Internet Newsletter for Lawyers
In order to fully appreciate the way in which the legislation has been implemented it is necessary to understand the concept behind its enactment. The anti-money laundering legislation mounts a two pronged attack on crime. The first, as we all know, is the creation of a series of new crimes, the majority of which are contained in the Proceeds of Crime Act 2002 and which have achieved considerable publicity. The second, more subtle, line of attack is the imposition of a civil compliance regime which impinges dramatically on the day to day operation of the office. Value Added Tax turned us into tax collectors and the civil compliance regime will turn us into policemen.
While the civil compliance regime contains detailed regulations, its main thrust is towards due diligence testing. You must know your client AND you must know his matter. We have all become increasing familiar with “know your client” due diligence as an ever widening section of society asks us to produce passport and utility bill for even the most mundane transaction.
Part of the Kaye Tesler site showing the services currently offered and
indicating the ones which may now need to be reviewed or discontinued.
We must examine every transaction and ask ourselves whether it makes commercial sense and whether it is in line with the client’s general trade or business and we must satisfy ourselves absolutely that there is not the remotest suspicion of money laundering involved. Both the Government and the Law Society have made it clear that our profession is likely to be targeted by increasingly clever money launderers looking to hide behind the respectability of our profession for their nefarious tasks.
The anti-money laundering regime is so complex that it is impossible in a short article to consider its effect in any detail. This article asks the question whether on-line services are a dead duck in the light of the due diligence requirements that now fall on us. If you wish to know more about money laundering in general, then with the editor’s permission, I mention that I have published two aids. Firstly, a two hour lecture available on audio CD aimed at principals (£75+VAT) and secondly, a web based training scheme for both principals and staff at www.moneylaundering.uklaw.net (the demo is free) by which firms can comply with their obligation to train staff.
Websites offering on-line legal services basically have three components.
The second component that I call “point of contact” may equally continue, provided that when offering such services, measures are put in place that will enable you to undertake both client and matter due diligence.
It is in the third component that extra care has to be taken and indeed some elements may have to be discontinued.
The true on-line services in reality constitute a completed document service. My practice was the first to offer such complete "buy over the counter" style services. These are services such as deed poll change of name or power of attorney. The client completes a questionnaire on line and the information is merged to relevant precedents. Other “buy on-line” services such as will drafting or obtaining grants of probate or letters of administration, may go a little further with more contact with the client. The service consists not only of drafting the requisite affidavit but also of lodging and receiving the Grant.
The very essence of on-line services is that they are offered electronically without ever meeting the client and not undertaking client and matter due diligence. “Over the counter” services such as deed poll drafting clearly can no longer be undertaken on-line as indicated with a “X” in the picture on the previous page. Some other on-line services as indicated by a ‘?’ may still be possible but serious consideration will be necessary. We must never forget that under the regulations, client due diligence is a personal obligation.
Hopefully, variations in procedure relating to instructions received via either the brochure or “point of contact” components of a website, will enable client and matter due diligence to be undertaken, but those tests impinge dramatically on the third element of an on-line service website making them virtually impossible without some lateral thinking e.g. consider using a webcam, or one of the latest generation of mobile phones that can send photographs – just some food for thought!
Operators of on-line websites should understand that money launderers are becoming ever more desperate and ever more wily in their attempts find routes to clean their dirty money. It takes but a moments thought to see how they could use a solicitor’s on-line service to achieve their ends. Let us look at some examples.
It would be not be beyond the realms of his imagination on the death of a relative to claim that a large sum was found stuffed in a mattress and then clean the cash as part of the deceased’s estate.
Imagine the money launderer obtaining a power of attorney over the affaires of a dementia patient. He places his dirty money into the dementia patients bank account over which he has gained control and proceeds to use it for his own ends.
The money launderer knows that he will be asked for proof of identity. He takes a tenancy of a flat and applies for gas and electricity. He sends the utility company his correct identity together with a deed poll showing that he has changed his name and asks for the utility bills to come in his new name and hey presto – new documents of the type that he requires in due course will arrive through the post. He tells anyone asking that he has never been abroad and has no passport.
Ironically non-qualified service providers who may, for example, provide divorce services or other legal documents on-line but who are nothing other than the sellers of precedents, are probably not affected by the civil compliance regime. The regulations are such that a legal service to be affected must, “involve participation of a financial or real property transaction…” One can well see those precedent sellers arguing strongly, and probably correctly, that they are not affected.
Interestingly, those form providers who draft wills may however be caught as the regulated sector includes any person who provide “by way of business…. services in relation to the formation, operation or management of a trust.” Conceivably therefore companies selling forms creating wills which create trusts might be caught by this provision.
Whatever the ultimate view, legal practice will never be the same again.
Michael Kaye is a partner in Kaye Tesler & Co., (www.kt.uklaw.net), e-mail email@example.com. He is widely known as an innovator in the legal IT sphere and has published many lectures on audio CD. His latest venture is a web based anti-money laundering staff training program, with details at www.moneylaundering.uklaw.net.
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