Why It’s Important for International Firms to Review Their Anti-Money Laundering Strategies

Every law firm should have an anti-money laundering (AML) strategy, and that strategy should be reviewed on a regular basis. Failure to take action could result in prosecution or disciplinary action.

Law firms are a major target for money launderers. As a result, Canada and other countries have implemented regulations that affect international law firms.

Why International Firms Need to Review Their AML Strategies

When international firms fail to review and update their AML strategies, they may find themselves vulnerable to prosecution and the target of money laundering schemes.

Unfortunately, many law firms struggle to remain compliant.

In Canada, the SRA found that after MLR 2017 came into play, most firms were taking an active approach to reduce anti-money laundering risk, but there were still several key areas of concern.

Only about a third of the reviewed firms, such as immigrationlawyertorontofirm.ca, had implemented a written risk assessment or were in the process of writing one.

Only 69% of the reviewed firms in Toronto had written evidence that the risk had been assessed, indicating that not all firms were keeping the necessary records of their decisions in regard to client risk.

Among the reviewed firms, six were taken into the disciplinary process due to poor practices and processes. An additional 19 firms said that their staff had breached the firm’s AML/CFT policies. In this case, the issues were resolved through additional staff training, reprimands and referrals to the SRA.

These results highlight some of the issues and challenges that law firms face when it comes to AML regulations.

A separate survey from 2016 highlighted other challenges that law firms face in AML compliance: establishing a client’s source of wealth, identifying ultimate beneficial ownership, and asking fee earners to take due diligence responsibility.

Nearly half of those who were questioned stated that educating staff on how to report compliance breaches has been very challenging. This challenge raises concerns that firms may miss “internal red flags” when working with clients if they have not been adequately trained to know when and how to report breaches.

Many firms also find it difficult to focus their onboarding process on AML due diligence without sacrificing the speed at which they attract new business.

That survey also found that only 8% of firms were screening their entire client base on a regular basis despite the fact that sanctions lists are updated regularly and a client’s risk profile can change at any time.

A report from 2018 indicates that firms in the Canada may not be taking their obligations seriously enough, as reports of suspicious client activity have fallen 10%. Failure to report suspected money laundering in the UK is a criminal offense that comes with a prison sentence of up to five years.

If international firms hope to mitigate the risk of violating AML compliance and being vulnerable to prosecution, they must review and update their AML strategies on a regular basis.

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