Law Firm Anti-Money Laundering — Rebukes, Reminders & Recommendations

Withers rebuked for failing to provide appropriate anti-money laundering training” —

  • ” Withers has been rebuked by the UK’s law firm regulator for failing to provide appropriate anti-money laundering training to its staff. The public rebuke is contained in a regulatory agreement published by the Solicitors Regulation Authority (SRA) which says Withers failed to comply with The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 over a 28-month period.”
  • “‘The firm’s conduct was non-compliant because all of its relevant employees need to be aware of the relevant anti-money laundering legislation, especially when considering the nature of the work the firm undertakes and its client base.'”
  • “The SRA said a rebuke was a proportionate response because it created a credible deterrent to other firms and there was no evidence of lasting harm to consumers or third parties. In addition, the breach had been remedied and there was a low risk of repetition.”

In New York, Si Aydiner who focuses on the defense of attorney discipline actions, writes: “Money Laundering, Lawyers, and Escrow: The Case for Voluntary Due Diligence” —

  • “Though the popular television series Ozark romanticizes the underlying criminal conduct, money laundering and the manipulation of beneficial ownership are genuine issues confronting lawyers.”
  • “Whether lawyers should be mandated financial “gatekeepers,” like banks, has been well debated. ABA Formal Opinion 463. The perception that lawyers are a “significant gap” in the struggle against money laundering—as established by 60 Minutes—has little to do with the profession however.”
  • “Lawyers, conversely, are required only to report cash payments exceeding $10,000 (using Form 8300). (FATF-MER p. 38). The lawyer as the “gap” in identifying beneficial ownership stems, not from cultural resistance, but rather from the tripartite relationship between lawyer, escrow account, and bank.”
  • “These recent amendments only confirm the need for lawyers to perform a minimum degree of due diligence on clients for two reasons: establishing whether to decline representation (which will depend, to some degree, on the lawyer’s appetite for risk) and having proof in the file that a contemporaneous effort to learn was made in order to militate against an allegation of scienter in a disciplinary proceeding or criminal investigation.”
  • “A leading authority on the issue of client due diligence is the ABA’s Voluntary Good Practices Guidance for Lawyers To Detect and Combat Money Laundering and Terrorist Financing (Good Practices). It advocates for a ‘risk-based approach’ to due diligence that ‘ensure[s] that measures to prevent or mitigate money laundering and terrorist financing are commensurate with risks identified.'”
  • “As State Tax Law §1409 and Administrative Code §11-2105(h) direct, the identification of beneficial ownership is now locally mandated. Lawyers who make a living facilitating financial transactions may be prudent to employ basic, uniform, due diligence establishing beneficial ownership. While such efforts may be onerous, there are existing resources available to ease the burden. And the cost of such due diligence inquiries should be chargeable to the client.”
  • “While a client intent on engaging in illicit activity can misrepresent beneficial ownership, this due diligence is precisely the type of evidence that can be disclosable under Rule 1.6(b)(5)(i) in a subsequent disciplinary investigation implicating Rule 1.2(d) or any other requiring scienter. Demonstrating a willingness to take non-mandated steps would also be strong evidence against the catchall provision of Rule 8.4(h). My Committee experience, and service in-house for two separate federal investigations, instruct that a lawyer’s posture under the circumstances is largely reactionary—the lawyer lacks control under the duress of scrutiny. And a practice of consistent and basic due diligence will serve you well.”
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