Current money laundering regulations disproportionately affect small firms and promote ‘tick box compliance’, the Law Society has told the Treasury.
Responding to a consultation about the effectiveness of the UK’s anti-money laundering regime, the Society warned that the current regime ‘undermines the effectiveness and proportionality of the measures’ and drives up costs for legal services consumers.
Law Society president I.Stephanie Boyce said: ‘At its centre, the UK AML regime should be effective at reducing money laundering and terrorist financing. It must be built on an evidenced-based assessment of the risks and what works to mitigate those risks.
‘A risk-based approach will be most effective, as it requires regulated persons to focus more fully on those clients and situations which present the greatest risk, rather than conducting a less rigorous, but nonetheless onerous and costly, assessment across a broader range of matters which is not effective in tackling money laundering.’
HM Treasury opened a call for evidence in July as part of the government’s economic crime plan. A final report setting out the findings of the review and, possible options for reform is expected to be published by the end of June next year.
Last week, the Law Society and the City of London Law Society denounced government plans for an economic crime levy, which aims to raise £100m per year by taxing businesses that are subject to UK money laundering regulations and have annual revenue of over £10.2m.
The professional bodies said it was more appropriate for improvements to be funded by taxpayers and other sources such as the assets recovered from criminals and AML fines imposed on the regulated sector.