Review calls for accounts rule to stave off fraud

A new solicitors' accounts rule is needed to curb the risk of client accounts being used by money launderers as quasi-bank accounts, a consultation paper released by the Law Society this week suggested.

The Society's regulation review working party's paper, 'Minimising the Risk of Money Laundering', attached a new draft accounts rule that would prohibit the use of solicitors' accounts where there is no underlying transaction or provision of 'solicitor-like services'.

The document set out arguments in favour and against the adoption of a new rule.

Reasons for change included the fact that regulation might be more effective than relying on criminal prosecutions to pick off bad transactions and that some solicitors appear to be offering what amounts to banking services.

'A new rule would demonstrate that the Law Society and the profession take the problem seriously,' the consultation paper said.

It also cited several arguments against creating a rule: that it is not generally a function of professional rules to replicate criminal legislation; that such a rule may stifle genuine solicitors' services; and that dishonest solicitors would ignore the rule in any event.

The Law Society's standards board and compliance board are in favour of the new rule - subject to the outcome of the consultation.

The Society's deputy vice-president, Ed Nally, said: 'Seen in the context of the introduction of the Proceeds of Crime Act 2001, and new money laundering regulations, the timing of a new rule is consistent with the new legislation.'

Alison Crawley, the Society's director of regulation policy, said: 'We want a rule that curbs bad practices but that does not stop what solicitors do normally.'

The consultation period will end on 1 July 2003.

LINKS: www.lawsociety.org.uk

Jeremy Fleming