Lawyers face near impunity for breaching money laundering rules in UK

4 minute read

Law firms in the UK face almost zero risk of criminal enforcement if they breach money laundering rules, and very little prospect of meaningful fines, according to a report released on Monday by Spotlight on Corruption and Global Integrity.

The report – “A Privileged Profession? How the UK’s legal sector escapes effective supervision for money laundering” – shows that a fragmented set of nine different professional bodies responsible for self-policing the legal sector’s compliance with UK anti-money laundering (AML) rules are providing uneven and inadequate enforcement.

The report also shows that a government target to strengthen the consistency of supervision for the legal (and accountancy) sector by spring 2021, has been substantially missed.

Drawing on detailed analysis of UK government and regulator reports, interviews, and Spotlight on Corruption’s own research, A Privileged Profession finds that:

New measures in the Economic Crime and Corporate Transparency Bill going through Parliament at the moment – to ensure legal sector supervisors must help prevent and detect economic crime as part of their regulatory function – are a welcome step forward. However, it is clear that a step change in how the legal sector is supervised for money laundering is urgently needed. Spotlight’s report calls for:

Dr Susan Hawley, Executive Director at Spotlight on Corruption, said:

 “The UK has a well-deserved reputation as the laundromat of choice for the world’s kleptocratic regimes. This couldn’t have been achieved without the legal profession – wittingly or unwittingly – playing an essential role. But our research shows that the efforts of professional body supervisors to deal with this long-standing problem are falling far short of where they need to be.

“Even on the vanishingly rare occasions when misconduct is identified, fines are negligible and criminal prosecutions non-existent.

“The government needs to act quickly to strengthen supervision of the legal sector, and across the board, to ensure the UK financial system cannot be exploited by kleptocrats and criminals.”

Professor Paul Heywood, Director, GI-ACE Anti-Corruption Evidence programme, added:

“If we are going to tackle the issue of money-laundering in the UK, we need not just an appropriate regulatory environment, but also the means to ensure it is effectively enforced. This detailed report, based on extensive and far-reaching research, demonstrates that when it comes to the legal profession, the UK must do better on both fronts. The AML regulatory environment for the legal profession is fragmented and uneven, and even where breaches of duty are found, sanctions are weak and inconsistent.

“The report provides stark and compelling evidence that the UK is well behind where it needs to be regulating the legal sector’s engagement with money-laundering. Effective supervision of the sector needs to be strengthened if the UK is to lose its unenviable reputation as a hub for global money-laundering. Spotlight on Corruption’s report offers clear guidance on essential steps that should be taken.”

Use these links to download the Executive Summary and the full report.