The Scottish legal sector has been hit hard by the coronavirus pandemic.  80% of firms contacted in our recent survey reported reduced turnover and 90% told us that reduced cashflow is proving to be a challenge - 35% of Scottish solicitors and 41% of non-solicitors working in private practice in the legal profession have been placed on furlough. The profession is responding with resilience and determination and our Council and committee members have been involved in extraordinary work to develop interim measures supporting the profession and the clients they serve through the crisis.

While this work goes on, there are those who will identify opportunities in the disruption. As efforts are concentrated on adjusting to new ways of working, they will seek to exploit perceived vulnerabilities.

So it is particularly important in these difficult times, that we maintain a clear focus on our AML measures and requirements and with that in mind, we wanted to bring you a round up of AML news and events.

SARs are a crucial part of UK law enforcement and are a legal obligation for those working in the regulated sector.

We have partnered with the National Crime Agency to produce a webinar which will help you to produce high-quality SARs.

The webinar is largely focused on DAML (Defence Against Money Laundering) SARs, but will help in the submission of any type of Suspicious Activity Report.

You can access the webinar here

Earlier in the year we published the results of our Trusts and Company Services Providers (TCSP) thematic review.  This was an extensive piece of work which highlighted a real need for improvement in compliance with the Money Laundering Regulations, in TCSP work.  We would strongly encourage you to read the report in full and consider how the learnings might apply to your firm.

In July we will be starting work on our next thematic.  This time the focus will be on Politically Exposed Persons (PEPs) and we will be contacting a large number of firms working with PEP clients to take part in stage one of the review. Firms who took part in last years review may be asked to complete the initial questionnaire.

Under r.26 of the Money Laundering Regulations (MLRs) 2017, it is a criminal offence to act as a beneficial owner, officer or manager (BOOM), or as a sole practitioner, of a practice unit in scope of the regulations without Law Society approval.

Due to the Covid-19 crisis, the Disclosure Scotland service is currently only processing applications for people working on sectors deemed vital at this time. HM Treasury are content that, on a temporary basis, firms or new sole practitioners can provide a statutory declaration that the BOOM(s) does not have a relevant criminal conviction as part of the application.

Find out more here.

It is crucial that solicitors continue to look after their own health and safety and that of their colleagues and clients by following Government restrictions.  This does of course, present challenges when solicitors, limiting physical contact with clients, still need to carry out thorough ID and verification checks.  In response to this issue, we have produced guidance on carrying out non face-to-face ID and verification checks and you can find this in the practice updates section of our coronavirus updates page.

Firms were required to be compliant with the terms of the Fifth Money Laundering Directive with effect from the 10 January 2020.  There was a short lead in time between the regulations being laid in Parliament on 20 December and the legislation coming into force.  In recognition of this we agreed to take a proportionate and risk-based approach to non-compliance for a limited period after this date.

The new requirements have now had time to embed and we would like to take this opportunity to remind you of your regulatory obligations.

The UK Legal Sector Affinity Group (LSAG), of which we are a member, published a key changes document to help the legal profession comply with the new requirements.  These include, a duty to collect proof of registration for entities, a duty to inform the registry of any discrepancies in their information and changes to client due diligence and enhanced due diligence and you can  find further information and the full document on our website here.

The UK Legal Sector Affinity Group (LSAG), which includes the Law Society of Scotland and all the legal sector supervisors named in the Anti-Money Laundering (AML) regulations, has jointly published an advisory note, highlighting key AML risks and challenges for the legal profession associated with the Covid-19 crisis. It also includes information to help the profession comply with their ongoing obligations under the Money Laundering Regulations. You can find further information and access the advisory note on our website here.

The National Crime Agency consistently produces quality insight and information on money laundering and illicit finance which you can find on their website.

This month they have produced their latest SARS in Action May 2020

The have also updated the reporting routes and glossary codes which must be used when reporting and you can find the Glossary Codes Note document here.

The Glossary Codes and Reporting Routes document can also be found on the NCA website here

The NCA have also produced a publication identifying Indicators of Modern Slavery and Human Trafficking in the Legal Sector. Interestingly, the report draws attention to the fact that criminal defence family and immigration solicitors are most exposed to the signs of human trafficking.  Notably, these areas of law and practice fall outwith the scope of the money laundering regulations – which demonstrates how vital it is that all members of the legal profession remain alert and vigilant for the signs of criminal activity.

The European Commission has put forward a series of measures designed to further strengthen the EU's framework to fight against money laundering and terrorist financing:

  • an Action Plan for a Comprehensive EU policy on Preventing Money Laundering and Terrorist Financing
  • a refined and more transparent methodology to identify high-risk third countries
  • an updated list of high-risk third countries

Further information and answers to frequently asked questions can be found on the European Commission website. 

To help support firms through the unprecedented circumstances and difficulties of the Covid-19 crisis, we extended the AML Certificate deadline by three months.

That extended deadline of 12 June is now almost upon us, and therefore we would strongly advise you to begin the exercise as soon as possible, if you haven’t already done so.

You can find everything you need to get started on the completion and submission of your certificate, including answers to frequently asked questions, a downloadable paper copy of the certificate, should you wish to prepare your data in advance before submitting online and completion notes with additional supporting guidance, on our website.

If you are likely to struggle to meet the extended deadline, please let us know as soon as possible by emailing us at aml@lawscot.org.uk.

AML Certificate

The AML Certificate is a questionnaire about your clients, products, services and the way in which you deliver those services.  It is a crucial tool in our statutory obligation to deploy a risk-based approach to our AML Supervision and must be completed by those firms in the scope of the AML Regulations. This year the submission deadline is 10 April 2020.

Suspicious Activity Reports

SARs are a crucial part of UK law enforcement and are a legal obligation for those working in the regulated sector. In collaboration with the NCA, we have produced a free webinar on producing high-quality webinars.

Trust or Company Services Provision thematic review report

Last year we carried out our first thematic review to help us better understand and minimise risk in what is an inherently high-risk area of law – Trust and Company Services Provision (TCSP).

AML Registration Requirements during the Covid-19 crisis

Due to the Covid-19 crisis, the Disclosure Scotland service is currently only processing applications for people working on sectors deemed vital at this time. HM Treasury are content that, on a temporary basis, firms or new sole practitioners can provide a statutory declaration that the BOOM(s) does not have a relevant criminal conviction as part of the application.

Coronavirus update

We are working with partners in the Scottish legal sector and closely monitoring official advice and updates from Scottish Government and NHS to ensure that we are acting in accordance with the latest guidance to protect the health, safety and wellbeing of our employees, members and stakeholders.

Fifth Money Laundering Directive key changes document

The UK Money Laundering Regulations have been amended, to take account of changes imposed by the EU’s Fifth Money Laundering Directive with effect from 10 January 2020. The UK Legal Sector Affinity Group (LSAG) have agreed an interim “Key Changes Document” to help firms comply with the new requirements.

Preventing money laundering during Covid-19

The UK Legal Sector Affinity Group has published an advisory note for legal practitioners to prevent money laundering or terrorist financing going through law firms during the Covid-19 crisis.

Anti-money laundering

The fight against money laundering and counter terrorist financing - the role of the legal profession.

Cybersecurity guide

Help keep you, and your clients' interests, safe with the second edition of our Cybersecurity guide.