Advice and information related to Rule B6: Money Laundering - Identifying Issues
Most solicitors know instinctively when something feels wrong about a transaction. If you are worried about a client or transaction, ask yourself the following questions:
Has there been any reluctance on behalf of the client to provide adequate ID?
A common theme amongst money laundering problems is endless promises to provide ID, which is then produced at the last minute and given little or no scrutiny.
Why has the client advised at a late stage that a third party will become involved in the transaction/provide the funds?
Both of these should be a concern.
Does the client appear to have a deep understanding of the money laundering regulations?
This is beginning to appear as a concern, on the simple principle that some criminals are very good at being criminals.
Is the client proposing a transaction that is unnecessarily complicated?
The stock explanation for complexity is that it is for "tax reasons". Ask to see the tax advice upon which the whole proposal is based.
Why have I been chosen for instructions on this particular matter?
Another common thread with money laundering problem cases is a solicitor being engaged to do work outwith their normal sphere of expertise. Do not be flattered but consider the money laundering implications and also issues of general risk management.
Why is a client so disinterested in the proposed level of fee?
If a significant sum of money is being laundered, criminals tend to regard fees as irrelevant.
What to do if you are unhappy with the proposed transaction/client
Depending on when you identify that there is an issue, you have a variety of options:
You are not satisfied as to ID/the basis of the transaction/the client at a very early stage.
You are not obliged to take on any particular client or piece of business. If a client cannot satisfy you as to the nature of the business and their identity, you should decline to act.
You realise something is not right during the course of the transaction.
In terms of the regulations, you should raise your concern in writing (including email) with your money laundering reporting officer (MLRO). This effectively passes responsibility for reporting to your MLRO and it is their responsibility to make a decision on whether to report and how you are to proceed. If you are the MLRO, or you unsure how to proceed, call the Law Society of Scotland's, Professional Practice Department (0131 476 8124).
The problem arises at the last possible moment.
Professional money launderers often engineer this situation. Do not put yourself or your firm in jeopardy out of misplaced loyalty to the client. If a transaction fails to settle on schedule despite heavy contractual penalties, it is likely to be due to failure on the client's part to comply with money laundering regulations. It may even lead to a complaint/claim but that is preferable to an accusation of criminal conduct.
Properly trained staff is a legal requirement under the directive, but they are also your first line of defence. They could identify problems at a very early stage.
Robust procedures that cannot readily be overwritten by anyone (including partners) are a significant protection. Even if your firm is unfortunate enough to be the victim of a money laundering fraud, the fact that you have robust procedures in place is a significant defence to a suggestion that you were actively involved.
Terms of business letters
Robust clauses relating to money laundering are strongly recommended. These limit the amount of cash that can be paid through the firm and highlight that transactions can be disrupted/delayed by failure to provide ID/source of funds etc. Where a transaction has been refused consent by the Serious Organised Crime Agency (SOCA), it is not 'tipping off' to remind the client of your terms of business if you warned them of the consequences of their actions.
Most solicitors have ample work, but even if you do not, you should turn away questionable business. If in doubt, err on the side of caution