“WHY ANTI-MONEY LAUNDERING AND COUNTER TERRORIST FINANCING TRAINING?”

The Money Laundering Regulations require persons working in the financial and professional sector (solicitors, accountants, tax advisors, those offering financial servces, estate agents, etc) to establish an anti-money laundering (AML) and counter terrorist financing (CTF) compliance regime and provide staff with professional training programmes so as raise levels of awareness about the risks of money laundering and terrorist financing in general.

Failure to establish an AML / CTF compliance regime and provide an adequate training programme constitutes a criminal offence punishable by a maximum of two years imprisonment.

What is more, the requirements of an adequate compliance are about to change with the introduction of the EC Third Directive on Money Laundering, to be implemented in the UK by the Money Laundering Regulations 2007.

The significant changes to be brought about by the new legislation include -

• a new approach to client identification and due diligence
• a new obligation to identify beneficial owners
• new concepts of enhanced due diligence and simplified due diligence
• new requirement for continuous monitoring of client transaction
• new rules for reliance on 3rd parties for client identification
• revised requirements for office policies and procedure
• enhanced training requirements
• new enforcement powers

A House of Lords Select Committee recently recommended that training on the prevention of money laundering must be a component of any continuing education for solicitors.This now includes training on counter terrorist financing as well.

Launching a special Red Alert hotline for solicitors, the Law Society declared that the profession is determined to foil the activities of money launderers. “We will do this by making sure solicitors are alert to the dangers, aware of their obligations and can easily warn the authorities if they have suspicions”.

The Proceeds of Crime Act 2002 extended the obligation to report suspicious activity. The obligation is triggered whenever there are reasonable grounds to suspect that a person is engaged in money laundering or terrorst financing. Failure to make a report is punishable by a maximum of 5 years imprisonment. Liability under this offence is governed by an objective and not a subjective test.

What is more, if a solicitor acts on behalf of a client in a transaction funded by the proceeds of crime, he is liable to a sentence of 14 years imprisonment if he suspected that the proceeds of crime were involved. Here, a solicitor’s liability is governed by a subjective rather than an objective test.

However, the threshold for reasonable grounds to suspect money laundering or terrorist financing is very low. A person will be held to be suspicious where he believes that there is a possibility (which is more than fanciful) that a person is engaged in money laundering or terrorist financing. A person will be regarded as being suspicous where he “turns a blind eye”, or fails to ask questions about the source of the funds.