From setting up complex company structures for clients to helping purchase luxury real estate and negotiate mortgages, lawyers play a critical role in facilitating and legitimising money flows. Their role as witting or unwitting “enablers” of money laundering has long been recognised.
Ensuring that lawyers stay on the right side of the fight against money laundering and alerting law enforcement to suspicious funds is essential to the integrity of the UK financial system and to the UK’s national security.
Up to now, the legal profession has largely been allowed to regulate itself when it comes to money laundering – with anti-money laundering (AML) supervision falling to nine different professional bodies in the sector. This system is broken.
In 2015, the government’s first ever National Risk Assessment of money laundering threats identified the large number of supervisors for the legal and accountancy sectors as a key driver of serious “inconsistencies” in the UK’s anti-money laundering supervisory regime. In 2018, the global AML watchdog, the Financial Action Task Force (FATF), also found “significant deficiencies in supervision by the 22 legal and accountancy sector supervisors.”
In response, the government set a target in its 2019–22 Economic Crime Plan to “strengthen the consistency of professional body AML/CTF supervision” by March 2021.
Our report, which is based on a comprehensive review and analysis of existing supervisory data over the past three years, finds that there is a long way to go in achieving this goal. The legal sector supervisors tasked with holding legal firms to account for breaches of the UK’s AML rules remain fragmented, with enforcement action uneven and inadequate.