Funny money: Don't be like Al Capone
By Susan Humble
With money laundering now a sophisticated affair, Susan Humble warns of the risks of complacency
Some Like It Hot, starring Marilyn Monroe, Tony Curtis, and Jack Lemmon, is a rib-crackingly hilarious and politically incorrect film.
The heroes become heroines, as they go on the run from mobster Spats Colombo after witnessing a shootout, using the band Sweet Sue and her Society Syncopators as their foil. Chaos ensues.
Al Capone should be hanging heavy on the mind of every solicitor involved with regulated work. He was said to have laundered the proceeds of his crimes in cash-only laundromats.
Money laundering is a bigger and more sophisticated business today. HM Treasury describes professional services as a “crucial gateway for criminals looking to disguise the source of their funds” in its recent national risk assessment.
Money launderers aren’t going to turn up on our doorsteps looking like Al Capone. Violin cases containing smoking guns have been swapped for Bitcoin and investment schemes, with fraudulent conveyancing transactions on the side.
This piece does not aspire to be Anti-Money Laundering Rules for Dummies. There are no short cuts, no easy reads. Legal services remain at high risk of abuse. Complacency is not an option.
The daunting starting point for each of us should be the Legal Sector Affinity Group 2021 guidance. This Gormenghast of essential information is published collectively by all legal services supervisors in the UK, including the Solicitors Regulation Authority (SRA). Legal services supervisors make rules informed by the government via the money laundering legislation.
On its website, the SRA pulls out the four key changes emphasised in the new guidance:
• Understanding source of funds and source of wealth.
• Understanding your technology to use it effectively.
• Clarification on high-risk sectors, accepting cash into the client account, customer due diligence (CDD) and timing of CDD/exceptions.
• Discrepancy reporting to Companies House and others from duties/obligations introduced from January 2020.
The SRA has also published an easy-to-read report, Anti-Money Laundering (AML) Visits 2019-2020. This is an eye-opening account of the ways in which firms across the spectrum fall short of their obligations. It also provides a helpful, practical framework for easy compliance wins to help us feel better about what we can and must achieve.
The Law Society website has excellent resources for those getting to grips with requirements, including webinars involving those from the SRA tasked with policing compliance, and firms’ experience of how they have implemented the requirements.
The webinars could be criticised for focusing on well-resourced large firms rather than sole practitioners and SMEs. That’s the feel from the comments in the live chat at least. Nevertheless, they are a good starting point, and proportionality remains highly relevant.
Before you start ploughing through the documents, perhaps muse on the following real-life cases.
In January 2021, the Solicitors Disciplinary Tribunal found that solicitor Matthew Himsworth had “acted in reckless disregard of the risk of money laundering” in allowing his client account to be “repeatedly used” as an escrow service. His misconduct was aggravated by his “failure to verify the identity of paying third parties” and he failed to check the source of wealth and funds of the investors into an investment scheme.
Himsworth was fined £15,000 and ordered to pay the same in costs. He cannot act as a sole practitioner, manage a law firm or be a signatory on client account or be a compliance officer for three years.
In November 2020, Seatons Law agreed to an SRA fine of £14,000 for wrongly rating three property transactions as low risk. The firm admitted failing to perform adequate CDD and ongoing monitoring and failing to have in place an adequate AML policy. The fine was calculated by reference to the firm’s turnover and reduced by the maximum allowed for mitigation.
The time will come, sooner than we think, when this level of fine will be considered small fry. Money laundering is on the global agenda. The SRA has publicly identified the fight against money laundering as a priority – and rightly so.
Susan Humble is a senior partner at Susan Humble at RIAA Barker Gillette riaabarkergillette.com She is former CEO of the Solicitors Disciplinary Tribunal