New AML Guidance needs a careful review.
On 20th January 2021 the Legal Sector Affinity Group (LSAG) finally issued their new draft AML guidance for law firms.
Since 2017 LSAG have agreed to issue one sector wide piece of guidance rather than different versions for each type of lawyer.
We were told to expect this guidance with both the Law Society of England and Wales and the Solicitors Regulation Authority talking about the project at events last year. However, it’s no surprise it’s taken a while to finalise since it does represent a comprehensive refresh of the existing guidance.
Part one (which applies generally to all legal professionals) is some 212 pages (about 50 more than the previous version) while part two contains specific guidance for Barristers and Notaries, but that is yet to be released.
Only a couple of pages in, you can detect a change in emphasis in the guidance, from focusing previously mainly on interpretation of the legislation for the sector to now setting out the Regulators expectations of good practice.
Practices must now pay attention to the parts of the guidance which LSAG think they should be doing, and if a practice decides to deviate from that, they need to be prepared to explain why. Clearly MLROs and MLCOs are going to have to consider this guidance carefully to ensure they’ve picked up all the areas of mandatory and recommended practice and that they can demonstrate they’ve thought about what is appropriate for their firm. This is not a small task!
That said, the guidance really is very good at setting out in some detail how to comply. In my experience many firms will welcome this additional detail, particularly for example the table listing out how to approach screening of staff, and a clear remit for senior management and nominated officers in the firm.
There are new chapters on the use of Technology and Internal Controls and a rewrite of the Privilege content.
With any new piece of writing which is over 81000 words long, there are some minor inconsistencies which will be resolved hopefully in the next draft. From our brief reading of the document there are some differences between early parts of the document (in the compliance principles) and the more detailed parts of the document further on. Therefore, we recommend reading the document cover to cover to ensure you pick everything up.
Conspicuous by its absence is the recent SRA Guidance on Tax Advisers, which if you’re not aware, could have some very substantial implications for the way your firm operates. It’s not that easy to find but here is the link – https://www.sra.org.uk/solicitors/resources/money-laundering/money-laundering/tax-adviser-guidance/
Do consider this at the same time as the guidance because it may be that for parts of your practice where you’d previously not considered the need to comply with the Regulations (Family Law, Employment and Litigation specifically) you may now have to.
One point we should make is that the guidance is draft, and it could be some months before it receives Treasury approval. From experience, any changes are likely to be minor but you should be aware of the possibility, particularly if you’re investing in new solutions.
We’ve put together a package of support for firms on implementing the new guidance which you can read about here –