Lawyer Monthly Magazine - September 2019 Edition

14 WWW.LAWYER-MONTHLY.COM | SEP 2019 Monthly Roundup news Half of law firms (50%) think that a lack of understanding of money laundering typologies is the biggest internal barrier to tackling financial crime in the legal sector, according to a new report from global analytics provider LexisNexis® Risk Solutions. Compounding this issue further, almost one in three (30%) firms believe that the single biggest risk in the fight against the UK’s dirty money problem is evolving criminal methodologies which enable financial criminals to get around the current regulatory framework, and allow them to slip past controls and sidestep regulation. Overall in the research, law firms were judged to be the least at risk of being a money laundering target, with only 4% of respondents ¾ including banks, gambling firms and estate agents ¾ stating the legal sector to be one of the highest at risk. An opinion that is overall mirrored by the legal sector - only 20% of law firms believe their own industry is a high- risk target for money laundering. The report ¾ On the Frontline: The UK’s Fight Against Money Laundering ¾ is based on research conducted by the Economist Intelligence Unit and found that one in three (33%) lawyers felt the UK regulatory framework was only somewhat effective, or not effective, in driving businesses to tackle money laundering. As part of this ineffectiveness, one of the largest obstacles according to nearly half of respondents (46%) is the number of supervisory bodies responsible for anti-money laundering (AML) matters across the professional services sector, which is creating confusion. One in three (32%)respondentsbelieve that a lack of consistency in AML controls across different industries is the largest external barrier to combatting money laundering, which could point to multiple regulators resulting in multiple standards for compliance. Law firms also believe that a lack of ability to share information with other regulated businesses outside of their organisation is preventing the fight against financial crime, with 40% of respondents choosing it as the largest barrier to tackling the problem. Half of Law Firms Do Not Understand the Money Laundering Risks Facing Them FRAUD What do law firms think the solution is? Unsurprisingly, the report found that over a quarter (26%) of respondents felt that streamlining the number of supervisory bodies would make AML compliance more efficient, and one in three (34%) said that tougher penalties on firms and individuals would also improve the fight against money laundering in the UK. Despite law firms believing they are low risk, there are signs that the legal sector is increasingly aware of its obligation to crack down on money laundering. 76% of law firms anticipate increasing their technology budgets as part of AML resources over the next five years, and 72% aim to increase their training budget, and educate staff on how to identify red flags and take action if they suspect money laundering is taking place. Michael Harris, Director of Financial Crime Compliance and Reputational Risk at LexisNexis Risk Solutions says: “Lawyers’ view that they are a low-risk industry is not only at odds with the heightened regulatory scrutiny of the legal sector, but also suggests law firms aren’t fully aware of the important role they play as gatekeepers in protecting the UK from the impact of financial crime. In this role, it is vital that law firms understand the true scope of the risks facing them and how they can mitigate these risks. Financial criminals are highly intelligent and use every legal loophole available to them to stay in the shadows, appearing only once one of these loopholes is closed. Understanding exactly how money launderers exploit certain legal services is key for all law firms as they seek to combat the growing trend of money laundering utilising legal services. Apart from ensuring regulatory obligations are taken seriously, training and education on financial crime risks are essential.”