July 22, 2009

House of Lords committee adopts Law Society recommendations on money laundering and the financing of terrorism

July 22 2009

A House of Lords European Union Committee report into money laundering and the financing of terrorism has adopted a series of Law Society recommendations which highlight a need for a change in the law.

The House of Lords Committee looked at international cooperation to prevent money laundering and the financing of terrorism. They considered how effectively EU Member States, the UN and others cooperate in this area, and whether there is an effective formal legal framework for criminal justice cooperation.

The House of Lords report, released today, recognises the Law Society's long-held concerns about the generation of unnecessary reports due to the breadth of the UK's anti-money laundering offences and confirms that they agree that this aspect of the law is not proportionate.

The Law Society is concerned that the breadth of the UK's anti-money laundering offences mean that minor regulatory breaches committed by clients need to be reported to the authorities by solicitors and others in the regulated sector, irrespective of whether the client was rectifying the breaches.

Prosecution agencies had advised the Committee that they were unlikely to prosecute anyone for money laundering in those circumstances as it would not be in the public interest.

Law Society Chief Executive Desmond Hudson said, "The Law Society is pleased that the Committee have adopted our view, that promises probably not to prosecute are insufficient and that the law itself needs to be changed. The Law Society remains committed to working with government agencies to develop effective law reform which is appropriate for the whole regulated sector on this issue."

In its evidence before the Committee the Law Society also raised concerns about the burdens on the private sector imposed by the anti-money laundering regime and the need for greater clarity with respect to equivalence.

Desmond Hudson added, "We have appreciated the commitment from SOCA [Serious Organised Crime Agency] and other government agencies in recent years to improve the AML regime but still see there is scope for making it more effective and proportionate. We are pleased that the Committee has encouraged government to take steps to more fully assess the costs of compliance and adequately demonstrate the benefits obtained. We agree that the provision of greater certainty on the issue of equivalence will also help reduce compliance red-tape."

The Law Society will continue to work with its members and relevant government agencies to ensure that criminals are denied access to the legal system for the purpose of laundering funds and that the role played by solicitors in the anti-money laundering regime is both effective and proportionate.

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