20201221 My end-of-year newsletter : suspicious activity reports; failure to regulate lawyers and more

Failure to regulate lawyers.

The other big live issue in relation to suspicious transaction reports is the persistence of several large jurisdictions to avoid bringing lawyers within the scope of the ″reporting entity″ regime.

One would think that this argument was long dead. True, when solicitors in the UK were first brought within the regime it was as a by-product of something else: the Financial Services Act 1986 covered all of those who advised on a wide range of financial and asset transactions. All those covered by the Financial Services Act were within the scope of the Money Laundering Regulations as first brought into force in 1994. Basically, only those lawyers who specialised only in child care law and pure criminal law could claim that they were outside the regulatory perimeter.

That’s when the arguments started because solicitors, which were the affected lawyers, didn’t spot it before the Regulations came into force.

Over a period of years, lawyers all over Europe lobbied to limit the effect of the money laundering directives and, while the EU was in a hurry to get it done for unconnected reasons, the lawyers prevailed and instead of bringing everyone up to the UK’s standard, everyone was taken to a lower standard of, primarily, transactional work. That left litigators out of account which, on any sensible approach is dumb because litigation has always been an excellent way of moving moneys or even property between parties. Even so, lawyers, in many disciplines, were in.

But across the world, the rear-guard action by lawyers’ trade* bodies (some of which have a conflict: trade union v regulator under one roof) continues. The USA, Canada and Australia are some of the most prominent hold-outs.
In Australia, where its law is mind-bogglingly badly drafted, there is a thing called ″Tranche 2.″ Instead of just saying ″these are the reporting entities and this all applies from x,″ the Australian government split the implementation into two stages or ″tranches.″ Various trades and professions fell into the second tranche.

That gave time for more lobbying and, in the hilarious world that is Australian politics, more chances for more prime ministers who would get bogged down in various matters in his few months in office and this would be too much of hot potato to hold onto.

In 2009, the Law Council of Australia, with assistance from the Law Society of England and Wales, which, along with German legal bodies had been at the forefront of stalling the EU’s efforts leading up to the Third Directive, produced its ″money laundering guide.″ It’s been updated and the most recent version is 2016.

It says ″there is little if any actual evidence of lawyer involvement in money laundering or terrorism financing. For these reasons the Law Council of Australia has opposed the proposed extension of the money laundering and terrorist financing reporting regime to legal practitioners. ″

Would you like to read that again? Even if one tidies up the English and says ″involvement of lawyers…″ it still does not suggest any serious grasp of reality.

And, FYI, it’s not a ″proposed extension.″ It’s in the Act. Successive governments have failed to produce and enforce the regulations required for implementation.