Lawyers struggle to comply with anti-money laundering regulations
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In short
The fact that banks had difficulty complying with the anti-money laundering legislation had already become painfully clear through sky-high fines imposed on ING and ABN Amro by the Public Prosecution Service (OM) and the criminal prosecution of each top executive. But top law firms have also recently been in the news because of non-compliance with the Anti- Money Laundering Directive (AMLD). For example, Pels Rijcken, the Dutch state attorney, was discredited because of former CEO Frans van Oranje who channeled 10 million from clients. The company NautaDutilh is also suspected of money laundering in Belgium.
The AMLD for lawyers
Law firms often assist their clients in complying with the AMLD, but have also been assigned a gatekeeper function by the government. They must therefore comply with this law, just like civil-law notaries, brokers and accountants. In addition to customer due diligence, part of complying with the AMLD is reporting unusual transactions. Refusing a report is punishable, but in 2020 there were only 21 reports of unusual transactions made by the 17,000 lawyers in the Netherlands. This compared to more than 245,000 reports by bankers and 2,500 by accountants. Records of Houthoff's partner meeting, leaked by the FD, show that compliance is not a priority and that lawyers are not aware of the AMLD.
Due to the gatekeeper function, lawyers are charged with compliance with the AMLD. Customer due diligence must be performed and unusual transactions must be reported to FIU-the Netherlands. The AMLD is based on a risk-oriented approach in which the gatekeepers assess the risks of its clients. The AMLD already broadly indicates what additional risk factors are, but various organizations such as the Financial Action Task Force (FATF) and National Risk Association (NRA) have also drawn up lists of increasing risk factors for the legal profession. Based on the estimated risk, a simple, standard or enhanced customer due diligence is performed.
However, there is an exception in the Wwft for lawyers (Art. 1a(5) Wwft):
"The Wwft does not apply to lawyers and law firms insofar as they perform activities for a client concerning the determination of the client's legal position, his representation, and defense in court, advising before, during and after legal proceedings or giving advice on instituting or avoiding legal proceedings (Section 1a (5) Wwft).
This means that lawyers who perform these activities (determination of one's legal position, representation and defense in court, giving advice before, during, and after a lawsuit, or giving advice on instituting or avoiding a lawsuit) do not have to comply with the guidelines of the Wwft. This also applies to the obligation to report to FIU-Netherlands. The phrase "determining his legal position" is interpreted restrictively in the Netherlands. Freely translated, it means the first exploratory interview. This first exploratory interview is therefore exempt from the obligations of the Wwft.
The Dutch Bar Association has written a manual to provide lawyers and employees of law firms with tools to comply with the anti-money laundering regulations.
CDD On Demand
It is precisely to make compliance with the Wwft easier, SCOPE FinTech Solutions invented the CDD On Demand solution. The compliance check within the CDD On Demand solution automatically requests data from various sources about the entered legal or natural person (client). The client is checked on various points, ranging from PEP and sanction lists to insolvency registers. After the extensive compliance check, you can request a digitally certified report from the client. If a client has been examined, he can be placed on a monitoring list. As a result, people are always aware of any changes within your client portfolio. In CDD On Demand, this monitoring is done automatically and is checked daily. If anything changes, you will be notified.
You can now try CDD On Demand for free by requesting ten trial credits. Better be safe than sorry!