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Emerald Group Publishing Limited
Some thoughts on reporting suspicions, applying for consent and tipping off
Article Type: Editorial From: Journal of Money Laundering Control, Volume 17, Issue 3
Many in the regulated sector still find it difficult to understand why the regime of reporting suspicions, applying for consent to proceed with transactions and tipping off actually exists. This is particularly true for solicitors, especially those who have been in practice for quite a number of years and who had become used to the concept of lawyer – client privilege. Often when talking with solicitors about the anti-money-laundering regime, it is obvious that they find it intrusive, costly and unfair.
They often ask why solicitors in this country (the United Kingdom) have to comply with such a regime when their American counterparts do not. The answer, of course, is to comply with the Money Laundering Regulations, which were introduced by European Union Directives. It is beyond the scope of this Editorial to discuss the wider issues as to why lawyers in some parts of the world are not subject to a money-laundering regime while others are.
The combination of the criminal offences in the Proceeds of Crime Act 2002 and the Money Laundering Regulations provides a complex framework which is often difficult to explain, not only to students in university classes, but also to professionals, such as solicitors and accountants, as well as bank officers.
The Regulations introduced a risk-based approach which involves, among other things, any solicitor operating in the regulated sector having to conduct customer due diligence on the clients which includes such matters as identification of clients, details of beneficial ownership of property and a range of other relevant information. In addition, they have to keep records, have relevant policies and procedures and have staff fully trained.
The real problem in practice is when a solicitor has been instructed to undertake a transaction by a client, but has formed a suspicion in relation to the transaction. Where this has happened, the solicitor is under a duty to make a suspicious transaction report and cannot then proceed with the transaction without receiving consent to do so from the National Crime Agency (which has only been in existence since October 2013). This obviously leaves the solicitor in a very difficult position. In fact, the solicitor could actually proceed with the transaction without consent, but would then be potentially facing criminal action for doing so. In practice, it seems likely that in most cases, consent will be given within a relatively short period, within a few days at most. But the person making the report clearly does not know how long it will take, and if it goes beyond the time and date for completing the transaction, a potential problem arises.
The solicitor cannot tell the client anything – no explanation of any kind can be given. So if the client comes into the office demanding to know why, for example, the completion of a house sale or purchase has not taken place what can the solicitor do? If the solicitor tells the client that a report has been made, then the tipping off offence would arise and that would spell trouble for the solicitor. So, in effect, the solicitor cannot tell the client anything and cannot complete the transaction until consent has been given. Even if there is a delay of only a day, this could cause significant loss for the client.
So, by complying with the anti-money-laundering regime and making a suspicious activity report, the solicitor has put herself/himself in a difficult position. In reality, what seems to take place is that the solicitor virtually goes into hiding to try and remain out of contact until consent is received or the relevant period of time runs out. If consent is received after the transaction should have taken place, then the solicitor will be able to go ahead and complete but will probably have a very unhappy client. As the solicitor will still not be able to give any explanation for the delay, the client is likely to assume incompetence and may want to make a civil claim. Of course, the solicitor will almost certainly have lost the client.
If the client is actually a criminal, he or she will no doubt have worked out why the transaction is not taking place and will have effectively been tipped off. However, in this situation, the solicitor will not be liable for tipping off. Nicola Bolton, of the Law Society’s Money Laundering task force, puts it very well “[…] there are only so many ways of saying nothing, even for an experienced solicitor […]”
When we meet with anxious solicitors, this is an issue which keeps cropping up.
© Andrew Campbell & Elise Campbell. This editorial is based on a chapter in Ryder, N., Turksen, U. and Hassler, S., eds. (2014) Fighting Financial Crime in the Global Economic Crisis: Policy, Trends and Sanctions. Routledge.
This is the subject of a much longer piece by the authors entitled Solicitors and Complying with the Anti-Money-Laundering Framework: Reporting Suspicions, Applying for Consent and Tipping off which will appear in Fighting Financial Crime in the Global Economic Crisis: Policy, Trends and Sanctions edited by Professor Nicholas Ryder, Dr Sabine Hassler and Dr Umut Turksen, and published by Routledge later this year.
Andrew Campbell and Elise Campbell
8 May 2014