Risk Update

Anti-money Laundering — News, Developments and Concerns on the AML Compliance Front

Posted Dan Bressler

In the UK: “Why is it crucial for lawyers to identify and verify source of funds?” —

  • “The growing number of frauds, tax evasion, investment scams, and money laundering cases across the country has once again turned the spotlight on the importance of complying with anti-money laundering (AML) policies.”
  • “Nonetheless, financial institutions are not the only ones subjected to AML regulations. Law firms are also required to monitor and investigate the source of funds they accept from their clients in legal transactions.”
  • “As a lawyer, you may already have information about the bank account your client has been using to make payments. However, investigating the source of funds goes beyond collecting financial documents. Law firms must also determine how their client came to possess that money and where it was used.”
  • “According to the latest report by the Solicitors Regulation Authority (SRA), the officials received a total of 273 reports of potential AML violations in the past year. As a result, the authority visited 85 firms to offer guidance on tax-related issues, with more than 150 desk-based reviews taking place. Moreover, the SRA took 29 enforcement actions and issued £160,000 in fines. The officials also made more than 30 suspicious activity reports to the National Crime Agency.”
  • “It is no secret that law firms are among the biggest targets for money laundering. Lawyers who handle excessive amounts of funds confidentially are at the risk of non-compliance with the anti-money laundering regulations. It is also worth mentioning that their actions may weaken the public confidence in legal professionals.”

In the US: “Treasury Department Rules Could Help Strengthen AML Whistleblower Program” —

  • “The U.S. Treasury Department is currently drafting proposed rules to implement the whistleblower provisions of the Anti-Money Laundering (AML) Act of 2020. These rules will help determine the future success of the newly created AML whistleblower program. By crafting commonsense regulations, the Treasury Department can strengthen the program, despite shortcomings in the law that need to be fixed by Congress.”
  • “The AML Act became law on January 1, 2021 as part of the massive National Defense Authorization Act. Included in the AML Act were provisions establishing a whistleblower reward program for individuals who report money laundering violations to U.S. authorities.”
  • “Modeled off the Dodd-Frank Act (DFA), which established the highly successful SEC Whistleblower Program, the whistleblower reward provisions of the AML Act were meant to establish a program which incentivized insiders to blow the whistle by offering anti-retaliation protections and monetary awards. However, the AML Act strayed from the model of DFA in a number of ways, creating devastating loopholes which are undermining the potential of the program.”
  • “Given these loopholes, which include the lack of a mandatory minimum award, the apparent inability for the Treasury Department to actually pay awards, even where justified, and the exclusion of all employees at FDIC insured financial institutions and credit unions from coverage under the law’s anti-retaliation provisions, urgent legislative reform is needed to make the AML Act effective.”
  • “The AML Act does not mandate regulations and thus there is no deadline for the Treasury Department to adopt them. It is expected, however, that they will do so this year. Currently, there are no regulations in place. Thus, the Treasury Department can draft rules without being restricted by any existing, outdated or ineffective regulations.”
  • “Money laundering was recently recognized by the Biden Administration as one of the key drivers facilitating international corruption, and its most harmful impacts, including terrorist and drug cartel financing, bribery, tax evasion, and undermining the rule of law. The Treasury Department must take advantage of the AML Act to administratively design the most effective transnational anti-money laundering whistleblower program consistent with the official United States Strategy to Countering Corruption.”