The government has acknowledged Anti Money Laundering (AML) regulations ‘are seen as a major burden’ to professional business service firms, and has pledged to reform the controversial rules by the end of the year.
Writing in the Professional and Business Services Sector Plan, which sets out details of the UK’s Modern Industrial Strategy for the sector, the government stressed that the regulations are ‘a vital tool’ in safeguarding against money laundering and terrorist financing risk. However, the plan acknowledged ‘the importance of ensuring the MLRs are clear and proportionate to the risk’. It continued:
“Before the end of this year, HM Treasury will therefore bring forward a package of changes to the MLRs aimed at improving their effectiveness.”
Although the plan doesn’t specify what the changes will be, the government says it will ‘take steps to encourage the use of digital identity’ to aid money laundering processes.
The announcement was welcomed by the Law Society of England and Wales, with president Richard Atkinson calling for ‘a proportionate system and greater clarity for the legal sector’.
He added:
“In our response to the government’s consultation last year, we outlined our views and are pleased to see the government’s recognition of the disproportionate burdens current AML regulations place on law firms, particularly smaller practices.
“Legal professionals are committed to fighting financial crime, but compliance measures must be proportionate, targeted and risk-based to be effective without stifling access to justice or placing undue strain and financial cost on firms and practitioners.
“We support a regulatory approach that values the expertise and integrity of the legal sector while ensuring the AML obligations are streamlined, coherent and fair.
“We will continue to engage with policymakers to ensure that any reforms strike the right balance between robust AML controls and practical compliance for the legal profession.”
With the Solicitors Regulation Authority saying it will increase enforcement of AML regulations this year, the news that reform will bring greater clarity and proportionality should come as a relief to firms.
Financial penalties of increasing size and number have led one regulation expert to question whether firms would be better off by ignoring the rules altogether. In response to one firm being fined £64,000 for AML breaches, Brian Rogers, regulatory director at Access Legal, said:
“Based on figures I have used in previous posts (£300ph x 5 hours pw), this firm could have been better off by over £400,000 over the six years for ignoring its AML obligations and focusing on fee earning (as with previous firms, I am not saying this firm actively chose non-compliance over compliance).
“Even if the figures were £300ph x 1 hour pw, the firm would still have been £29,600 better off being non-compliant over the six years! As I have said before, I am not condoning non-compliance, but when you look at the above figures you can see why some firms may be tempted to choose the non-compliance road!”
