Anti-money laundering is a broad term for laws, processes, and regulations that protect the financial system from criminal activity and hidden assets. AML checks are crucial in preventing money laundering, terrorist financing, and other financial crimes.
By conducting these checks, solicitors are contributing to global efforts dedicated to maintaining the integrity of the financial system and upholding the rule of law.
What is money laundering?
In summary, money laundering is a form of financial crime that enables criminals to disguise the source of their money.
Money is taken from criminal activities such as:
- General Fraud
- Drug trafficking
- Theft and embezzlement
- Tax and customs violations
- Terrorist financing
This is then mixed with legitimately earned sources and cleaned through a complex web of transactions through different businesses, borders, and currencies. This makes it incredibly difficult to trace, and even more difficult for authorities to successfully prosecute criminals. After the laundering is complete, the money can be cashed out so a criminal can regain the laundered money without risking getting caught.
What are Know Your Customer (KYC) checks?
One of the most common processes to identify money laundering is Know Your Customer or KYC checks. In the legal sector, this process is mandatory for every new client. To run a compliant KYC check, the new client is required to submit official ID documentation as well as proof of their source of funds. It is then the solicitor’s responsibility to verify their name, date of birth, photo, and address.
Compliance solutions such as Red Flag Alert, are then used to verify this data. Our technology verifies your clients are who they say they are, and that there are no obvious warning signs in their bank accounts. Whilst KYC checks may seem inconvenient, they protect businesses and solicitors from the impact of not complying, such as being connected to a financial or money laundering crime.
Key reasons solicitors need anti-money laundering checks:
1) Legal and regulatory requirements
Solicitors are bound by various legal and regulatory frameworks that aim to prevent the legal profession from being exploited for illicit activities such as:
- International standards
- National laws
- Professional regulations
This means solicitors are legally required to implement measures to combat money laundering.
2) Prevent money laundering.
Money laundering involves making illegally obtained funds appear legitimate by passing them through legal channels.
Conducting AML checks allows solicitors to verify the identities of their clients and understand the source of funds they intend on entering into the legal system.
3) Combat terrorist financing
AML checks also assist in identifying any potential connections between solicitors’ clients and terrorist organisations.
Scrutinising financial transactions and conducting due diligence or enhanced due diligence on clients, means solicitors can detect and report suspicious activities that may be linked to terrorist financing.
4) Professional reputation and ethics
Solicitors have a duty to maintain the integrity and reputation of their profession. Implementing robust AML measures helps ensure that solicitors are not unwittingly involved in illegal activities.
By adhering to AML regulations, solicitors demonstrate their commitment to ethical conduct and contribute to the overall integrity of the legal system.
5) Legal liability
Failure to perform adequate AML checks can result in legal consequences for solicitors. This can include:
- Regulatory penalties
- Criminal charges
- Loss of professional license
- Reputational damage
All of which can occur if they are found negligent in their AML obligation.
How can Red Flag Alert help you?
Stay compliant easily and protect your business with our AML Solution for Legal:
- A full range of risk level checking
- Unbeatable match rates
- ID verification
- Enhanced due diligence
- Sanctions and PEPs real-time screening
- Monitoring alerts
- User-friendly interface
- Secure audit trail