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Firms urged to take notice of upcoming changes to anti-money laundering regulations
March 10, 2023

 

 1. Introduction

In line with the 2022 Money Laundering and Terrorist Financing (Amendment) (No.2) Regulations, firms must ensure they are aware of upcoming changes that will impose further compliance requirements on those businesses subject to the MLRs from 1 April 2023.

 

 2. Changes to beneficial ownership transparency: a revised approach to discrepancy reporting

The current approach to due diligence requires a Law Firm to establish, before commencing a formal relationship, the necessary information to check risk. This includes, when acting for an incorporated entity, a check on Companies House to confirm that the information held on the Company Register matches the information obtained about the corporate entity. Where an issue is found, and the register is considered incorrect, a Firm is then required to ensure the register is updated or a report is made to Companies House highlighting the incorrect information.

Effective 1 April 2023, Regulation 9 amends regulation 30A(1) of the MLRs to extend the scope of the discrepancy reporting regime (reporting discrepancies to on the companies house register) so that it is an ongoing requirement and limiting the requirement to report only ‘material discrepancies’.

Regulation 30A of the MLRs requires relevant persons (MLRO) to report to the Registrar of Companies any discrepancies between the information they hold about the beneficial owners of companies due to CDD measures and the information recorded by Companies House on the public companies register.

The requirement applies at the onboarding stage, “before establishing a business relationship” therefore, the amendment aims to enhance the accuracy and integrity of the register by making the obligation ongoing.

At a practical level this now requires a Law Firm to be mindful of changes to their corporate clients. Passing due diligence checks at the commencement of the relationship is no longer enough. It is now necessary to be aware of changes in a corporate entity and to ensure the companies house register is updated with the new information and, if not, to ensure the client updates the information, or the MLRO must report the discrepancy.

Does this mean that a fee earner must check companies house each time they handle a new matter? The answer has to be No!  That would be an unreasonable expectation. However, as the relationship continues and new information is learnt, should a fee earner check companies house to ensure it is up to date? The answer has to be YES!

An update is needed to a Firm’s AML Policy and guidance provided to a fee earner.

 

 3. What is a Discrepancy

A discrepancy is when the information that an obliged entity holds about a beneficial owner is different to the PSC information recorded by Companies House.

This could include:

  • a difference in name
  • an incorrect entry for nature of control
  • an incorrect entry for date of birth
  • an incorrect entry for nationality
  • an incorrect entry for the correspondence address
  • a missing entry for a person of significant control or a registrable beneficial owner
  • an incorrect entry for the date the individual became a registrable person

 

4. Other Updated Requirements

4.1 Trust Registration Service – Various changes have already taken effect, including for those firms dealing with trust entities. Solicitors who have historically acted as trustees or advised the creation of trusts will need to know what the changes mean for their practice. Otherwise, they risk failing to comply with their AML obligations. Further information on the new rules can be found here: www.gov.uk/guidance/trust-registration-extension-an-overview

Read our previous blog here on Trust Registration requirements.

4.2 Economic Crime Reform – The ‘Economic Crime and Corporate Transparency Bill’ has been introduced into Parliament with a suggestion that further, substantive regulatory reforms are on the way. Announcements regarding a new and improved public/private Economic Crime are expected soon.

Firms need to be aware of all these changes and should take a closer look at their existing internal policies and processes to ensure they are meeting the existing and upcoming requirements.

Our member firms who already use our ongoing compliance service will receive updated guidance on the changes to the process and an updated AML policy.

 

 5. How confident are you about compliance?

Our goal is to ensure the firms we work with have and retain a compliant structure enabling the firms, their managers, and owners to focus on running their businesses and servicing their clients.

Prevention is always better than cure when it comes to risk and compliance, and a proactive response will keep the regulator from your door and help manage costs.

If you believe your firm may be at risk or wish to confirm your firm is achieving the required standard, we offer a range of solutions at The Strategic Partner, including:

  • Regulation 21AML 2017 Independent Audit – A review of the firm’s approach to regulation and compliance to include AML procedures with the audit meeting the requirements of Regulation 21of the AML 2017. The output of which provides the firm with a written gap analysis and solutions to remedy any issues that rise and ensure the firm is compliant, find out more
  • Training– Our typical AML Training includes:
    • AML Training for ALL staff to meet the firm’s obligation to provide annual training.
    • 1-2-1 training for the MLRO and MLCO on their obligations and requirements.
    • Practical training for those involved in client onboarding to ensure their ID and AML checks are correctly completed.
  • File Revies/Auditing – At TSP, we engage with firms undertaking file reviews where we consider your procedure, staff, systems and files to ensure the procedures are up to the required standard and being implemented at case level with a report of the outcome.

Our packaged risk and compliance solutions provide guidance and support to firms on a range of topics and include: –

  • Our Risk, Regulation and Compliance Service (including AML), provides firms with the necessary Policies Control and Procedures (PCP’s) – that are in line with CQS requirements and the standard of the relevant quality mark –  alongside training, supervision structure, an annual independent assessment and reporting. This solution ensures that firms and their staff are compliant and remain so. It also clarifies what to do in the event of a mistake and/or a breach occurs.
  • Our extended service, Risk, Compliance, AML Guidance and Register Administration, provides an outsource solution for firms where The Strategic Partner not only manages and maintains the risk registers and provides guidance to all staff (inc. Partners), we also produce monthly risk and compliance reports.

The combination of these two solutions provides a law firm with a robust and cost-effective risk and compliance strategy that ensures staff have access to expert guidance as it is needed.

 

About The Strategic Partner

The Strategic Partner is a law firm knowledge hub. We work with law firms and professional indemnity insurers, advising and guiding on compliance and risk management techniques to assist and reduce instances of claims or regulatory breaches.

We offer a range of services and consultancy tailored to the Legal sector. We have gained a wealth of knowledge and experience in the overall management of law firms and work with them to achieve profitability, stability, and efficiency. Our goal is to become a valued and respected partner to our member law firms, consistently providing high-quality services and solutions.

For more information about The Strategic Partner, you can call us on 0203 911 9710, email us info@thestrategicpartner.co.uk or visit our website to make an online enquiry.

 

You can download and view the PDF of this article here. 

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