“Tracing Key Legal Developments in the UK’s AML Regime” —

• “Prateek Swaika and Sagar Gupta of Boies Schiller Flexner discuss the regulatory framework of UK’s anti-money laundering regime and explore key legal developments.”
• “In response to the Russian military action in Ukraine, the UK government has continued to impose stringent sanctions and strengthened its anti-money laundering regulations aimed at targeting Russian financial and trade sectors, state-owned media and individuals connected with the Russian government. In turn, this has influenced the attitude, risk appetite and risk exposure of businesses in recent months.”
• “Considering the heightened scrutiny and evolving regulatory landscape, businesses (including accountants, consultants and lawyers) in the UK are facing ever-increasing oversight and must be careful not to run afoul of AML regulations. This includes instituting and maintaining up-to-date policies and procedures designed to promote and achieve AML compliance.”
• “Businesses, particularly small to medium ones, are likely to come under increasing pressure to maintain strict compliance with an ever-growing number of compliance checks and obligations.”
• “We anticipate that this area will continue to see reform, such as with the passing of the Economic Crime and Corporate Transparency Bill, which remains under consideration in Parliament.”
• “This legislation provides for increased investigation and enforcement powers for Companies House, brings crypto assets within the scope of civil forfeiture orders, legislates against the misuse of limited partnership structures and permits businesses to share information to combat economic crime.”
• “Given that AML and sanctions have been front and center of the UK government’s legislative and regulatory agenda in recent months, it is unsurprising that regulators such as the Solicitors Regulation Authority (SRA) are also being given more teeth in order to ensure AML compliance among practitioners.”
• “These changes have brought the role of AML compliance officers in businesses and law firms into sharp focus. With the increased regulatory enforcement owing to the geopolitical situation in Europe, it is likely that businesses will continue to be closely monitored and scrutinized for their AML compliance, including the conduct of AML compliance officers.”
• “With increasing focus on customer due diligence and verification of ultimate beneficial owners, due to the legislation described below, it is likely that firms will need to conduct a lookback review of customer due diligence files and take appropriate action. In view of this increasing compliance burden, it is imperative for AML officers to maintain ongoing dialog with their business teams to promote information sharing and risk reporting.”

“American Lawyers Can Cater to the Corrupt. The ABA Should Act” —

• “Congress narrowly fell short of passing a bill requiring attorneys perform the same safeguards as others to prevent money laundering. The ABA lobbies against these changes but should fight for reform, says Scott Greytak of Transparency International US.”
• “An international law enforcement task force created in the wake of Russia’s invasion of Ukraine recently announced an alarming accomplishment: A guilty plea from an ‘enabler’ of international money laundering and sanctions evasion. The accused had admitted to helping an associate of a known Russian oligarch dodge rules adopted in response to an ‘threat to the national security and foreign policy of the United States.'”
• “Who was this mastermind, who’d helped move millions in dirty money across the world? Was it a Russian operative, covertly channeling illicit transactions from a bunker in Belgorod?”
• “No. It was a New York City lawyer, sitting at his desk. And if the US’s largest association of lawyers, the American Bar Association, continues to have it its way, every lawyer in America will remain exempt from the US’s most important anti-money laundering law.”
• “American lawyers are often the go-to middlemen for criminals looking to move and hide their dirty money in the US. And for good reason—neither federal law nor the model ethics rules put out by the ABA require lawyers to know who their clients are, to conduct due diligence on those clients, or to stop working with them if they suspect they’re using their services to commit a crime.”
• “Unlike every bank in America, American lawyers are not subject to the US’s most important anti-money laundering law, the Bank Secrecy Act. This is true even when they’re providing services that are financial in nature, such as incorporating a company for a client, setting up a trust for a client, or managing a client’s money—none of which require a law license. Adding insult to injury, the ABA’s Model Rules of Professional Conduct do not require American lawyers to have any BSA-grade anti-money laundering safeguards.”
• “Given the razor-thin margin that kept the Enablers Act from becoming law, and perhaps needing to mitigate the reputational damage wrought by its controversial lobbying campaign to block the reform, the ABA recently proposed some changes to its Model Rules. But as with so much legal fine print, the devil is in the details.”
• “If, from that assessment, the lawyer “learns” that the client or potential client seeks to use the lawyer’s services to commit a crime, and the client essentially cannot be persuaded otherwise, the lawyer must decline or terminate the representation.”
• “Note first how this language (and associated comment) do not actually use the words ‘due diligence’ or even ‘client.’ There is intention in this choice. The term “due diligence” carries with it known industry usage and standards, particularly in the context of the BSA.”
• “Note also how the proposal doesn’t require that lawyers have any specific due diligence policies or procedures. Instead, it simply alludes to lengthy guidance documents…”
• “Altogether, the American Bar Association is essentially saying, ‘Hey, we already have ethics rules that address the use of lawyers to launder money. But here’s some more guidance to show how they work.’ But as we all know by now, these rules have failed. Instead, the ABA’s latest proposal serves only as another reminder that what’s needed is action from Washington.”