Is that wig made of wool or wolf?

A phrase I use quite often in training is, “You’d think so, wouldn’t you?”.  As in, “If the payment is coming to us from another regulated bank, won’t they have done all the checks?”  Or, “Given that CDD checks have been in place for decades now, shouldn’t clients be used to being asked to verify their identity?”  Or indeed, “If a lawyer suspected a client of wrongdoing, wouldn’t he want to protect himself and his firm by reporting that concern?”  And yet it seems that we are still battling the reticence of lawyers to – as I have been told they often see it – betray their clients’ confidence by making suspicious activity reports.

At the end of October last year, Donald Toon – who holds the marvellous title of “Director of Prosperity” at the National Crime Agency – spoke to over a thousand UK solicitors at a conference in Birmingham, and he was not happy with them.  He said that said solicitors were “absolutely at the front line of the detection mechanism for money laundering” but that “something is not working effectively”, with the net result that they are not making enough SARs.  In the 2017 annual report on the SARs regime, published on 11 October 2017, it was noted that “independent legal professionals contributed 0.77% (4,878) of the total number of SARs received over the 18 months [October 2015 to March 2017].  In comparison to the 2014-15 figure of 3,827, the sector saw a 9.93% drop.”  And this is against the background of an overall increase of 9.94% in the number of SARs.  To be fair to lawyers, decreases in reporting levels were also exhibited by building societies, money service businesses, accountants and TCSPs – but Mr Toon made the point to his audience of solicitors that lawyers have a particularly close relationship to their clients: “There is a question over whether everyone in the legal profession understands the value of what is being asked for.  You see high-value transactions in a way that no other part of the financial services sector can.  Those with the closest relationship in client terms are not reporting to us.”

Full disclosure: in twenty years of providing AML training to the regulated sector, I have been able to count my legal clients on the fingers of, well, two fingers.  It is generally accepted that lawyers preferred to be trained by other lawyers, and I am certainly not that – I am simply a nosy and doggedly determined layperson with an unhealthy interest in one specialised area of legislation.  But I do wonder whether, in isolating themselves like this, attending conferences and gatherings only with others from their profession, lawyers are missing out on learning from other parts of the regulated sector.  Banks, accountants, TCSPs, casinos and estate agents could open their eyes to the range of laundering that goes on, and to the multifarious (and convincing) disguises that launderers will assume.  Lawyers may well be the experts in legislation, but perhaps they are more trusting in the purported honesty of their clients than we had realised.

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4 Responses to Is that wig made of wool or wolf?

  1. Robert J Long says:

    In my (admittedly not as long as some, but over a decade) career in law enforcement I have found the legal sector to generally be, well, unhelpful. I don’t think they have any illusions about their clients, I suspect part of the problem is that by definition they must deal with people whose money is a bit…well murky shall we say and if those people thought their legal firm report them, they might not be inclined to be their client. At the top end of the spectrum you will have “high net worth individuals” who, regardless of how they came about said net worth seem to think they should be immune to the inconveniences that beset everyone else. Again if they think their legal representative is passing on information they will no doubt move firm. So I think you will see low SAR from the legal profession until ALL of the legal profession embraces it. Which I cynically don’t see happening unless they are forced to. Since they are a self-regulated profession (see below) that is unlikely to happen.

    It’s not just in the ML arena that the legal profession is a bit tricksy. Trying to get the Solicitors Regulatory Authority to take action was always a uphill struggle! I sometimes feel they were more like a medieval guild than a modern professional organisation.

  2. Thank you for your comment, Robert – I was hoping I wasn’t going to be on my own with this one! I know many lawyers as individuals and they are, without exception, charming and intelligent (and the ones I know are – or tell me they are – very pro-AML), but the profession as a whole is getting AML wrong on many levels.

  3. Gareth Marklew says:

    My personal view, again from the perspective of someone working in law enforcement is that, as with most sectors, you’ve got a variety of lawyers. Some are essentially criminal themselves; they know full well that they’re facilitating criminality, and are happy to profit from it. They’ll never engage properly with the system. At the other end of the spectrum, you’ve got those whose integrity is beyond reproach, and who fully fulfill all of their obligations. And in the middle you have the rest. The question then becomes what’s stopping people moving more from the middle section towards the right end of the legal community.
    Partly, it’s psychology. The Optimism bias can be a strong one; bad things happen to other people. More publicity to demonstrate just how easily ignoring Money Laundering regulations can go wrong for lawyers might help here. Partly, I think it’s down to tradition. The legal profession really doesn’t seem to adapt to change well, and persuading some of its more traditionally inclined figures that the times when you could just take as granted that your client’s a good egg because you know who he or she plays golf with, and when an explanation that you relied on the information provided was all that was necessary to keep your own hands clear are long since passed, could be an uphill struggle. Partly, as Robert alludes to above, I think it’s down to nagging doubt: I think there are enough solicitors out there who are a little concerned that if they look too closely at certain clients they will find things they don’t like, and would rather look the other way and hope nobody notices than address the issue at hand. Perhaps they’re concerned that taking action will implicate themselves in their clients’ past conduct (and so need to be persuaded that they’re far more likely to get themselves into trouble by not acting to fulfill their MLR obligations), or perhaps their clients are intimidating enough that they fear for their own well being (at which point the law enforcement community needs to reassure them that they can be protected from repercussions). Finally, I think it’s down to personal principles (misguided ones, I’d argue, but still relevant): a lot of lawyers got into the profession because they were inspired by the idealistic idea of standing up for the little man, and ensuring that everyone has the protection of the law; sometimes informing the authorities about concerns about clients is seen as somehow wrong, as if they’re helping The Evil Empire (aka the likes of Rob and I) rather than being in their client’s Rebel Alliance against our perceived oppression! Convincing them of who the good guys (and women) really are here is the problem! All knotty issues – it’d be interesting to see the legal professional bodies doing some research to see which (if any) category their members fall in to!

    • Some really interesting musings here, Gareth – thank you for sharing them. I will admit that I hadn’t thought of idealistic young lawyers setting out with the intention of protecting the little man, but – now that you say it – I am sure it is true. Perhaps admitting that there are rather fewer little men than they might have hoped (and rather more big bad wolves) is too much for some lawyers!

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