Law firms in England & Wales are required to conduct Anti-Money Laundering (AML) checks due to legal obligations outlined in the Money Laundering Regulations 2017. These regulations were implemented to align with European Union directives and international standards aimed at combating money laundering and terrorist financing.

1. Why law firms do AML checks!

   The key reasons why law firms in England must conduct AML checks are as follows:

   • Legal compliance: The Money Laundering Regulations 2017 impose legal obligations on law firms to implement measures to prevent their services from being used for money laundering or terrorist financing activities. Law firms are required to have robust AML policies and procedures in place and to conduct ongoing due diligence checks on clients.

   • Identification and verification of clients: AML checks help law firms identify and verify the identity of their clients. This includes obtaining and verifying identification and address information, such as passports, driver’s licences, or utility bills. Knowing the identity of clients is crucial for law firms to assess the risk associated with providing legal services and to comply with Know Your Customer (KYC) requirements.

   • Risk assessment: AML checks enable law firms to assess the risk of money laundering or terrorist financing associated with a client or transaction. By conducting due diligence, including gathering information about the client’s background and the nature of the proposed legal work, law firms can identify potential risks and take appropriate actions to mitigate them.

   • Reporting suspicious activity: If law firms identify any suspicious activity during the course of their work, they are obligated to report it to the National Crime Agency (NCA). This includes suspicions of money laundering or terrorist financing activities. The AML checks assist in detecting red flags or indicators of potential illicit activity that may require further investigation and reporting.

2. Penalties for non-compliance:

   Non-compliance with AML regulations can result in significant legal and financial consequences for law firms. Authorities can impose fines, revoke licences, or even bring criminal charges against firms that fail to meet their AML obligations. Conducting AML checks is crucial for law firms to comply with the law and mitigate the risk of penalties.

   It is important to note that the specific requirements and obligations may vary based on the nature of the legal work undertaken and the risk profile of the clients involved. Law firms are advised to stay updated with the latest AML regulations and guidance issued by the regulatory bodies to ensure compliance.