HRS Family Law Solicitors AML risk assessment 2020

 

The 2017 Money Laundering Regulations took effect from 26th June 2017.  The 5th EU Directive on AML has been adopted in to UK law by the 2019 Regulations and as such this assessment has been updated by CIR who is the firm’s MLRO / Money Laundering Reporting Officer (MLRO).  We have carried out an independent firm-wide AML audit and developed a new risk assessment this year updating the reviews of 2019 and 2018 which did not require significant action.  On this occasion there are major changes so please read carefully and note the new policy.

1 Introduction: Money Laundering and Trust or Company Service Providers

HRS is regulated by the SRA and as such we are subject to their regime.  This rightly highlights money laundering and terrorism funding as a priority risk.  It is taken very seriously and therefore our procedures must reflect that.  The Law Society provides Guidance which we follow and note.  All lawyers should and are expected to read it.

2 Responsibilities of senior managers

CIR is the MLRO and as such is responsible for company policy and implementation.  We currently use the 2020 money laundering policy in conjunction with the operations manual to combat ML threats.  This risk assessment carried out in June 2017 was designed to effect a complete revision of our system and the threats that face us in order to ensure that our procedures are both robust and fit for purpose.  This 2020 review is again a full revision.

3 Risk assessment, policies, controls and procedures

This risk assessment has been undertaken following a review of all the Money laundering forms for the last three years and interviews with key staff such as the COFA, the Practice Manager and Supervisors.  The reader is referred to the money laundering policy’s of 2012, 2017 and 2020.

4 Customer due diligence

Staff are required to obtain two forms of ID from every new private client and if possible from every Legal aid client.  They should obtain photo and address ID where possible and seek assistance if it is not.  If someone else is making a payment such as a family member then this person’s ID must also be obtained.

Staff are required and do complete money laundering forms for each new client and if there is an issue or concern that develops, during the course of the case.

All first attendance notes must contain a risk assessment specifically geared to the client.  The assessment has followed a random review of such notes.

Records show that fee earners are following the requisite procedure.  The ML forms are not kept in the file but instead provided each month to the Supervisor and thereafter to the MLRO for consideration and storage.  Any concerns should be noted on the ML form and emailed to the MLO.  The form then allows for consideration and dialogue before a decision is reached to either quarantine the file or to make a Suspicious Activity Report.

The system appears to be robust to date.  We have reviewed the training level too and consider it appropriate; one session for every staff member each year and an external seminar update for the lawyers.

We therefore believe that our system is both appropriate and sufficiently robust to protect the firm and to discharge our regulatory responsibilities.

5 Reporting suspicious activity

There have not been any recent SAR’s.  The reasons for this are that the ML procedure is firmly imbedded in the culture of the firm with training for all staff every year.  Furthermore, the company does not undertake conveyancing, does not act for commercial entities and has very few high net worth clients.

6 Record Keeping

The company keeps all ML forms for five years in accordance with the guidance and to mirror the SAR rules.  We undertook a number of SAR’s in 2014 and they would have been retained under the new 5 year period until 2019.

7 Staff awareness

Is good although there is an obvious turnover point.  Every new staff member may due to the firm’s cycle wait some months before being trained.  This is not ideal and therefore AML should henceforth form part of the induction process.  This was the extract from the last edition.  AML is now firmly part of the induction.

8 Risk indicators

The firm is no longer “new” and therefore less likely to be targeted.  We do a lot of Legal Aid where POCA 2002 and ML are less relevant.  The firm acts in the vast majority of cases for clients with relatively limited means.  We do not act for bodies corporate where the identity of the payee may be hidden.  We do not undertake residential conveyancing.

For all of these reasons we assess the ML risk as low.  That said we need to work on the lack of SAR’s.  It may well be that there are good reasons for this, namely that the staff do not have any concerns or they are able to get the additional information and evidence needed to satisfy themselves that there are in fact no problems.  In order to address the possibility of a problem the new addendum money laundering policy will include assistance with SAR’s and highlight the risk factors to be considered.

The cash limit was £5000.  This is rarely used but does provide flexibility for urgent final hearing or counsel instruction.  It is judged to be appropriate.

9 Coronavirus

This difficult situation has made AML practice more difficult but also provides opportunities for criminals.  As such we have tightened our procedures and insisted upon payment by This current situation has provided a challenge as far as AML is concerned and provided an a opportunity for criminals.  We have therefore amended the cash limit so that payments must be by card rather than cash for higher sums over £2500.  We have also invested in technology to facilitate ID provision and sent out guidance for the staff about AML and remote working to help them with compliance.  We encourage video rather than telephone first interviews and for clients to show the ID during that meeting and then photograph it for email or text message to us.

10 Where to find information 

The known criminal’s checklist published by the UK Government
High risk third country published by the EU
The SRA website
The LSAG particularly chapter 18
The NCA website
HRS operations manual and the HRS money laundering policy

11 Recommendations

  1. Amend the CDD and EDD rules
  2. Include AML in the file review procedure
  3. Promote video interviews where possible
  4. Conduct training on the Terrorism Act 2000 (TACT) as part of the ML training.

12 Conclusion

Our current system works well, is adhered to and is understood by staff.  We need to continue to consider why there are so few concerns identified and monitor it.  Updated training must continue each year.

CIR 010620