The large amount of content in this month's newsletter shows there is a heck of a lot going on in anti-money laundering (AML) and financial crime policy at present.
UK money laundering action plan
HM Treasury and the Home Office have issued an action plan to address the findings of last year's national risk assessment (NRA) of money laundering and terrorist financing.
The action plan seeks to address four main areas: a stronger public-private sector partnership; strengthening the law enforcement response; increasing the UK Financial Intelligence Unit's (UKFIU) international reach, and; improving the effectiveness of the supervisory regime.
As anticipated, the government's plan to reform the Suspicious Activity Reports (SARs) regime includes considering whether the consent regime should be removed. This would also mean the statutory defence provided by the consent regime would also be removed, although government insists that the Proceeds of Crime Act 2002 (POCA) would be amended to ensure that reporters who fulfil their legal and regulatory obligations would not be criminalised.
The Law Society is still preparing it's response to the action plan as I write this update. Accordingly, I cannot be certain exactly how our response will read but I can confirm that the Law Society will not accept the removal of the statutory defence in consent without it being replaced by a mechanism within POCA offering similar protection from legal proceedings.
To this end, we have engaged the services of Counsel to assist us in developing a viable alternative in the absence of the consent regime. I hope to be able to update you further on this point in my next update.
The other section in the action plan is a 'call for information' on the AML Supervisory Regime. This review is in response to the national risk assessment (NRA) alleging the potential for inconsistencies in supervision across the various bodies.
The call for information covers:
the identification of risks
supervisors accountability
penalties and enforcement
ensuring high standards in supervised populations
the role of professional bodies in AML/combating the financing of terrorism (CFT) supervision
guidance
transparency
information sharing
effectiveness of the Financial Conduct Authority (FCA)
the number of supervisors.
The Law Society's responses to both strands of the action plan will be available to view on our AML homepage shortly after the 2 June closing date for responses.
The prime minister's Anti-Corruption Summit
The prime minister hosted an Anti-Corruption Summit on 12 May which was organised primarily by the Cabinet Office.
In the lead-up to the summit, the Law Society expressed it's willingness to assist with and wish to attend the summit.
We also became aware in the lead-up to the summit that a group of international law and accountancy firms were discussing with the Cabinet Office a proposed draft statement against corruption to which those firms could become signatories.
The Law Society subsequently decided to lead an initiative to develop a parallel statement of intent to fight corruption to be co-signed by other professional bodies. In the statement, signed by the Law Society, the Institute of Chartered Accountants in England and Wales (ICAEW), Society of Trust and Estate Practitioners (STEP) and 15 others, the signatories pledged to continue their work to tackle bribery, corruption, tax evasion, money laundering and the financing of international terrorism.
While we were not able to secure a place at the summit, I represented the Law Society at a conference on 11 May hosted by the commonwealth secretary-general, the Rt hon Patricia Scotland QC, entitled Tackling corruption together: A conference for civil society, government and business leaders.
The conference will be best remembered for the Nigerian president's response to David Cameron's gaffe which labelled Nigeria (along with Afghanistan) as 'fantastically corrupt'. President Buhari famously said in response to a question from a journalist:
'I am not going to demand an apology from anybody. What I am demanding is a return of assets. This is what I am asking for. What would I do with an apology? I need something tangible.'
EU developments
As noted in my previous update, a CFT action plan has been produced by the European Commission (EC) in response to the November 2015 Paris attacks. The ECs's Directorate-General for Justice and Consumers (DG JUST) recently published a roadmap for a directive amending the forth Anti-Money Laundering Directive (4MLD) to strengthen the fight against terrorist financing.
My previous update also mentioned the Law Society's involvement in the commission's supra-national risk assessment (SNRA) of AML/CFT. We attended a private sector consultation meeting regarding the SNRA in March and are working alongside the Council of Bars and Law Societies of Europe (CCBE) to ensure the legal sector is able to input thoroughly into the process.
In a further development, the Greens/European Free Alliance (EFA) group in the European parliament has set up a parliamentary inquiry committee to investigate the Panama papers revelations which will investigate the alleged failure of the EC, member states and other authorities to effectively implement and enforce the third money laundering directive.
An inquiry committee is the most powerful tool available to the European parliament and can investigate breaches of EU law by member states and if the commission has acted in accordance with its duties under the EU treaties.
In other EU developments relating to the Panama papers, EC vice-president Valdis Dombrovskis recently outlined the Dutch Presidency's ambition to 'evaluate the possibility for [4MLD] to be broader to go beyond measures for terrorism financing, also to capture issues on tax avoidance'.
SRA issues results of thematic review of AML compliance
The SRA has published the long-awaited report resulting from its AML thematic review and the results paint a positive picture of compliance by solicitors in England and Wales.
The results were welcomed by Law Society CEO Catherine Dixon who acknowledged the longstanding and continuing contribution of our members to our comprehensive AML offering.
Despite the results suggesting quite the opposite, the SRA attempted to cite a lack of full separation from the Law Society as a problem in AML supervision. In his foreword, CEO Paul Philip, says that 'truly independent regulation' in this 'difficult area' is 'all the more necessary as the need to fight corruption and money laundering becomes ever more important'.
The results of this review prove that our members take their AML obligations seriously and that the comprehensive package of practical support the Law Society provides is assisting them to meet their obligations.
I cannot see any evidence within these results that suggests either that our current supervisory arrangement for AML is 'broken' or that the Law Society is in any way failing in its supervisory responsibility for communicating obligations and providing assistance on compliance to its members.
EU referendum - 4MLD consultation
A number 10 spokesperson last week confirmed that there will be 'no new content' or 'no links' added to government websites during the four weeks before the EU referendum, a period referred to by Whitehall insiders as 'purdah'.
This means that HM Treasury's 4MLD transposition consultation document will not be published prior to 27 June.
