Practical Implications of the UK Money Laundering Regulations 2003 - Which are Now in Force

The Money Laundering Regulations 2003 are now in force in the UK and apply to 'relevant business' in the newly expanded 'regulated sector'. But what are the practical implications of this for firms of lawyers or

accountants?

Both the Law Society and the Consultative Committee of Accountancy Bodies have recently published bulky new guidance. This should be required reading for money laundering reporting officers in law and accountancy practices.

Businesses now in the regulated sector should already have made preparations for the new regime including the appointment of a money laundering reporting officer (MLRO) and a deputy to provide cover for holidays and sickness, the training of relevant staff and the introduction of forms and procedures for internal reporting of suspicions of 'money laundering'.

Staff training should have included guidance on which activities of the firm are now 'relevant business' falling within the 'regulated sector'. For lawyers the main focus will be on work in relation to financial or real property transactions and services in relation to the formation, operation or management of a trust or a company. For accountants the principal types of relevant business are accountancy, audit, tax and insolvency services. Investment advice has been 'relevant business' since 1994.

The Law Society has indicated that the provision of legal advice, participation in litigation, will writing and publicly funded work would not generally be viewed as 'relevant business'.

Identification

The first practical impact of the new regulations is likely to be the need to obtain documentary identification of a new client who wishes to instruct your firm to undertake 'relevant business'. Where a new business relationship is formed (in effect when you agree to act for a new client) the regulations require that as soon as is practicable after contact is first made, you obtain evidence of the new client's identity. This means that either the client must produce such evidence to you, or you should obtain it from elsewhere, or a combination of both. Identity records are required to be retained for five years after the business relationship ends.

Identification is not required in respect of a one-off transaction, which you neither know nor suspect involves money laundering, and which does not involve payment of more than 15,000 euro (about 10,000) by or to the client. In certain other cases specified in regulation 5 identification is not required. In...