Anti-Money Laundering Checks for Solicitors

Solicitors and law firms are often just as vulnerable to money laundering and other forms of financial crime as businesses in the financial services sector. The Financial Action Task Force therefore requires that solicitors meet AML regulations and carry out anti money laundering checks – this is monitored by the SRA (Solicitors Regulation Authority).

Short for designated non-financial businesses and professions, DNFBP is the acronym used to describe the additional occupations and industries which are legally obliged to comply with AML regulations, but don’t fit into the financial sector. Solicitors are a DNFBP, but so are estate agents, casinos, dealers in precious metals or stones, company service providers, tax advisors and external accountants.

Documents used to verify identity in AML checks must be certified by a reliable source. Some of the people who are qualified to certify these documents are: qualified lawyers or attorneys, accountants, licensed conveyancers, employees of the Homes and Communities Agency, and British Embassy or consulate staff.

Large sums of money, cross-border transactions, or clients from nations with significant risks of terrorism or corruption are characteristics of high-risk transactions. Purchasing real estate, forming trusts and companies, providing financial management and legal services are typical high-risk industries.

The Law Society is officially named as the supervisory authority for solicitors and law firms, but it has passed on all regulatory duties to the SRA, or Solicitors Regulation Authority. The SRA therefore monitors the compliance of solicitors and law firms in accordance with AML regulations.

The AML advice for the legal services industry is based on guidance published by the Legal Sector Affinity Group in 2018, as well as the 5th Money Laundering Directive, which arrived in January 2020. The compliance process includes carrying out a wide range of AML checks for solicitors, like sanctions and PEP screening, as well as checking for adverse media, performing ongoing monitoring and implementing a risk-based approach.

Serious consequences, such as hefty fines, criminal prosecutions, and reputational harm, can arise from failing to meet AML requirements. Partners and staff members of the company can occasionally be held personally accountable and a fraud or failure to comply can significantly damage the reputation of a company.

According to the Financial Action Task Force (FATF) - the independent inter-governmental body that develops and promotes policies to protect the global financial system against money laundering and terrorist financing – Red Flags can be divided into four categories: client, source of funds, professional advice and the nature of the transaction.