Money laundering: 42 red flag indicators
There is an increasing risk of law firms failing to have adequate systems and controls to prevent, detect and report money laundering and terrorist financing, the Solicitors Regulation Authority has warned.
The regulator’s latest warning notice comes hand in hand with the harder line being taken by the National Crime Agency (NCA) over poor-quality suspicious activity reports (SARs), which it said the legal sector is particularly prone to produce.
Research earlier this year showed that a third of SARs submitted by solicitors seeking consent to continue working on a matter do not contain enough information on which to make a decision.
The NCA has announced that, from 1 October 2014, consent SARs that do not contain reasons for suspicion, or a statement regarding criminal property, will be closed by the NCA upon receipt.
The warning notice emphasised that failure to make a disclosure to the NCA in appropriate circumstances can in itself be a criminal offence, and proceeding with a transaction in the absence of consent may result in the commission of a principal money laundering offence.
It said the NCA has identified one of the causes behind delays in the turnaround of consent requests as the non-inclusion of one or more of the elements required, namely:
- The information or other matter that gives grounds for knowledge, suspicion or belief;
- A description of the property that is known, suspected or believed to be criminal property, terrorist property or derived from terrorist property;
- A description of the prohibited act for which consent is sought;
- If known, the identity of the person or persons known or suspected to be involved in money laundering or who committed or attempted to commit an offence under any of sections 15 to 18 of Terrorism Act 2000; and
- If known, the whereabouts of the property that is known or suspected to be criminal property, terrorist property or derived from terrorist property.
A separate warning notice highlighted the 42 ‘red flag indicators’ of potential money laundering and terrorist financing that should lead to lawyers asking further questions of their client, or making a SAR. They were put together by the Financial Action Task Force.
They include if the client is secretive or evasive about who they are, the reason for the transaction, or the source of funds; uses an intermediary, or does not appear to be directing the transaction, or appears to be disguising the real client; avoids personal contact without good reason; and refuses to provide information or documentation or the documentation provided is suspicious.
The warning notices form part of a concerted SRA effort to crack down on money laundering risks at law firms.
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