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Learning from a Recent Case: Why Robust Risk and Compliance Procedures Are Crucial
July 24, 2023

 1. Introduction

Recent developments in financial crime have highlighted the critical role of robust money laundering processes and procedures for law firms. For instance, a case involving Narinder Kaur, who amassed half a million pounds through an extensive shoplifting operation and subsequent money laundering activities – which was illustrated as a case study by the Solicitors Regulation Authority (SRA) in their recently updated guidance note Proceeds of Crime: Guidance  – serves as a stark reminder of the potential risks posed to law firms that fail to implement stringent safeguards against such crimes.

This article aims to summarise the case and offers some initial guidance for law firms on how to avoid similar situations while adhering to the guidelines set by the Solicitors Regulation Authority (SRA) and obligations under the Proceeds of Crime Act 2002 (PoCA), the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs).

 2. The Case of Narinder Kaur

Narinder Kaur, from Cleverton, Wiltshire, was recently found guilty of 25 separate offences at Gloucester Crown Court following a four-month trial. Her extensive criminal activities involved fraud, money laundering, possessing proceeds of crime, conspiracy to defraud, and perverting the course of justice.

Over the course of her crime spree, Kaur targeted more than 1,000 shops across the country, including branches of well-known retailers such as Boots, Debenhams, and John Lewis. Her fraudulent scheme included stealing items from high street stores, and dishonestly claiming refunds on those items, sometimes on multiple occasions, that she was not entitled to.

Kaur’s criminal activities did not stop there. She extended her fraudulent activities to involve solicitors, deceiving eight different firms by instructing them to sue her brother for money, which she then arranged for an accomplice to make payments in the thousands of pounds using stolen card details which she then asked the solicitors to transfer to her.

Read further details here: Wiltshire shoplifter made £500k with refund trick crime spree

 3. Guidance for Law Firms

The severity of fraud and economic crime and the issues highlighted in the recent Kaur case illustrate the necessity to prioritise robust risk assessment and money laundering processes, policies, and procedures. Here are some initial steps that law firms can take to prevent becoming embroiled in similar situations:

  • Proceeds of Crime Act 2002 (PoCA) and Anti-Money Laundering (AML) Compliance: Law firms must implement and maintain comprehensive policies, controls and procedures to identify and mitigate the risk of money laundering and to meet their obligations under PoCA. This includes conducting thorough due diligence on clients, monitoring financial transactions, and reporting any suspicious activities to the relevant authorities. The regulator stresses that:
    • All firms have obligations under the Proceeds of Crime Act 2002 (PoCA), regardless of the services they provide, not just those within scope of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs).
    • PoCA imposes additional requirements on those in scope of the MLRs.
  • Know Your Client (KYC) Procedures: Implement rigorous KYC and CDD procedures to verify the identity and legitimacy of clients. This includes verifying the source of funds involved in transactions and continuously monitoring client relationships for any unusual or suspicious behaviour. – Read our recent article: The Importance of Source of Funds Enquiries: Understanding your Obligations
  • Staff Training and Awareness: Educate all staff members about the risks of money laundering and the importance of complying with AML regulations. Regular training sessions will help employees recognise potential red flags and take appropriate actions. Once training has been provided, ensure the evidence of completion is recorded accurately. Training should be provided annually and to all new starters.
  • Monitoring and Reporting: Establish a robust monitoring system to track financial transactions and identify any irregular patterns. If any suspicious activities are detected, report them promptly to the SRA or other relevant authorities as per your obligations.
  • Appoint a Money Laundering Reporting Officer (MLRO): The MLRs requires all firms in scope to appoint an MLRO – it remains optional for firms out of scope. However, the regulator recommends that all firms consider doing this so that they can take advantage of the protection afforded by PoCA, streamline their reporting, and help manage threats to the firm.
  • Collaborating with Third-Party Consultants: Another solution involves seeking external support in the form of third-party compliance consultants such as The Strategic Partner. Our compliance specialists can provide up-to-date knowledge on SRA regulations, advise on best practices for compliance management, provide training programmes, and offer additional resources to help the firm and their MLRO, COLP and COFA to navigate complex regulatory issues. It is the role of the consultant to ensure your firm is compliant and with the focus we have for firms across the industry our exposure is much greater enabling more effective and efficient decision making and response times.

This is not an exhaustive list and firms must also consider the risk that individual clients and client matters may pose and may adopt more stringent policies, controls, and procedures accordingly.

Additionally, firms are advised to review the newly released ‘Proceeds of Crime – Guidance’. This extensive guide, published by the SRA, provides crucial information designed to aid firms in preventing financial crime, understanding the UK’s proceeds of crime regime, and meeting expectations for compliance with these regulations. Read the guidance here: https://www.sra.org.uk/solicitors/guidance/proceeds-crime-guidance/

 4. Robust Risk and Compliance Procedures

Firms play a crucial role in bolstering law enforcement agencies, such as the National Crime Agency, police services, and HMRC, as well as other investigatory bodies, in combatting financial crime. Therefore, strict compliance with the Solicitors Regulation Authority’s guidelines and obligations is of utmost importance. This not only meets the expectations of these agencies but is paramount in safeguarding the interests of both the firm and its clients.

 5. Robust Support and Guidance from Industry Specialists

At The Strategic Partner, we appreciate that keeping pace with regulatory expectations and meeting the requirements is essential but time consuming and often confusing. Our services are designed to provide firms, employees, and their MLRO, COLP, and COFA with the comfort of knowing that even in the busiest of times, you remain compliant and can evidence that you are. We can offer expert guidance and support, including:

  1. Regulation 21 AML 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 21 of the AML 2017. The output of which provides the firm with a written gap analysis and solutions to remedy any issues that arise and ensure the firm is compliant.
  2. Training and Education: We offer customised training programs to educate your staff on AML regulations, source of funds and source of wealth enquiries, risk assessment, and suspicious activity detection. Our training ensures that your team is equipped with the knowledge and skills to fulfil their compliance responsibilities.
  3. Risk Management and Compliance Review – A review of the firm’s approach to regulation and compliance to include all regulatory requirements and AML procedures. The output of this provides the firm with a written gap analysis and solutions to remedy any issues.
  4. Ongoing Compliance Support: Our experts provide ongoing support and guidance, keeping you up-to-date with the latest AML regulations and best practices. We offer regular compliance reviews, advice on complex cases, and assistance with regulatory reporting requirements.

Packaged Solutions – Implementation of robust solutions to ensure the firm achieves compliance and then maintains compliance through the provision of ongoing support and assistance: –

  1. Risk, Regulation and Compliance Service (including AML)
  2. Risk, Compliance, AML Guidance and Register Administration Service

Get in touch with The Strategic Partner

For more information on The Strategic Partner and to discuss how we may be able to assist in accelerating your risk management or compliance and regulation or simply to keep this up to date you can call us on 020 3911 9710 or email us info@thestrategicpartner.co.uk.

 

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

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