Is your identity check really necessary?

Several times recently I have had firms of solicitors demand that I prove my identity. What is so odd about that? Well, only that, in the circumstances, no identity checks were necessary. Being an expert in money laundering law I knew that. And being an insufferable smart arse, I felt compelled to tell them they were wasting their time and mine. I met a wall of incredulity. They all told me that the checks were mandatory.

So, I had to back down, spending hours downloading apps, locating utility bills and getting my phone to read a little chip hidden in my passport. To add injury to insult, they then stuck the cost on my bill. One firm even added a sanctions check, which was especially weird, as all I was doing was making my will. What do they think sanctions are supposed to cover?

Have solicitors forgotten what identification checks are for? For the avoidance of doubt, they are to prevent crooks using fake identities to hide their ownership of property and other assets. Hence, one must carry them out when providing conveyancing, trust or corporate services.

But when someone is making a will, swearing an affidavit, suing somebody, getting divorced, engaging in mediation or getting legal advice, these activities are outside the scope of the Money Laundering Regulations. The reason is that such activities offer minimal scope for money laundering. 

So, why are solicitors insisting?

Some argue it is safer. Today’s personal injury client might be tomorrow’s conveyancing client. So maybe it is best to check them when it isn’t necessary in case you forget to do so when it is.

Even if you find that argument convincing, which I don’t, it makes no sense when someone is merely swearing a statutory declaration. Yet, when I had to do that, it was the same old story. Absurd. People take the oath in court without their passport.

The confusion can have comic results. The FT ran a headline ‘Russian warlord passed UK money laundering checks with his mother’s utility bill’, which sounded pretty bad. Indeed, the most liked online comment read ‘discreet law and its lawyers should be disbarred’. But Yevgeny Prigozhin was merely bringing a libel action, so no checks were required. If the firm had not bothered with checks, they might have avoided much opprobrium.

Confusingly, the latest Solicitors Regulation Authority (SRA) Code of Conduct says that solicitors must ‘identify who you are acting for in relation to any matter’. But what does that mean? When one lawyer asked if they must obtain proof of identity in matters outside the Money Laundering Regulations, the SRA answered with a firm ‘No’. Sadly, they proved unable to explain what their own rule means, offering a rambling commentary suggesting firms should ‘take a proportionate approach’. My interpretation of the rule would be that you must identify your clients, in the sense of being clear who you are and are not acting for. But you need not verify their identity (ie, obtain evidence) unless the Money Laundering Regulations apply.

Not carrying out the necessary checks

It is more concerning when AML checks are vital, but not conducted. This happens far too often. Last year, we learned that Clyde & Co had been acting for a Liberian-registered company for years without checking who owned and controlled it. The company had told them that it wanted to keep its shareholders ‘confidential’, a comment that should have clanged like a mighty warning bell.

More extraordinary still was the Child & Child case. Far from running the required checks, the firm set up an offshore shell company to enable the daughters of Azerbaijan’s president to secretly buy two apartments worth £60m. Transactions like that reek of money laundering. But the lawyer concerned got off with a mere fine.

It is hard to avoid the conclusion that while many solicitors are running pointless checks in risk-free cases, others are acting for ultra high-risk clients without checks. I know the SRA has its hands full regulating solicitors’ sexual behaviour and social media posts, but perhaps one day they will find the time to sort this out.

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