Conveyancers are trusted by their clients to handle not only their money but their most sensitive information too. Combine this with the fact that they are dealing with high-value transactions and it’s clear why they are vulnerable to a variety of financial crimes, such as money laundering, which is alone reported to cost the UK over £100 billion every year!
Seeing as it poses a substantial threat to both conveyancing departments and their clients, what is the industry doing to combat financial crimes like laundering and phishing attacks? Could it be doing more?
Must try harder
It is certainly true that plenty of guidance has already been issued by various bodies, including the Law Society and the Solicitors Regulation Authority (SRA).
The SRA has been under pressure from the government to ensure that firms are complying with EU Anti-Money Laundering Directives of 2017 and 2020 .
It has responded to the challenge with concerted action, producing guidance and a risk assessment to make it easier for law firms to comply.
It has also stepped up efforts to ensure compliance through regular monitoring, writing to 400 firms in 2019 and asking them to supply their mandatory anti-money laundering risk assessments.
Despite their efforts, however, a recent report by the SRA revealed that one in five UK law firms are still failing to comply with the money laundering regulations, pinpointing a lack of reporting, and a failure to maintain adequate prevention systems as key issues.
Every law firm must meet the obligatory anti-money laundering (AML) standards according to the FCA, but these standards should not be the high water mark to reach for; they should represent the lowest possible stepping off point.
At the very least, all firms should be applying a risk-based approach to their AML risk assessment practices. This will simplify and focus their resources where they have the greatest impact. Alongside their risk assessment policy, conveyancers should also collect evidence of Client Due Diligence (CDD).
All law firms applying a risk-based approach also need to be proactive in widening their knowledge of current criminal trends in the money laundering world, whilst also bringing their own experiences and observations to the table.
Only then will the firm be able to effectively review which tools they use and how they use them to adapt to the specific risks they might face.
Signs of danger
Half of the battle is in being aware of what danger signs to look out for. Conveyancers should be suspicious of any unusual settlement requests or instructions, fictitious buyers, irregular money transfers, and a reluctance to provide information.
Essentially, if it seems out of the ordinary then it needs to be addressed. Conveyancers should comply with either Law Society Conveyancing Quality Scheme (CQS)/Solicitors Regulation Authority (SRA) or Council of Licensed Conveyancers (CLC) guidance on money laundering.
There is a lot of industry focus on CQS at the moment – although the scheme has been around for several years the Law Society has just started to assess firms on requirements of the CQS, and AML is a key element of this assessment.
A convincing fraud
Money laundering is not the only game in town, of course. Online fraudsters have become far stealthier of late and have taken to using the identities of law firms - either real or invented - to convince members of the public to part with sensitive information and even money.
These fake firms will go to some extreme lengths to appear legitimate and as many of them operate overseas, they can be incredibly tough to pin down.
As many of these fraudsters can prove so convincing, even to a trained eye, it’s worth considering a Lawyer Checker report that checks the details of a vendor’s conveyancer account against a historic database of transactions. The Solicitors Regulation Authority (SRA) also issues scam alerts about people who refer to themselves solicitors but are not, so this is certainly a resource that should be properly utilised.
A practical solution
Whilst it is fair to say that regulators are directing considerable effort into combating financial crime in the form of both money laundering and fraudulence, there are still perceived barriers preventing more law firms from conforming to these regulations.
Yet, in many cases, solutions to dealing with these barriers already exist. For example, the burden of both checking and monitoring can be eased by using an automated AML search rather than manual processes.
As part of their conveyancing search offering, Geodesys offers personal and company-based AML searches to all customers. The process is quick and simple and will verify customers in real-time. It’s also fully compliant with the EU’s Fourth and Fifth Money Laundering Directives.
Generally speaking though, the industry must work together to ensure that all such solutions are implemented and to further encourage all parties to remain compliant. This is the only way we will be able to combat financial crime effectively, as the criminals retreat further and further into the shadows.