Money laundering puts City firms on defensive

Five major firms call on Deloittes’anti-fraud; Linklaters steps up global compliance operation

Five top 30 law firms have called in Deloitte & Touche’s anti-fraud team because of mounting concerns that money launderers are targeting their lawyers.

Deloittes’ head of fraud management Mark Tantam says his team was called in because the firms “had a problem with money laundering, or because they felt exposed to money launderers, particularly in foreign offices”. Firms are also reacting to the National Criminal Investigation Service’s requests that they should report as often as banks do.

The revelation comes at the same time as Linklaters & Alliance is reviewing its client detection procedures and boosting its internal watchdog department. Partner Donald Williams, who took over the compliance post two months ago and who works with assistant Nicola Gillespie, says that he intends to recruit another partner and an assistant.

The firms being advised by Deloittes are seriously concerned that their procedures need to be improved, says Tantam, and also because they have had to report transactions as a result of suspicions around their clients’ activities.

Law firms also need to prepare for the forthcoming European Union (EU) directive, which tightens a 1991 directive to require that all lawyers report any suspicions of money laundering.

Tantam refuses to name the firms that Deloittes is advising, but reports that law firms are having problems over lawyers in offshore offices being approached by launderers who want to get dirty money out of the country. He says: “They either use people in that office or use people in the City [of London] and use that [overseas lawyer] relationship to transfer money out. This isn’t deliberate activity by law firms, but they may fall victim to someone who’s quite sophisticated.”

Linklaters is planning to set up a global compliance unit to ensure that the procedures used in London to detect money laundering are adopted worldwide. Williams has drafted an electronic checklist that is more comprehensive than the old guidelines which will be used globally.

However, Williams stresses that money laundering will never become an issue for Linklaters, as the majority of its clients are listed companies – a sentiment echoed by other leading City firms.

The real problem is ensuring that offices outside the EU have the same compliance structures in place. “We don’t currently have the capacity to police our branches outside the EU,” says Williams. “These branches are obviously operating under different jurisdictions to the offices in Europe, but they must adopt a higher standard than is usual locally.”

The Law Society has lobbied the EU over fears that the new directive may mean lawyers will have to warn clients at first interview that they may be reported on (The Lawyer, 25 September, 2000).