Christopher Giles, Managing Director of UK consultancy Legal RM (emphasis added):
"Although law firms understand the law itself, they are failing to apply it operationally in their own business practice. The UK Proceeds of Crime Act, The Prevision of Terrorism Act 2008, the Weapons of Mass Destruction Act, and the US Treasury Department's Office of Foreign Assets Control (OFAC) Sanctions List make it illegal to do business with sanctioned individuals or entities linked with the proceeds of crime or the funding of terrorism. For law firms, this means that unless they are in a position of privilege with a client, they are liable and accountable to the letter of the law, especially in their client screening obligations. Likewise, law firms must also comply with the regulatory obligations around anti-money laundering, including the EU 3rd Money Laundering Directive, the Money Laundering Regulations 2007, as well as the Solicitors Regulation Authority and the Law Society. They must also carefully consider the business risk of new clients in the context of these legal and regulatory obligations….
…We've recently conducted risk audits with two of the Top 100 commercial law practices. We found two terrorists within their client database, several suspected cases of laundering proceeds of crime, numerous instances of banned company directors as named company contacts, as well as drug traffickers - none of which they were aware of despite implementing what they considered to be adequate ‘ongoing client monitoring'. Law firms need to be systematically and comprehensively screening clients against global sanctions lists or be prepared to face the growing financial penalties associated with a breach."
(See his full blog post for more on this.)
Their findings don't surprise me, I have to say.
While of course his blog post is intended to spur law firms into proactively checking and monitoring their compliance with sanctions and other requirements (presumably preferably by hiring his consultancy firm!), he makes a good point that's worth repeating.
Lawyers are notoriously bad at looking after their own personal legal or financial affairs.
And law firms, I suspect, could do more to sort out their own money laundering and other compliance and risk management systems with better use of technology.
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