Risk Update

Law Firm AML Updates — Russian Mercenary Boss Makes Quick Work of AML Rules, Opinion on the General State of Affairs

Kathryn Westmore, a senior research fellow at the Centre for Financial Crime and Security at RUSI (the Royal United Services Institute) writes: “Carrot or stick? The future for AML supervision of the legal sector” —

  • “The events of the last year have resulted an unprecedented focus on the role of the legal sector in enhancing the UK’s reputation as a haven for dirty money.”
  • “The sector has long been felt to have a problem with meeting its anti-money laundering (AML) regulatory obligations and there has always been an uneasy tension between AML and other core tenets like professional privilege and the right to legal representation.”
  • “This system of supervising lawyers, and indeed other professions like accountants, is, however, in need of a “radical overhaul,” according to an influential group of backbench MPs. The campaign group Spotlight on Corruption has claimed that the UK’s legal sector “escapes effective supervision for money laundering”.”
  • “The government has committed to a consultation later in 2023 on the future AML supervisory framework and recognised that “there is more to do”, proposing a number of options for reform in the way that the professions are supervised for AML purposes.”
  • “The Economic Crime and Corporate Transparency Bill, currently working its way through the legislative process, has started to move the dial on AML supervision on the legal sector, introducing new fining powers for the Solicitors Regulation Authority (SRA) and Scottish Solicitors’ Discipline Tribunal and a new regulatory objective around preventing economic crime.”
  • “Where firms consistently fail to understand and comply with their basic requirements, then yes, that’s exactly the type of behaviours that the SRA and the other supervisors should be cracking down on.”
  • “And there are many, many more firms that simply get things wrong through ignorance, lack of resources or, frankly, a blasé attitude to compliance, than there are firms that are deliberately and willingly facilitating money laundering.”
  • “The PBSs, by their own admission, generally favour a supervisory approach of engaging with the sector informally rather than more formal routes. There is a place for formal supervisory activity, and it can be used effectively both to punish breaches of the regulations and act as a deterrent to others in the industry.”
  • “But as we look forward to the government’s consultation on AML supervision, what it should really be asking is not necessarily how we can increase the number of fines in the sector but what are the effective interventions that will really drive up the level of compliance in the sector.”
  • “What tools, information and resources might the sector need to be able to fulfil their obligations that they don’t have at the moment?”

Russian mercenary boss passed money laundering checks by using a bill in his mother’s name, report says” —

  • “The head of the Wagner mercenary group, implicated in war crimes in Ukraine, was able to pass UK money laundering laws by using a gas bill in his 81-year-old mother’s name, according to the Financial Times.”
  • “Yevgeny Prigozhin presented the document in response to a 2021 request by a London law firm for his identity documents, before accepting him as a client, the FT reported, citing leaked emails.”
  • “The request was made before Russia’s invasion of Ukraine. But at the time Prigozhin was under UK, EU and US sanctions for funding mercenaries connected to human rights abuses elsewhere in the world, as well as attempts to interfere with the 2018 US elections.”
  • “Prigozhin’s Russian lawyers sent Discreet Law a copy of his passport and a gas bill in his mother’s name, which had an address in the Russian city of St Petersburg, the FT reported.”
  • “His lawyers wrote that ‘the bill is issued in the name of the claimant’s mother (Violetta Prigozhina) who actually lives at the client’s residential address and pays the bills.'”
  • “A lawyer at Discreet Law replied by saying: ‘We are satisfied with the [anti-money laundering] documents,’ according to the FT. The firm was given permission to represent him in 2021 by the UK Treasury, the FT reported.”
  • “Prigozhin had hired the firm to sue Eliot Higgins, founder of investigative news outlet Bellingcat, for libel after Bellingcat reported on the group’s activities and Prigozhin’s connections to the Kremlin.”
  • “The case was later struck out, and Discreet Law applied to stop representing Prigozhin in March 2022.”

See also: “UK government ‘let lawyers bypass sanctions’ to help Putin ally sue journalist.”