New international guidance, intended to help legal professionals identify and mitigate money laundering risks, was agreed on Friday 17 October at an international summit of the Financial Action Task Force (FATF), the inter-governmental body charged with combating money-laundering and terrorist financing. The guidance was developed through an active involvement and dialogue with the International Bar Association (IBA)’s Anti-Money Laundering Legislation Implementation Group (AMLLIG), in consultation with other lawyers including members of the American Bar Association and the Council of Bars and Law Societies of Europe.
The new FATF guidance sets out a risk-based approach to assessing the likelihood of money laundering taking place in any case or with any client, and sets out recommended approaches to the implementation of effective monitoring processes and training programmes in law firms.
Although there is little or no evidence of lawyers being unwittingly involved in money laundering, FATF is keen to ensure lawyers remain vigilant in examining the real identity of their clients. The guidance provides the basis for lawyers to develop a common sense, proportionate approach to client due diligence.
Significant concerns remain in many jurisdictions about the further requirement for lawyers to report to the authorities ‘suspicious activity’. The IBA intends to continue its dialogue with FATF on this and other related matters.
The principal categories of risk assessment the guidance identifies are geography, the nature of a client and its business, and the nature of the service requested by the client. The guidance suggests some variables that may impact the risk such as the regularity or duration of the client relationship and the level of regulation to which a client is subject. They also offer a variety of suggestions to deal with higher risk situations.
The guidance discusses how a risk-based approach should be implemented within a legal practice setting out processes for conducting due diligence about clients and monitoring clients over time. Its recommendations for training suggest that it should be tailored to the appropriate levels of detail and frequency for the relevant legal professional’s role. The IBA is considering more detailed advice to its membership about the best approaches to training in this area.
The guidance also recommends the adoption of specific internal processes dealing with anti-money laundering as an integral part of a practice’s wider internal controls ensuring that they are part of the overall responsibility for good governance and that this aspect of management supervision is most directed at areas susceptible to higher risk.
Stephen Revell, Chair of the IBA AMLLIG and a partner of Freshfields Bruckhaus Deringer says, ‘This guidance will act as a valuable point of reference for setting standards around the world, helping to direct attention to the areas of greatest risk of money laundering in law firms. The importance the IBA places on lawyers knowing the rules and best practices in this arena is already reflected in the IBA’s website at http://www.anti-moneylaundering.org/. We have very much welcomed the active dialogue between FATF and the IBA and other representatives of the legal profession in producing this guidance.’
David W Rivkin, Chair IBA Legal Practice Division and a partner of Debevoise & Plimpton LLP says, ‘We encourage every jurisdiction, bar and law firm to assess the role of this guidance within their own regulatory or management framework in ensuring that the appropriate resources are directed towards the minimisation of the risks of money laundering, including terrorist financing, via the relationship of client and legal adviser.’
The new FATF guidance sets out a risk-based approach to assessing the likelihood of money laundering taking place in any case or with any client, and sets out recommended approaches to the implementation of effective monitoring processes and training programmes in law firms.
Although there is little or no evidence of lawyers being unwittingly involved in money laundering, FATF is keen to ensure lawyers remain vigilant in examining the real identity of their clients. The guidance provides the basis for lawyers to develop a common sense, proportionate approach to client due diligence.
Significant concerns remain in many jurisdictions about the further requirement for lawyers to report to the authorities ‘suspicious activity’. The IBA intends to continue its dialogue with FATF on this and other related matters.
The principal categories of risk assessment the guidance identifies are geography, the nature of a client and its business, and the nature of the service requested by the client. The guidance suggests some variables that may impact the risk such as the regularity or duration of the client relationship and the level of regulation to which a client is subject. They also offer a variety of suggestions to deal with higher risk situations.
The guidance discusses how a risk-based approach should be implemented within a legal practice setting out processes for conducting due diligence about clients and monitoring clients over time. Its recommendations for training suggest that it should be tailored to the appropriate levels of detail and frequency for the relevant legal professional’s role. The IBA is considering more detailed advice to its membership about the best approaches to training in this area.
The guidance also recommends the adoption of specific internal processes dealing with anti-money laundering as an integral part of a practice’s wider internal controls ensuring that they are part of the overall responsibility for good governance and that this aspect of management supervision is most directed at areas susceptible to higher risk.
Stephen Revell, Chair of the IBA AMLLIG and a partner of Freshfields Bruckhaus Deringer says, ‘This guidance will act as a valuable point of reference for setting standards around the world, helping to direct attention to the areas of greatest risk of money laundering in law firms. The importance the IBA places on lawyers knowing the rules and best practices in this arena is already reflected in the IBA’s website at http://www.anti-moneylaundering.org/. We have very much welcomed the active dialogue between FATF and the IBA and other representatives of the legal profession in producing this guidance.’
David W Rivkin, Chair IBA Legal Practice Division and a partner of Debevoise & Plimpton LLP says, ‘We encourage every jurisdiction, bar and law firm to assess the role of this guidance within their own regulatory or management framework in ensuring that the appropriate resources are directed towards the minimisation of the risks of money laundering, including terrorist financing, via the relationship of client and legal adviser.’
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