“Narrow AML rules allow lawyers to act for ‘lawful but awful’ clients” —

• “The narrow focus of the anti-money laundering (AML) regime on criminality leaves solicitors ‘free to facilitate and legitimise the flow of corrupt capital while staying within the bounds of the law’, a major report has warned.”
• “Campaign group Spotlight on Corruption also found ‘surprisingly little visibility’ in Solicitors Regulation Authority (SRA) guidance, as well as individual law firms’ own codes, of ‘the overriding ethical commitment to safeguard the public interest’.”
• “‘Given the regulatory gap in the AML regime, there is an urgent need for guidance about how the SRA’s high-level principles should shape ethical decision-making by lawyers and law firms around kleptocratic wealth,’ it said.”
• “The report, Gatekeepers, Enablers or Technicians?, presents the findings of academic research exploring the role of solicitors in England and Wales in relation to kleptocracy, state capture (where illicit activities are legalised by a ruling elite) and ‘grand corruption’, and the question of whether lawyers should take on work which is ‘lawful but awful’.”
• “The AML regime was a ‘vital safeguard’ against illicit finance, ‘but its narrow focus on criminal activity means it does not adequately capture the proceeds of kleptocracy, state capture and grand corruption’, it said.”
• “It was perfectly possible, for example, that a solicitor doing comprehensive AML checks on a foreign politically exposed person (PEP) seeking to buy a luxury London property using the profits from a lucrative state contract in a kleptocratic regime would find no evidence of criminality and no grounds to suspect money laundering.”
• “Indeed, the PEP may well offer documentary evidence showing the contract was lawfully awarded through an official process that included sign-off at the highest levels of state power. ‘Their kleptocratic wealth is illicit, but not necessarily illegal.'”
• “This gap was even more obvious on the reputational side of enabling, where lawyers provided reputation laundering tactics, from online reputation management, setting up philanthropic foundations and donating to political parties, to ‘lawfare tactics which aim to silence critics’.”
• “This all meant ‘a major regulatory gap in the UK’s defences against dirty money, currently filled by the choices that lawyers and law firms make in accepting or refusing this work.'”
• “But the report found a tendency among solicitors towards ‘ethical minimalism’, or viewing legality as the primary benchmark for professional conduct rather than broader moral considerations.”
• “‘This position has come under challenge from both those within the profession and those outside it, sparked by a range of ethical concerns relating to kleptocratic wealth, environmental harms and human rights issues.'”
• “Many lawyers defended decisions to act for clients with kleptocratic wealth by pointing out that if they turned it down, another firm would simply pick up that business, the report observed. This meant ‘systemic change requires a shift in professional norms’.”
• “In the absence of a clear regulatory or ethical framework, firm culture, geopolitical developments and reputations concerns drove decision-making around client selection.”
• “Spotlight’s review of 20 unnamed firms showed that their statements on responsible business practices addressed environmental, social and governance issues in broad terms, but had nothing on kleptocracy or grand corruption.”
• “Interviews carried out for the research suggested that, in practice, the ‘ethics’ of client selection tended to be conflated with AML compliance.”
• “‘As one lawyer described it, the compliance department is the ‘ethical conscience’ of the firm. This also illustrates how compliance can easily be treated as separate layer of red tape rather than embedded processes which shape firm culture.”
• “‘Given the pecking order within hierarchical firm structures, concerns raised by compliance officers or junior lawyers can easily be disregarded or downplayed by senior partners who manage client relationships and bring in their business.'”
• “Without client selection being based on a coherent ethical framework, it went on, there was ‘a lack of clarity and consistency’ in how lines are drawn on kleptocratic wealth.”
• “One senior lawyer commented: ‘We all dropped our Russian clients overnight – but no one asked us about the Gulf states.'”
• “The interviews also revealed that reputation was often used ‘as a proxy for ethics’, shifting the focus from ethical complexities to a reputational challenge of justifying work for a particular client to the public – ‘or opportunistically marketing this high-risk appetite to prospective clients’.”

“Solicitor suspended after client’s millions pass through bank account” —

• “The first solicitor ever prosecuted for ‘tipping off’ a client about a money laundering investigation has now been suspended from practice for allowing a client to use his firm’s account as a banking facility. The Solicitors Disciplinary Tribunal (SDT) also fined Osmond Solicitors’ compliance officer.”
• “The Solicitors Regulation Authority’s (SRA) investigation was triggered by William Osmond’s arrest by the Serious Fraud Office (SFO) in 2019.”
• “The SRA alleged that the London firm received and paid out £388m in multiple currencies on behalf of an overseas businessman, ‘Person A’, and charged him nearly £1.2m in fees. From 2003 to 2019, the firm acted for Person A, or a company owned or controlled by him, on approximately 132 matters and he accounted for about 10% of its turnover.”
• “William Osmond, who qualified in 1979, was the owner and manager of the firm, and Person A’s main point of contact. He admitted breaching the SRA accounts rules and also contributing to the firm’s anti- money laundering failures by failing to conduct ongoing monitoring of its business relationships or applying enhanced customer due diligence.”
• “In mitigation, Mr Osmond pointed out that none of the transactions had resulted in loss to any client or third party and he had not profited from them. Once he became aware of the banking facility rules, he added, he stopped making payments and returned all the funds held by the firm to Person A. The SDT said allowing use of client account in this way, ‘for no other reason than the convenience of a client’, was a very serious breach of the rules.”
• “It said: ‘Aside from the firm’s own written anti-money laundering policies, controls and procedures, there was clear guidance from the Law Society and the SRA warning of the need to mitigate the risks of the firm’s services being used for money laundering, which [Mr Osmond] should have been aware of.’ Despite the mitigation, the SDT considered that the misconduct was serious enough to consider striking off Mr Osmond.”

“Lawyers worried by over-reliance on SRA discretion post Dentons” —

• “Specialist regulatory lawyers have expressed concern that the High Court ruling in the Dentons case places too much reliance on the Solicitors Regulation Authority’s (SRA) view of the seriousness of rule breaches.”
• “On Tuesday [3/11], Mrs Justice Lang said there was ‘no universal requirement’ that breaches of SRA rules could only amount to professional misconduct if they were serious, culpable and reprehensible.”
• “‘Such requirements only arise where they are inherent in the rule in question,’ she said. This was not the case when it came to anti-money laundering (AML) rules and so she quashed the decision of the Solicitors Disciplinary Tribunal (SDT) to clear Dentons.”
• “The judge said SRA guidance that only serious breaches of the AML legislation would progress to disciplinary proceedings was ‘a safeguard against over-zealous enforcement’; it meant that ‘trivial breaches will not be prosecuted’.”
• “Jayne Willetts – who runs her specialist eponymous firm in Birmingham – said the effect of the ruling was to remove from the SDT the ability to determine whether a breach was so minor that it did not represent professional misconduct.”
• “‘The tribunal is best placed to make these decisions with its experience and independence and to make these decisions to protect the public.”
• “‘Not all breaches represent a risk to the public. Not all breaches warrant a sanction. The notion as advanced by the judge that the SRA can be relied upon to make that distinction is not borne out by experience to date.'”
• “Former SRA adviser Paul Wightman, a barrister and consultant at strategic and compliance consultancy DG Legal, described the decision as ‘overly legalistic’.”
• “‘Punishing firms with otherwise exemplary systems and controls for breaches that are acknowledged to be inadvertent and committed in good faith seems to me to be regulation for regulation’s sake.'”
• “Mr Wightman said few people would be reassured by the SRA guidance, arguing that giving the SDT discretion to find minor breaches were not misconduct was ‘a much greater protection against over-zealous enforcement’.”
• “Michelle Garlick, a partner at Weightmans and head of its Compli service, said: ‘Whilst it is an understandable decision legally, it will be interesting to see what happens next, whether it be a further appeal, another full SDT hearing or an agreed outcome.”
• “‘The SRA will be encouraged by the decision but I hope it reviews carefully it’s enforcement strategy and internal application of it to be clearer about what serious actually looks like in practice and only pursues disciplinary proceedings in circumstances which properly fit that criteria.'”
  “Paul Bennett, a partner at Bennett Briegal, said he was not surprised by the decision but his concern was that it enhanced the SRA’s enforcement discretion beyond AML.”

Law Society Online Class: “Compliance with the LOCS:23 UK GDPR Certification Standard (Monday 28 April 2025)” —

• “On 1 February 2024, the UK Information Commissioner’s Office (ICO) approved a UK GDPR certification scheme for legal service providers, enabling them to demonstrate that they comply with UK data protection law. “
• “The Legal Services Operational Privacy Certification Scheme (LOCS:23) defines how legal service providers can best manage clients’ personal data in compliance with the UK GDPR. “
• “Join us for this online classroom, where our expert speakers, Stephanie Pritchett and Ben Wootton, will explain what the LOCS:23 scheme entails and who and what it applies to. They will also explain the difference in becoming LOCS:23 Ready or LOCS:23 Certified, as well as the benefits of achieving and risks of not achieving compliance with LOCS:23 or the UK GDPR more generally. Organisations will also benefit from their insights and tips on managing LOCS:23 audit processes, and in meeting the LOCS:23 controls. “
• “There will be an opportunity for Q&A, and Stephanie and Ben will then open the floor to gather feedback from attendees on their LOCS:23 and/or wider UK GDPR compliance journey. They look forward to answering delegate questions. “
• “This online classroom will be held on Monday 28 April 2025 from 12:30pm to 14:00pm. “

Law Society Book: “Essential Q&A guidance for all compliance officers” —

• “Conflicts of interest are rarely easy to assess for law firms. It is the classic judgement issue: professional obligations and case law are fact-specific. Any black-and-white conflict issue, the office dog will avoid. But more complex conflict queries require in-depth knowledge of the rules and facts, thinking time, and outstanding recording-keeping to justify withdrawal or continuing, if the perceived conflict does not exist.”
• “This book is written in a question-and-answer format to tackle the practical challenges of conflicts of interest, confidentiality and disclosure for solicitors and compliance officers for legal practice. This layout is incredibly helpful in practice and I have continued to refer to this book when advising client law firms.”
• “The areas covered include the regulatory starting point in respect of overviewing the rules, and dealing with conflicts of interest both in terms of a solicitor and client conflict (known as an ‘own interest’ conflict or a conflict between two clients), confidentiality and duty of disclosure.”
• “The common conflict of interest scenarios are a little basic for my personal preference, though these are the sometimes basic questions asked by my law firm clients. In the next edition, I would like to see more complex examples, an exploration of how confidentiality should be central to conflict analysis, and some additional case law, including SRA and SDT disciplinary cases so that firms can see how the rules are utilised. But this is a minor quibble.”
• “The Risk Management Discussions and Solutions chapter is particularly useful from a COLP’s perspective and probably justifies the purchase price on its own. This book should be available to all COLPs because the issues permeate both contentious and non-contentious work. It is also a very useful additional resource for considering regulatory and ethical duties arising in an area with which the profession has struggled for some years. Given the SRA’s ever-increasing, proactive investigation and fining powers, this is a sensible risk management area to look at.”

“After probing fund managers’ approach to valuations, the FCA shifts its focus to conflicts more generally” —

• “Key takeaways”
  • “In its review of private market valuations, the FCA found that firms need to improve processes for identification and documentation of potential conflicts of interest.”
  • “The FCA found weakness in governance, identifying, documenting and addressing conflicts of interest, and having defined processes for carrying out ad hoc valuations.”
  • “Following this review and the publication of its findings, the FCA launched a wider review into conflicts of interest.”
    “In anticipation of the FCA’s increased focus on this area, firms should ensure that their conflicts of interest policies are implemented with appropriate rigor, taking account of the FCA’s findings.”
• “On 5 March 2025, the UK Financial Conduct Authority (FCA) published a report outlining its findings from an earlier review conducted on private market valuations (Valuations Review).”
• “One of the main outcomes of its Valuations Review was that firms need to improve processes for the identification and documentation of potential conflicts of interest in their valuations process to increase the independence of their valuation functions.”
• “Shortly before publishing its findings in connection with the Valuations Review, the FCA announced on 26 February 2025 in a Dear CEO letter addressed to asset managers that it will be conducting a multi-firm review of conflicts of interest at firms managing private assets (Conflicts Review). In addition to a review of conflicts practices, the Dear CEO letter also announced:”
  • “(i) A multi-firm review of the application of the Consumer Duty in model portfolio services,”
  • “(ii) Review of private funds’ financial crime systems and controls,”
  • “(iii) Continued focus on liquidity risk, and”
  • “(iv) Engagement with firms that offer sustainability-related products in connection with sustainability disclosure and anti-greenwashing rules.”
• “This alert focusses on the conflicts aspects and provides an overview of the current conflicts rules, the reasons for the Conflicts Review and the potential implications on businesses that hold private assets. It will be relevant to institutional investors and managers of private assets including private credit and private asset funds.”
• “The key principles applicable to alternative investment funds (AIF) in the UK are set out in Chapter 10 (Conflicts of Interest) of the FCA’s Senior Management Arrangements, Systems and Controls sourcebook (SYSC). By way of summary, the key requirements with which AIF managers need to comply include:”
• “Taking all reasonable steps to avoid conflicts of interest, including those arising between the AIF manager and the AIF, among AIFs, and between clients of the AIF manager; Maintaining and operating effective organisational and administrative arrangements to identify and prevent or manage conflicts of interest; and Disclosing any conflicts of interest to investors where the AIF manager does not have reasonable confidence that any risk of damage to the interests of the client will be prevented.”
• “The FCA is concerned about the impact poorly managed conflicts of interest may have on asset valuations. In its Valuations Review, the FCA found that valuation-related conflicts were often documented generically rather than identifying specific conflicts in respect of particular products or transactions (Section 21.2.2).”
• “The FCA is focussed on firms that operate multiple intersecting business lines, continuation funds, co-investment opportunities or that partner with other financial institutions, thereby creating an increased likelihood that a conflict of interest could arise.”
• “As stated above, the FCA is concerned with the implications of inaccurate price valuations and the impact this has on investor decision-making. Obscuring price transparency is detrimental to informed decision-making by investors, which increases investor risk across the market both in terms of the severity and likelihood of adverse consequences.”
• “In particular, the FCA states that the Conflicts Review will focus on the use of governance bodies and reviews by the ‘three lines of defence’ to ensure policies are effectively implemented. In its letter, the FCA emphasises its expectation that conflicts policies must evolve to meet requirements of increasingly complex private markets.”
• “When conducting its Conflicts Review, the FCA is likely to select firms that operate intersecting business lines which may give rise to conflicts of interest including firms that have in-house valuation functions and make use of continuation funds.”
• “The precise implications of the Conflicts Review will depend on the FCA’s findings. Potential outcomes could include the issuance of fresh guidance on conflicts or a consultation on amendments to the conflict rules.”
• “Mangers of funds should act now to review and evaluate conflict-of-interest risks to improve their current governance and control processes in line with the FCA’s Valuations Review recommendations.”
• “The FCA has put firms on notice that it will be following up with firms where senior investment professionals were voting members in valuation committees, to understand how their position as voting members is consistent with the independence of the decisions made and whether their role compromises independent oversight and challenge.”
• “Any firms currently operating in ways that are inconsistent with the FCA’s expectations, including in particular those that were subject to the Valuations Review and have performed poorly in relation to their peers, should take action to ensure that they take steps to improve performance in this area. Firms may find the following questions helpful when considering how they manage the conflicts risks that they face:”