Azeem Rashid, Director of Lawtech 365.
By Legal Futures Associate Verify 365
Latest sanctions mean UK law firms cannot conduct any transactional work for Russians.
In response to the Russian leader’s advancement on Ukraine territory, the UK government has announced for the first time in history, that law firms will no longer be able to provide “transactional legal advisory services”.
At the outset, legal services were one of the few services that were excluded from the prohibited list under UK and EU sanctions, however, the recent announcement identifies Russia relies deeply on UK professional services.
“Russia is highly dependent on Western countries for legal services with 85% of all legal services being imported from G7 countries”. It states that the UK accounts for 59% of these imports.
The new sanctions are part of a wider aim to hamper Russian businesses’ ability to operate, including IT, architectural, engineering, advertising, and auditing services. The UK also bans the export of nearly 700 goods that are crucial to Russia’s industrial and technological capabilities.
According to Swiss anti-corruption watchdog, Basel Institute on Governance, the UK is in the top 20 countries for money laundering risks. The Basel AML Index measured the anti-money-laundering efforts of 128 countries, including their legal systems, the transparency of financial and public sectors and susceptibility to corruption and bribery. The index drew on data from the FATF, Tax Justice Network, the World Bank and other sources.
Identifying the true beneficial owner behind the business transactions going forwards will need some help from technology, explains Azeem Rashid, Director of Lawtech 365.
“Technology plays a huge role in identifying risks and ultimate beneficiary owners, and law firms must now determine the natural or legal persons who have a percentage in shares or interests and if their ownership is direct or indirect. UBOs must go through the appropriate AML/KYC checks in a uniform and efficient way, and legal technology platforms like Verify 365 can help identify this.
The UK Government has recently announced the Economic Crime Bill imposing foreign ownership of property to be more transparent, in direct response to Russian aggression, it was passed through the House of Commons in a single day – which normally takes months.
Alongside this, the proposed Policy Paper will make it necessary for all company directors to verify their IDs, making the data with the Companies House more up-to-date and reliable, another effort to improve corporate transparency.
“Anti-money laundering (AML) compliance is one of the most costly and challenging issues facing the legal and financial sectors today. We’re working with law firms to identify risks, strengthen procedures and improve efficiency – fortunately, lawyers now have at their disposal the technology that simplifies and automates most of the AML processes that are required,” added Rashid.
Many international law firms closed their Russian offices following the invasion of Ukraine in February, however, James Cartlidge, former Parliamentary Under Secretary of State at the Ministry of Justice was against banning legal services explaining that “access to legal professionals is considered a fundamental right in democratic societies”.
Balancing the risks associated with Russian and money laundering whilst upholding the right of access to justice is proving to be a fine line, but to maximise their ability to counter any risk, technology seems to be the right solution.
