Treasury targets pooled client accounts in AML action plan

Treasury proposals to bolster the UK’s anti-money laundering regime could see law firms get ‘battered’ with requests from banks for information about pooled client accounts, the Law Society's flagship conference on economic crime has heard.

The Treasury is consulting on regulations to close ‘regulatory loopholes, address proportionality concerns and account for evolving risks in relation to money laundering and terrorist financing’. Pooled client accounts were identified as a specific weakness in the UK’s regime.

Under the proposals, pooled client accounts would be ‘decoupled’ from the simplified due diligence framework, removing the requirement for banks to treat pooled client accounts as ‘low risk’. Banks would be required to take ‘reasonable measures’ to understand the purpose of the pooled client account, gather sufficient information about the customer’s business and assess the risk associated with the account.

‘Banks must obtain further information and consider imposing additional controls on the PCA where appropriate to manage risk,’ the treasury's consultation paper says.

‘Holders of pooled client accounts must, on request, provide the bank with information about the identity of persons whose funds are held in the account (ie the underlying customers). This is intended to ensure transparency and facilitate effective oversight, without requiring banks to conduct [customer due diligence] on all underlying customers.’

However, hundreds of attendees at the Law Society’s economic crime conference yesterday heard that Chancery Lane will ‘push back’ on the proposal.

Simmons & Simmons’ Amasis Saba, a member of the Society’s economic crime taskforce, told the conference, that the onus will fall on banks to be comfortable about who the beneficial owners are, which could include counter parties.

'This is an area the Law Society will be pushing back on... Your teams are going to get battered by requests. If you have multiple banks, [that means] multiple requests. If the Financial Conduct Authority says "you're dealing with a high-risk sector", it's unlikely the banks will give us a pass.'

The treasury’s consultation closes on 30 September.