Philip: Many, many prosecutions on the way
The low number of suspicious activity reports (SARs) made by solicitors relating to possible terrorist financing indicates under-reporting, a senior policeman told the profession this week.
The warning comes as the chief executive of the Solicitors Regulation Authority (SRA) predicted that the regulator would become “more muscular” in its expectations of solicitors in relation to anti-money laundering (AML).
Ian Collins, training and engagement lead at the Metropolitan Police’s national terrorist financial investigation unit, told Wednesday’s SRA compliance officer conference in Birmingham that just 30 of the 2,402 SARs made by solicitors in 2018 related to terrorist finance.
This “probably isn’t proportionate” given the number of transactions solicitors would have handled last year, he suggested.
Mr Collins stressed that suspicion was “a very low bar” that had to be crossed to make a SAR (it is ‘a possibility that is more than fanciful’). The report did not need to be lengthy – just a single page “explaining why you have suspicions”.
All such SARs were investigated, he said, adding that solicitors should not double report – a mention of terrorist financing suspicions within a Proceeds of Crime Act SAR would be picked up.
Amasis Saba, chair of the Law Society’s money laundering task force and deputy money laundering reporting officer at City firm Bryan Cave Leighton Paisner, called for a chance of culture so that AML was not seen as administration.
“If you haven’t made a SAR in the past 18 months, you need to document why,” he added. While it may be understandable given the nature of a firm’s work or clients, “that memo is the first thing you’ll want to have on the desk” when SRA came asking about AML compliance.
Earlier this week, the SRA said it would be writing to the 7,000 firms that fall under the scope of the Money Laundering Regulations to ask them to confirm they have a risk assessment in place.
The session also highlighted the difficulties that privilege and confidentiality could cause. Asked how the police would view a firm refusing to act for a client because of money laundering suspicions but not making a report, Alison Kelly – a colleague of Mr Collins – said solicitors had a statutory duty to report suspicions they came across in the course of their business.
But Mr Saba pointed out that the information provided might still be privileged, “which may mean you can’t report”.
Deborah Price, deputy director of the national economic crime centre at the National Crime Agency, sought to reassure delegates of the “determination” to fix operational issues so as “to make it easier for you to use the SARs regime”.
Acknowledging that “the IT is terrible”, she said significant funding from the Home Office meant there would be “a sharp focus on making every bit of the process better, if not a lot better”.
In his address to the conference, SRA chief executive Paul Philip said it would become “much, much more active” on AML over the next six months, “visiting firms we deem as high risk in this area”.
He added: “There will be many, many prosecutions relating to AML.”
Mr Philip said Brexit would not change the AML regime, irrespective of the framework coming from EU directives. “We need to do it all the more because we’re leaving Europe,” he argued. “Nobody will do business with us as a country if we don’t comply.”
Speaking afterwards to the media, he said “we’re becoming quite muscular in terms of what we’re expecting”, with the SRA board considering whether the regulator has sufficient resources with the Sixth Money Laundering Directive on the horizon – the SRA is already spending £500,000 more on AML than it was last year.
The Fifth Money Laundering Directive being implemented in January 2020, and governments have until June 2021 to introduce the Sixth. This will make aiding, abetting and attempting to commit an offence of money laundering a criminal offence.
Mr Philip said: “Solicitors could find themselves on the sharp end of criminal enforcement and not just us.”
Meanwhile, half of UK law firms think that a lack of understanding of money laundering typologies is the biggest internal barrier to tackling financial crime, according to a report from LexisNexis Risk Solutions.
The research – On the Frontline: The UK’s Fight Against Money Laundering – found that law firms were actually judged to be the least at risk of being a money laundering target, with only 4% of respondents – who included banks, gambling firms and estate agents – stating the legal sector to be one of the highest at risk.
But a third of lawyers felt the UK regulatory framework was only somewhat effective, or not effective, in driving businesses to tackle money laundering.
The survey found that three-quarters of law firms anticipated increasing their technology budgets as part of AML resources over the next five years, and 72% aimed to increase their training budgets.
Bernard George 
I think the issue is that there are a number of circumstances which may lead solicitors to be aware (with a suspicion possibly more than fanciful) that their property transaction is being financed with “dirty money”. It’s much harder to spot the transfer of “clean” money to a terrorist enterprise. After all, if “clean money” is being invested in a house why should that give rise to a more than fanciful suspicion of terrorist financing? WE can’;t use our bank accounts as a banking service, so we shouldn’t be sending proceeds of sale to a charity in a part of the world known to be at risk of terrorist influence.
It would be really helpful for more examples (even in the most generic and anonymous terms) to be released of where suspicions have been reported. This broadbrush “Oh, they must be under reporting” is unhelpful. Most firms want to report. Most firms want to train their staff. And whilst I’m about it, a bit of feedback occasionally from the NCA would not go amiss. Type the report, send a form and never hear from them again is the usual.
In short
*What has not been reported in terms of terrorism
*How can staff be better trained in the light of what we know now
Solicitor-bashing over the issue is lazy and unhelpful.