AS ATTEMPTS TO CURB MONEY LAUNDERING INTENSIFY, JANET PARASKEVA SETS OUT HOW THE LAW SOCIETY IS KEEPING SOLICITORS ABREAST OF IMPORTANT CHANGES TO THE RULES

Sky marshals and flights grounded at Heathrow may have grabbed the headlines over the past few weeks, but government efforts to defeat terrorist activity are ongoing in many areas beyond the business of air travel.

For solicitors, this means money laundering.

In February and September 2002, I wrote to senior partners in all private practice offices in England and Wales explaining that significant changes were under way in relation to the way in which the anti-money laundering legislation applies to solicitors.

By 1 March 2004, the current changes will be complete, when the Money Laundering Regulations 2003 come into force.

The effect of the regulations will be that most solicitors' practices will fall into the regulated sector in relation to many areas of legal work, including property transactions and much company and trust work.

The new failure-to-report provisions in the Proceeds of Crime Act 2002 (POCA) will apply to this extended sector.

The Law Society's money laundering task force has now completed its work on a new pilot edition of 'Money Laundering: guidance for solicitors'.

This replaces previous versions of the guidance and can be found on the Society's Web site at: www.lawsociety.org.uk.

We are also preparing a printed version, which will be sent out to all firms as soon as it is ready.

However, I would recommend that firms access the Web version as soon as possible, as the new regulations will apply to work carried out by firms from 1 March 2004.

The guidance should help firms review their current anti-money laundering procedures and ensure that they are compliant in time for the new regime.

As you know, criminal penalties can be imposed for non-compliance with the regulations, so it is essential that each firm has a nominated officer and that nominated officers carefully consider this guidance and make sure that their firms have effective procedures in place.

The Law Society has emphasised to the government that we do not think enough time has been allowed for compliance with the regulations.

In response, the Treasury has assured us that it would expect businesses to take a 'common sense' approach in terms of compliance.

This guidance has been carefully prepared in the light of task force discussions with the government, law enforcement agencies, other regulatory bodies and, most importantly, the profession.

Our objective is always to ensure that there is a proper balance between the public interest in fighting crime, the interests of individual clients, and the public interest in access to justice.

It is also important that the law makes practical sense in the context of a solicitor's practice.

Our work continues through participation in government committees that are keen to hear our views on methods of implementation and enforcement - and we are achieving significant and practical improvements.

The guidance is published now in a pilot form because we will want to revise it in the light of comments from solicitors who use it and of developments in the enforcement and interpretation of the legislation.

We expect to publish a revised version in six to 12 months' time and we hope that it will also include practical guidance aimed at different areas of legal practice.

The guidance is risk based and does not take a prescriptive, checklist approach.

Cases vary so widely that the most effective way of spotting potential problems is for all relevant staff - including important back-office staff - to be properly trained in money laundering issues.

They need to know what to look out for, what is unusual, and how money launderers might try to use a firm of solicitors.

Solicitors must take a risk-based approach, and each case must be looked at in its entirety.

A checklist would not work in these circumstances.

Approaches to money laundering are developing all the time and so it is essential that the nominated money laundering officer in each firm checks the Law Society's Web site regularly, as well as keeping up to date with other information sources that are relevant to law firms.

You should expect your procedures to evolve over time to take account of developments.

The Society will certainly seek to update firms as comprehensively as possible through its Web site.

Since 11 September 2001, the international commitment to tackling money laundering and terrorist financing has intensified.

Those efforts have been fully embraced by the EU and by the UK government.

The Law Society continues to press for proportionality in the application of the money laundering regime to the provision of legal services, but recognises that solicitors have an important role to play in helping to fight crime and in securing the confiscation of the proceeds of crime.

That role is also an immensely challenging one and I hope this guidance will help solicitors steer a path through the complex set of duties and obligations now imposed on them.

Practical feedback on how it could be improved would be greatly welcomed.

Janet Paraskeva is the Law Society chief executive