic, putting more firms at risk of being used to launder money. The SRA Scam Alert has identified four potential scams relating to estate administration during the month of September 2021.
The SRA have guidance in place to ensure that Solicitors are complying with AML regulations to minimise this risk. However, while legal professionals commonly carry out AML checks on the beneficiaries and Executors of the Estate, the Deceased is rarely subject to such a check. However, legal professionals are likely to handle the assets of the Deceased, particularly when closing an individuals account and money is moved into to firms client account prior to onward distribution.
Once the assets are distributed to the beneficiaries, should the Solicitor fail to carry out appropriate AML checks on the Deceased who is later found to have illegitimate assets, this process could be viewed as money laundering. The consequences for money laundering are defined in the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 which state that, if convicted, a person may be imprisoned, face financial penalties or both.
What is the solution?
While the likelihood of Deceased clients having illegitimate assets may be low, the risk to Solicitors is extremely high. This risk can be avoided by performing a quick and cost-effective AML check of the Beneficiaries, the Executors and the Deceased.
Estatesearch can make this process simple through our comprehensive Anti-Money Laundering Search covering Identity Verification, PEP registers and UK HMCT Sanctions.
We include the search as standard in our Financial Profile Premium Search, our award-winning financial asset search which helps to identify estate assets and liabilities. With our single, superior search, we can help you satisfy more of your client due diligence, including the peace of mind that you’re not handling proceeds of crime when administering an estate.
This article was submitted to be published by Estatesearch as part of their advertising agreement with Today’s Wills and Probate. The views expressed in this article are those of the submitter and not those of Today’s Wills and Probate.