Product in Focus Series – Anti-Money Laundering Search

 In Probate

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70% of firms are at risk by not conducting an Anti-Money Laundering Search on the Deceased when administering an estate.

The United Nations estimates that 2-5% of the world’s GDP has been laundered. The UK government suggests that given that London is one of the world’s largest financial centres, it is highly likely that hundreds of billions of pounds are laundered in the UK annually. The COVID-19 pandemic has seen a shift from the use of cash toward e-payments and online banking, causing a change in the methods used to launder money. The UK government state that it is likely these methods will continue after all COVID-19 restrictions have been lifted. Given this shift, law firms can be a prime target for money laundering due to large sums of money being moved online. Firms must be aware of their Anti-Money Laundering (AML) obligations so that they can protect their clients and themselves from fraud.

What are the current regulations for AML?

AML regulations are a European Union (EU) directive that includes Customer Due Diligence (CDD) and Politically Exposed Persons (PEP) checks. The Money Laundering and Terrorist Financing Regulation 2019 implemented the EU Fifth Money Laundering Directive in the UK which aims to put a set of processes and rules in place that prevent money laundering and organised crime, as well as to protect those who may accidentally involve themselves in these illegal situations. The current Solicitors Regulation Authority (SRA) guidance suggests that Solicitors should carry out checks such as CDD, PEP and Sanctions, being the consolidated list of individuals and organisations that are under financial factions from the HM Treasury Office for Financial Sanctions Implementation.

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What is the importance of carrying out an AML on the Deceased during the Estate Administration due diligence process?

The SRA suggests that criminals are taking advantage of the disruption caused by the pandemic, putting more firms at risk of being used to launder money. The SRA Scam Alert has identified four potential scams relating to estate administration during the month of September 2021. The SRA have guidance in place to ensure that Solicitors are complying with AML regulations to minimise this risk. However, while legal professionals commonly carry out AML checks on the beneficiaries and Executors of the Estate, the Deceased is rarely subject to such a check. However, legal professionals are likely to handle the assets of the Deceased, particularly when closing an individual’s account and money is moved into to firms client account prior to onward distribution. Once the assets are distributed to the beneficiaries, should the Solicitor fail to carry out appropriate AML checks on the Deceased who is later found to have illegitimate assets, this process could be viewed as money laundering. The consequences of money laundering are defined in the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017, which state that, if convicted, a person may be imprisoned, face financial penalties or both.

What is the solution?

While the likelihood of Deceased clients having illegitimate assets may be low, the risk to Solicitors is extremely high. This risk can be avoided by performing a quick and cost-effective AML check of both the Beneficiaries, Executors and the Deceased.
Estatesearch can make this process simple and offers a comprehensive Anti-Money Laundering search covering Identity Verification, PEP registers and UK HMCT Sanctions. We include the search as standard in our Financial Profile Premium Search, our award financial asset search helping identify estate assets and liabilities. Giving you a single superior search, which helps satisfy more of your client’s due diligence, including the peace of mind you’re not handling proceeds of crime when administering an estate.

For more information on any of our services visit our website estatesearch.co.uk or email hello@estatesearch.co.uk

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