The Real Impact of anti-money laundering regulations worldwide

Money laundering regulations have far reaching effects for many organisations. They must be taken seriously and the regulators in the jurisdictions in which the money laundering regulations exist will expect to see evidence of compliance.

The problem facing those organisations is that there are no money laundering rule books and compliance is very much a matter for each organisation. This requires the development of the necessary systems and internal procedures to ensure and demonstrate compliance with money laundering regulations.

Organisations must establish and maintain a risk based approach with standards that are appropriate for the organisation while meeting the requirements of their money laundering regulations and include:

• customer due diligence measures and ongoing monitoring:
• reporting:
• record-keeping:
• internal control:
• risk assessment and management:
• the monitoring and management of compliance with, and the internal communication of, such policies and procedures:

The policies and procedures must also make provision for identifying and scrutinising (a) complex or unusually large transactions (b) unusual patterns of transactions which have no apparent economic or visible purpose and (c) any other activity which is regarded as particularly likely by its nature to be related to money laundering or terrorist financing.

Furthermore, the policies and procedures must accommodate provision for determining whether a client or potential client is a politically exposed person.

Regulation 21 requires that those organisations working in the Regulated Sector must take appropriate measures to ensure that Relevant Employees (curiously this phrase would not appear to include Partners although this cannot have been the intention) are:-

• made aware of the law relating to money laundering and terrorist financing; and
• regularly given training in how to recognise and deal with transactions and other activities which may be related to money laundering or terrorist financing.

At first glance it may be thought that a brief internal training session highlighting the requirements of Regulations 20 and 21 will satisfy compliance. It most certainly won't and adopting such an approach will inevitably lead to problems. Lawyers will need to completely review their existing systems and put in place written polices and procedures that are well thought out and can be shown to work in practice.

This will be no easy task and will involve a full risk assessment of existing clients, potential clients and work types. It will also involve the creation of a detailed manual or internal guidelines which will set out in a user friendly and easy to understand manner the firms systems for mitigating the risk of money laundering activity. Such systems should take on board the compulsory requirements of the Regulations and also the comprehensive guidance on compliance published by the Law Society on the 22nd February 2008.

Regulated firms must appreciate that compliance with the Regulations is not optional and the sooner they get their act together the better. Good systems, and the effective internal communication of them, will enable firms to illustrate compliance with each of the specific requirements set out in Regulations 20 and 21. Poor systems will result in uncertainty, inefficiency and inconsistency not to mention possible prosecution or professional sanctions.

Doing the hard work now will provide a platform that will protect your firm against the likelihood of enforcement action. Be aware also that firms must have management arrangements in place that ensure compliance with the 2007 Money Laundering Regulations.

Bill Jones is the Managing Partner of JMW Solicitors in Manchester and he is also Managing Director of ML Solutions 4U Limited a company which specialises in providing anti-money laundering solutions.  Further information can be found about these services at www.mlsolutions4u.co.uk. Alternatively Bill can be contacted by e-mail at bill.jones@jmw.co.uk.