Anti-money laundering for conveyancers

In recent AML news the Law Society money laundering task force has warned solicitors that the SRA will not be relaxing it’s monitoring of money laundering compliance, and the revised AML guidance from the Legal Sector Affinity Group has now been published on the Law Society website.

With the renewed emphasis on AML compliance and findings from the recent SRA AML audits, it seems like a good time to review some of the recent findings and recommendations, and their relevance to the conveyancing industry. As conveyancing activity is high-risk for money laundering it’s likely that the SRA may be auditing your own firm’s conveyancing activity in the future, so we’ve included a few practical tips based on the findings of Peacock Risk Management, whose team provides AML consultancy on a daily basis.

Geodesys offers both an automated AML service and a full AML auditing service to support your compliance. Please contact us for further details. We also offer training to ensure your team get the most out of our online AML screening and automation, and provide help with setting up your firm’s risk profiles.

What have the SRA audits identified?

The SRA has emphasised that, on the whole, law firms are doing their best to comply with the money laundering legislation. The recent monitoring has, however, identified that there can be a gap between policies, procedures and guidance from the money laundering compliance officer (MLCO) and what actually happens on a day-to-day basis in a practice.

That gap between policy and reality has resulted in nearly two thirds of firms reviewed needing some form of intervention from the SRA, and a further nine firms referred for further investigation.

Due diligence

The SRA found that in 53% of audited matters, insufficient Customer Due Diligence (CDD) had been collected. Examples included:

• Expired documents
• CDD records not being accessible to appropriate staff
• Client being known to the partners but no note on the file
• A false assumption that a central compliance team had gathered the supporting documentation
• Failure to assess whether Enhanced Due Diligence (EDD) was required and failure to carry out EDD when the need arose

Using an automated AML to support AML activity

An electronic AML service can certainly help your conveyancing team to meet many of the recent AML Directives’ requirements and address the shortcomings identified above. The key features of the Geodesys service for conveyancers are that it:

• automates your risk assessment based on multiple checks (number of checks depends on different profiles)
• provides automated screening of sanctions, PEPs and alert lists
• automates record keeping and audits, removing expired data
• offers both simplified and enhanced due diligence
• monitors compliance of clients and the firm, with downloadable reports
• ensures on-going due diligence, creating alerts for non-compliant documents or data

Please note, however, that the SRA does not advocate that law firms depend solely upon an automated service to meet AML requirements. MLCOs, are still ultimately responsible for ensuring the identity of your conveyancing clients. This means ensuring a firm-wide risk assessment policy is in place, checking that the automated service supports the day-to-day implementation of this policy and being aware of the sources of data used in electronic assessments.

AML audits

SRA monitoring has also identified that AML audits are often not independent. Although it’s permissible for law firms to carry out their own audits, rather than using an external consultant, internal audits should be overseen by a colleague with no regulatory role, rather than a MLCO or money laundering regulation officer.

In the case that you don’t have the required resource for auditing, it would then be worth considering an external audit. Geodesys offers a full AML auditing service in partnership with Peacock Risk Management. The audit includes a review meeting with your MLCO, recommendations for remedial action and a full audit report.

Policies and procedures

When interviewing conveyancing staff the SRA will be checking whether the conveyancing team knows what’s included in your policies and procedures manual. Whilst they are not testing exact recall of the contents, they will expect the team to know where to find the information and demonstrate understanding. Your policies and procedures information should also include relevant conveyancing templates eg a risk assessment template for mortgage fraud.

Case management systems

If your practice uses a case management system for your conveyancing matters, then you should be considering how the system is supporting your AML activity. For example, client AML checks should be kept separate from other files so they can be easily accessed for file reviews.

The SRA has stressed that its first priority is to help law firms get it right and there are lots of resources out there that can help.

For further information on our AML service, guidance on automating your risk assessments and details of our AML audit, please use our contact form to outline your requirements.