Lawyer Monthly - October 2022

FCA Encouraged to Investigate Whether Conservative Party Allies Engaged in Insider Trading 22% of Law Firms Fail to Check Clients Against Sanctions The City of London financial conduct watchdog has been asked by the opposition to investigate whether leaks of chancellor Kwasi Kwarteng’s September ‘mini-budget’ enabled billionaire hedge fund investors to make “small fortunes” by shorting the British pound. New research has revealed that law firms are neglecting to check whether their clients are subject to governmental sanctions. against Russia by the UK prior to the beginning of the February invasion of Ukraine, which has resulted in a further 7,200 individuals and 1,250 entities being added to the sanctions list. The survey forms part of SmartSearch’s ongoing Electronic Verification Uncovered campaign. Focused on digital onboarding, the campaign is pushing firms to switch to electronic verification in order to avoid doing business with legally problematic clients. current rate of 2.25% to as much as 5% by February. The Bank of England stated after the market closed on 26 September that it would not make a new decision regarding interest rates until the next meeting of its monetary policy committee, to be held in November. However, it stated that it would “not hesitate to change interest rates by as much as needed” to bring inflation back down to its 2% yearly target. of a damaging breach of regulations. Creek described negligent firms as “giving a green light to Russians looking to circumvent sanctions” and reiterated that an unintentional breach of sanctions is not a valid defence. The new information comes on the back of another recent report from the Commons Foreign Affairs Committee showing that the government is still struggling to tackle wealthy Russians who are using UK organisations to launder money. 2,500 sanctions had been placed ties to the Conservative Party to benefit. The controversy comes amid heightened market volatility. Kwarteng’s minibudget, which contained £45 billion worth of unfunded tax cuts aimed at higher earners, was picked apart by analysts who speculated that it could cause the pound to fall closer to parity with the dollar. Investors are also guessing whether the pound’s dramatic plunge may cause the Bank of England to raise interest rates past their A new release by SmartSearch, a leading provider of AML software in the UK, has revealed that 22% of legal firms admit to not checking that new customers are not subject to sanctions or Politically Exposed Person (PEP) lists. The figure comes from a survey of 500 decisionmakers in the legal, property and finance banking sectors conducted in May. Lawyer and SmartSearch managing director Martin Creek pointed out that these firms run the risk Tulip Siddiq, shadow economic secretary to the Treasury, urged the Financial Conduct Authority to determine whether these investors might have knowingly used insider information to profit from the devaluing of sterling. On 26 September, the pound fell to $1.03 against the dollar – its lowest level in history. The currency regained some of its lost value as speculation rose that leaked details of Kwarteng’s mini-budget had allowed investors with close MONTHLYROUND-UP 7

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