Criminal penalties could be scrapped for failure to comply with money laundering regulations

1 April 2011

The Law Society has described a decision by the Treasury to hold a consultation on decriminalising customer due diligence checks as a victory for proportionality.

The Law Society called for the abolition of the criminal offences under the Money Laundering Regulations in the 2009 House of Lords Inquiry and the 2009 Review of the Regulations.

The Law Society is lobbying for a more proportionate Anti-Money regime and is urging solicitors to respond to the forthcoming Treasury consultation.

Responding to the announcement, Law Society Chief Executive Desmond Hudson said the Society has been calling for this change on solicitors behalf and the government is clearly listening to our concerns.

"If the changes are implemented, while firms will still need to conduct due diligence and report suspicions of money laundering, they will no longer need to fear a criminal conviction if a passport they have on file goes out of date or if they did not get the right number of utility bills or bank statements for every director of a company they are instructed by."

"The Law Society has for many years been actively lobbying to ensure that the AML regime in this country is effective but also proportionate and workable.

"The possible removal of the criminal sanctions for failure to comply with the Money Laundering Regulations is something I specifically raised with the House of Lords when I gave evidence to them on the AML regime in 2009 and we raised it with HM Treasury in their review of the Regulations later that year.

"We believe this change will help law firms, and others who have to comply with the money laundering rules, to focus more energy on really knowing their client and watching for warning signs of money laundering; rather than being worried they will go to jail if they don't get the right pieces of paper in every situation irrespective of the risks a client poses.

We believe it will help law firms take a more risk based approach so that they allocate resources more effectively rather than slavishly following a tick- boxed approach. Equally, this is by no means a suggestion that firms can go soft on anti-money laundering compliance. Should a firm completely fail to have anti-money laundering systems in place, this is a breach of Rule 5 under the existing Solicitors Code of Conduct, the same obligation is to be retained under outcomes focused regulation. Both the SRA and the SDT have shown that they can and will take decisive action over such breaches.

This announcement shows that the government is listening to the Law Society on AML reform and we are looking forward to responding to the full consultation on amendments to the Regulations in the near future.

Read the government announcement: http://cdn.hm-treasury.gov.uk/2011budget_growth.pdf

Read the Law Society response to the House of Lords Inquiry: http://www.lawsociety.org.uk/documents/downloads/dynamic/amlevidence0309.pdf

Read the Law Society response to the HM Treasury review: http://www.lawsociety.org.uk/new/documents/aml/treasuryreviewsdec09.pdf

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