Webinar recap: AML compliance priorities for 2021
We know that Anti-Money Laundering (AML) compliance remains high on the agenda for law firms as they consider their priorities for the rest of the year.
With the Legal Sector Affinity Group (LSAG) guidance, as well as the latest report from the Solicitors Regulation Authority (SRA) about their visits, firms will be thinking about how to implement their recommendations. This is something that Amy Bell, legal industry advisor to Encompass and Director of Teal Compliance discussed in her latest webinar with us, as she told us what firms need to focus on in 2021 in order to remain regulator ready. We share just some of her insights. You can watch the webinar in full here.
Regulatory approach to enforcement
- Across the UK, it is clear that the focus on being able to evidence that the legal sector is compliant has increased massively and has been accelerated by the accountability that the regulators have to the Office for Professional Body Anti-Money Laundering Supervision (OPBAS)
- What we have seen over a period of years is an increase in the interaction with the regulator and the population when it comes to money laundering, as well as the increase in disciplinary action. In terms of numbers, sample work showed that the percentage of firms referred for disciplinary action after regulator visits has risen from 0% in 2014 to 64% five years later
- The regulator is now very clear on what they expect, and it is important to recognise the changing guidance
Legal Sector Affinity Group guidance
Prior to the webinar, new UK-wide Anti-Money Laundering (AML) guidance was released by the Legal Sector Affinity Group (LSAG). It expands upon the previous AML guidance released after the implementation of the The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 and Amy took the time to highlight this, explaining that it represents a “dramatic shift”.
She told how the new guidance has presented an opportunity for the regulator to demonstrate what they expect to see in terms of compliance, and provide more clarity in that respect, so firms feel focused and aware of the obligations.
Matter Risk Assessments
The latest iteration of the LSAG guidance includes a new section specifically on risk assessments, including the Matter Risk Assessment (MRA), and this is something that Amy highlighted as key during her presentation and one of the biggest changes between 2017 and current regulations. She said, in the view of the regulator, this type of risk assessment is crucial to “dictating the approach” you are going to take when it comes to areas such as Client Due Diligence (CDD), source of funds and ongoing monitoring.
So, what do firms need to know? Firstly, Amy pointed out that an MRA should not be a ‘tick box’ exercise. When thinking about theirs, firms should:
- Talk about risk rating
- Assess and have regard to negative news results
- Focus on recording their reasoning for the assessment
- Record why they have chosen their CDD approach
Another important issue that Amy highlighted in regards to proving regulator readiness was that a firm’s Money Laundering Reporting Officer (MLRO) should take seriously the expectation to report to the board on factors including:
- Changes to the AML/CTF risks of the practice
- Advised improvements to be made in the coming year
- Progress on any past recommendations
- The results of any internal auditing
- Resourcing concerns and considerations