The Money Laundering Regulations 2003 (MLR), came into force on 1 March 2004 and require internal anti-money laundering procedures within solicitors' firms.

The MLR apply to persons who carry out 'relevant business' and therefore are within the 'regulated sector'.

Regulation 2(2) defines relevant business as including legal services involving the participation in a financial or real estate transaction, the provision of company and trust services, insolvency and tax services, and financial services.

If a firm's business falls within the regulated sector, there are several obligations with which solicitors must comply or face the possibility of two years' imprisonment or a fine, or both.

Solicitors must identify clients, keep records and train their staff.

They must also establish other internal control and communication procedures aimed at preventing money laundering, including appointing a nominated officer (often known as a money laundering reporting officer).

Finally, solicitors must ensure that their employees are aware of the current legislation and they are given training on how to recognise and deal with transactions that may be related to money laundering.

The Law Society's pilot money laundering guidance (available on www.lawsociety.org.uk) advises solicitors to take a cautious approach when determining whether their firms carry out relevant business.

Firms that do not undertake relevant business - or who carry out a range of activities inside and outside the regulated sector - may choose to apply the MLR across the firm's business as a form of risk management.

This will help avoid commission of the criminal offences under the Proceeds of Crime Act 2002 and to ensure consistency for clients and staff.

- The Law Society's professional ethics team provides a confidential advice service for solicitors and their staff about professional conduct rules including money laundering (tel: 0870 606 2577, from 11am-1pm and 2-4pm).