AML efforts tend to move in one direction: more, greater, stronger, bigger – whatever the right adjective may be. Occasionally we see an unwinding (as when many jurisdictions removed general insurance business from the AML family) but for the most part, we tend to extend and increase. That said, the intended direction of travel can be halted – and sometimes by the most unlikely brake. Or maybe that’s my naivety talking; you might not find this unlikely at all.
The US is not a jurisdiction in which I work and so I hesitate to comment in any detail on their AML regime, except to observe that they do like to plough (sorry, plow) their own furrow (or should that be furrough?). What I do know – and what often surprises those new to the world of AML – is that under the American regime, lawyers are not subject to AML obligations. The AML obligations (CDD, record-keeping, etc.) are contained in the Bank Secrecy Act of 1970, which was significantly amended by the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (USA PATRIOT Act) of 2001, and (putting it simply) these laws apply only to “financial institutions”. And no matter how broadly you define that term, it does not include lawyers.
Now call me an old cynic, but is that not crazy? Everyone know that lawyers are vulnerable to money laundering – either deliberately enabling schemes for baddies or failing to spot that they are being misused by clients who look like goodies but are in fact baddies. Just last month the FATF published updated guidance on the risk-based approach specifically for legal professionals, in which it states as accepted wisdom – which, come on, it is – that nearly every service offered by the legal sector can be used for money laundering, from holding client funds to advising on property sales, from forming companies and trusts to managing client affairs. So it would seem logical that the US would upgrade its AML regime pretty sharpish to do what nearly everyone else in the world has been doing for years: welcome their lawyers into the AML fold.
There are plenty of influential Americans who want this to happen. But they keep coming up against the most obstinate of opponents: the American Bar Association. Yes, the official American Bar Association. OK, so people are often a bit lukewarm about joining the AML family – UK lawyers were not cock-a-hoop about it either, I seem to recall. But the Law Society does not have the clout of the ABA, and common-sense prevailed on this side of the pond. The issue has come back into the headlines recently because the ABA is currently engaged in opposing the creation of a register of beneficial ownership. We’re not talking about a public register – they oppose any register on the grounds that it “would impose burdensome, costly, and unworkable new regulatory burdens on millions of small businesses and their lawyers” and “raises serious privacy concerns for small businesses and the many individuals who would be designated as beneficial owners”. You can read their full objections here. If I were a wealthy criminal and needed a lawyer to help me with a spot of laundering, I know where I would go, and I’d pay handsomely for the privilege [little legal joke there – very little]. And I’m not alone in suspecting that this is the real reason for all the objections to anything AML-ish which could in any way inconvenience any paying client.
I hate money laundering 
They have an interesting take on things!! Have you ever tried to get ownership and control information for a Delaware corporation?? You won’t/can’t ! The biggest disclosure (lack of) black hole on the planet wrapped in the stars and stripes for ultimate protection!
There are occasional glimpses that the recalcitrant areas of the world are being dragged into the AML 21st century.
Not too many moons ago a Swiss trust company refused to provide CDD information as “they weren’t allowed to under the law” being pretty unhappy about this response I made a call and can only assume the person I spoke to must have “gone through channels” as some 10/14 days later the requested original CDD documents turned up. The accompanying phone call revealed that the Swiss police had called at the office and robustly explained to the directors of the Swiss Trust Company that they we required to provide the information and that they would do so…………..and lo and behold it is now neatly filed away in Jersey!!
Pot, kettle and all that, CDWOS – certain countries are much better at pointing the finger than at repairing the holes in their own AML regimes. That said, I take great heart from your Swiss story – yay Jersey!
Thank you for your article. Canada has the same issue where lawyers and paralegals are NOT covered by AML rules and the Bars/Law Societies opposed legal professionals being covered by such. Right now the best they’re doing is talk about best practices with Fintrac, the AML intelligence (but not enforcement) in Canada. This is a disgrace.
Thank you for your comment, and welcome to the blog. You are absolutely right about Canada and its legal sector. For UK MLROs, I think Canada and Australia are sometimes more dangerous than the US, because staff assume that these two jurisdictions are “just like the UK” and therefore doing AML to the same standard. Everyone knows that the US ploughs its own furrow. I always urge staff to check that the AML requirements in another country are indeed what they assume – even a country you think you know well can throw up some surprises! And, as you say, disgraceful surprises.