Several new changes are incoming in terms of anti-money laundering law, a webinar organised by the European Lawyers Foundation has heard (26 February).
The new AML package is expected to be published in June, with the aim of protecting EU citizens and the EU's financial system against money laundering and terrorist financing.
It will improve the way national systems against money laundering and terrorist financing are organised and work together. This will block fraudsters, organised crime, and terrorists from legitimising their proceeds through the financial system.
With the new package, all rules applying to the private sector will be transferred to a new regulation, while the directive will deal with the organisation of institutional AML systems at national level in the member states.
Harmonise rules
The provisional agreement on an anti-money laundering regulation will harmonise rules throughout the EU, closing possible loopholes.
The agreement on the directive will improve the organisation of national anti-money laundering systems.
Four proposals
Constance Desaunettes from the European Commission told the webinar that political agreement was reached in December about the Anti-Money Laundering Authority Regulation.
The package consists of four proposals: on AML regulation; the directive (which has a margin of transposition for member states); the transfer-of-funds regulation; and the AML Authority regulation.
The rulebook extended the scope to transfer to crypto-assets, she said. The new rules will cover most of the crypto sector, forcing all crypto-asset service providers (CASPs) to conduct due diligence on their customers.
Luxury goods
Traders of luxury goods, such as precious metals, precious stones, jewellers, horologists, and goldsmiths, are also in scope.
Obliged entities, such as financial institutions, banks, real-estate agencies, asset-management services, casinos, and merchants, play a central role as gatekeepers, the European Commission has said.
They will now be extended to include football clubs and agents, crowdfunding service providers, mortgage-credit intermediaries and consumer-credit providers, as well as operators of investor-residence schemes, and traders in high-value goods.
AMLA will also conduct peer reviews over the non-financial sector supervisor and will be able to issue non-binding warnings.
Each member state has already established financial intelligence units (FIUs) to prevent, report and combat money laundering and terrorist financing.
Under the agreement, FIUs will have immediate and direct access to financial, administrative and law-enforcement information, including tax information, information on funds and other assets frozen pursuant to targeted financial sanctions, information on transfers of funds and crypto-transfers, national motor vehicles, aircraft and watercraft registers, customs data, and national weapons and arms registers, among others.
Supranational supervision
Emma-Jane Williams (Law Society of Ireland AML policy manager, small picture) emphasised that the package would not make substantive changes to lawyers’ AML duties, though they would be elevated from a directive to a regulation.
The big change was national and supranational supervision, she said.
The era of tick-box compliance was past, she said, and AML risk assessments were now embedded in business-risk assessments. The requirements were already very well established across the EU legal sector.
Firms should be aware of what is at stake, because getting it wrong means the repercussions extend beyond AML compliance failure.
Risk to livelihood
Proceeds-of-crime offences could attract sentences of up to 14 years in Ireland, harmonised to four across the EU for money-laundering offences, Williams pointed out, with accompanying risk to livelihood and reputation.
“There is a huge benefit in setting aside the narrative that we often hear that AML is burdensome: if it helps small sectors and small firms to remove or reduce the risk of unwittingly being used to launder money, AML instead can be perceived as an opportunity when so much is at stake.”
No AML strategy would be complete without detailed sanctions assessment, Williams said, and the legal profession should be alert to attendant bids to move assets.
Lawyers should always expand their knowledge of the money-laundering risk to the legal sector, she said, whether by cash transactions or fraudulent debt collection or sham litigation.
Lawyers must adopt a risk-based approach to effective compliance, she said.
Research has found that lawyer knowledge can exist between two possibilities and be neither complicit nor unwilling, yet obvious red flags are missed.
“You can’t do compliance if you don’t know what these red flags are,” she said.
Core obligation
Claudio Cocuzza (chair of the CCBE’s AML committee) said that the core obligation on lawyers to make suspicious-transactions reports (STR) was very complex, in that legal privilege was in the DNA of lawyers.
Lawyers had come to terms with the important AML legislation when it was introduced in 2006, he said, and had to learn how to make STRs.
There are no substantial changes in the new package, and the perimeter of the lawyer’s privilege exemption is not changed.
Vigilant on divergence
“We know that we cannot provide legal assistance where we are aware that our client pursues illicit aims,” he said.
The CCBE must be vigilant on any national divergence on the new regime about reports, Cucuzza said.
Lawyers should be proud of fighting strongly on article 69 that, while member states should exercise supervision, it should not alter the independence of local bar associations, he said.
Article 69 protected the fundamental rights of bars, he added.
Law Society AML resources
The Law Society’s suite of resources for solicitor AML include:
A President’s eBulletin in late 2018 launched the following suite of AML resources designed to help solicitors comply with their statutory obligations:
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- Business risk assessment,
- Policies, controls and procedures,
- Risk-factor questionnaire for customer risk assessment,
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‘Document your Thought Process’ forms for customer risk assessment.
Sample adaptable forms designed to help you when updating your approach to AML: The Law Society issued supplemental AML guidance and solutions for solicitor AML during COVID-19 in March 2020 and, more recently, the Criminal Justice (Money Laundering And Terrorist Financing) (Amendment) Act 2021 Solicitor AML Update.
Sanctions resource hub
Information about how solicitors can ensure compliance with sanctions against Russia and Belarus over Ukraine is available by visiting www.lawsociety.ie/sanctions.
The sanctions resource explains the manner in which sanctions create a crime of handling funds or assets of sanctioned individuals, how to check sanctions lists, a recommended approach to develop your firm’s sanctions policy, and information about your relationships with clients following a confirmed hit on a sanctions list.