UK lawyers fail­ing to flag sus­pected money laun­der­ing – watch­dog

The Guardian - - NEWS - Juli­ette Garside Nick Hop­kins

Lawyers are fail­ing in their duty to com­bat sus­pected money laun­der­ing and have ig­nored re­peated warn­ings to in­crease their re­port­ing of sus­pi­cious ac­tiv­ity by clients, Bri­tain’s top law en­force­ment body has said.

Don­ald Toon, the di­rec­tor of eco­nomic and cy­ber­crime at the Na­tional Crime Agency (NCA), said the num­ber of re­ports it had re­ceived from lawyers had fallen by 10% this year, de­spite of a host of re­cent scan­dals that have led to Lon­don be­ing de­scribed as the mon­ey­laun­der­ing cap­i­tal of the world.

Toon ques­tioned whether lawyers were tak­ing their obli­ga­tions se­ri­ously enough, given that fail­ure to re­port sus­pected money laun­der­ing and ter­ror­ist fi­nanc­ing is a crim­i­nal of­fence pun­ish­able by up to five years in prison.

“We be­lieve that we do not get the level of re­port­ing from le­gal firms of sus­pi­cious ac­tiv­ity that we would ex­pect,” Toon said. “We have said it a num­ber of times and there has been no sig­nif­i­cant change.”

He said the NCA was work­ing closely with the So­lic­i­tors Reg­u­la­tion Au­thor­ity to iden­tify le­gal pro­fes­sion­als who were not fol­low­ing the rules. Toon is the lat­est pub­lic fig­ure to raise con­cerns about UK so­lic­i­tors and their prox­im­ity to con­tro­ver­sial clients.

MPs cen­sured the City firm Lin­klaters this year for its de­ci­sion to ad­vise on the stock mar­ket list­ing of an en­ergy com­pany be­long­ing to the oli­garch and Krem­lin in­sider Oleg Deri­paska, months be­fore he was placed on the sanc­tions list by the US govern­ment.

Lin­klaters said its 70-mem­ber team in Moscow, which in­cludes 12 part­ners, fol­lowed the high­est stan­dards and abided with all reg­u­la­tions against bribery and cor­rup­tion, anti-money laun­der­ing and sanc­tions.

The scale of the prob­lem that NCA in­ves­ti­ga­tors are re­quired to tackle is vast. The govern­ment es­ti­mates that £90bn of cash is laun­dered in Bri­tain ev­ery year.

This year the agency launched its first prose­cu­tions un­der the new un­ex­plained wealth or­der leg­is­la­tion, which targets non-EU na­tion­als.

“What you are try­ing to do is cre­ate a change in the cli­mate,” Toon said. “Suc­ces­sive gov­ern­ments, for rea­sons that seemed right at the time, have wanted the UK to be an open, invit­ing mar­ket. That car­ries real op­por­tu­nity and that car­ries some risk. The im­por­tant thing is to get the bal­ance right.”

The govern­ment’s his­tor­i­cally light­touch ap­proach to the flow of money into Lon­don has been a boon for its banks and for lawyers. How­ever, at least one se­nior so­lic­i­tor, a se­nior part­ner at the firm Child & Child, has been re­ferred to the so­lic­i­tors dis­ci­plinary tri­bunal for al­legedly fail­ing to carry out proper checks on a client. The hear­ing has yet to take place and the al­le­ga­tions are as yet un­proved.

So­lic­i­tors and other pro­fes­sion­als work­ing in par­tic­u­lar sec­tors have a le­gal duty to file what is known as a sus­pi­cious ac­tiv­ity re­port (SAR) when they have grounds to sus­pect they are be­ing asked to han­dle the pro­ceeds of crime or trans­ac­tions con­nected to ter­ror­ist fi­nance.

The fall in alerts from lawyers comes as the over­all num­ber of re­ports is ris­ing. The to­tal in­creased by 9.6% to 464,000 in the year to March 2018, ac­cord­ing to the NCA. A full break­down by pro­fes­sion will be re­leased this year, but a look at pre­vi­ous pe­ri­ods shows lawyers trail those work­ing in fi­nance. The re­lease two years ago of the Panama Pa­pers, a crack­down on hold­ers of se­cre­tive Swiss ac­counts by the US tax of­fice, and a se­ries of swinge­ing fines im­posed on HSBC and Stan­dard Char­tered, among oth­ers, have led to yearly in­creases in the over­all num­ber of SARs.

▲ The govern­ment says £90bn of cash is laun­dered in Bri­tain ev­ery year

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