Coming clean on money laundering

John Potts, head of corporate litigation, Clifford Chance Maurice Allen, head of banking, Weil Gotshal & Manges

David Byrne, head of investigation, Titmuss Sainer Dechert

The National Criminal Intelligence Service (NCIS) last week published its annual report containing a stinging attack on lawyers for failing to report suspicious transactions which result in money laundering.

In the report, solicitors are cited, alongside accountants, as “obvious targets” for the money launderers.

The study says only 1.9 per cent of disclosures to the NCIS are made by lawyers, even though the report claims that in many instances solicitors are essential for moving criminal funds through client accounts.

Simon Goddard, a detective in the strategic and specialist intelligence branch at the NCIS, says those who police the financial world continue to report the involvement of lawyers in money laundering, both willingly and unwittingly.

But do the NCIS' conclusions paint an unfair and exaggerated picture of lawyers in relation to money laundering, or are lawyers not doing enough to ensure that suspect transactions do not slip through the net before a crime occurs?

John Potts, head of corporate litigation at Clifford Chance, says: “I wouldn't have thought solicitors in general were used for money laundering.

“I would be surprised if it went on in firms of solicitors in the City.”

He thinks law firms are taking adequate procedures when vetting clients. “Most lawyers now are quite diligent, because the problems if they are found to be involved in something are so great. There is almost undue suspicion.”

Potts adds: “I think the criticism is unfair. Money laundering procedures are very tight indeed.

“We do checks on all our new clients, we can't just open a new client file without going through rigorous investigations, and we do make reports to the police from time to time.

“Other firms have got to get tougher and follow similar lines, everyone has to be vigilant. As long as there are loopholes, people will find out where they are,” he says.

Maurice Allen, head of banking and joint head of the London office of Weil Gotshal & Manges, says: “It seems to be the implication that solicitors turn a blind eye to this and I don't think they do.”

But he admits some firms could be more vigilant.

“In the US it is part of normal procedure to vet a client thoroughly before taking them on, but I'm not sure it's the case over here.

“If you asked most firms whether a partner could take on a client without doing investigations into them, I think the answer would probably be yes.

“Law firms tend to take people at face value, they are not always commercially aware. Maybe the Law Society should be reminding people more often on what they should be looking out for.”

Allen remains unconvinced by NCIS claims that law firms are regularly involved in money laundering.

“At the end of the day you don't need solicitors to launder money. Accountants are far more involved with money passing from one account to another,” he says.

David Byrne, head of the investigation and litigation department at Titmuss Sainer Dechert, says the low number of referrals by solicitors could be for one of two reasons. “Either the problem is not as widespread as they say or, possibly, solicitors are not as suspicious as the police would like them to be.

“If it is that bad why don't the NCIS come round and tell the law firms what they should be looking out for? If they really want our active involvement and assistance, they should come and talk to us instead of sniping at us,” he says.

“It is said this goes on a lot in property transactions, but the average property lawyer does not have the level of knowledge that the NCIS does.”

He is adamant the problem is not widespread in the legal profession. “I really don't think there is as much money laundering going on as they think.”