Anti-Money Laundering – Some Points to Note
Every year, Law Society of Singapore conducts anti-money laundering inspections (the inspections) into 50 law firms. Small, medium and large law firms with varying practices are inspected and the inspections cover both Singapore law practices and foreign law practices. The regulatory framework facilitating the inspections is as follows:
- Part VA of the Legal Profession Act 1966 (LPA);
- Legal Profession (Prevention of Money Laundering and Financing of Terrorism) Rules 2015 (the Rules); and
- Council of the Law Society’s Practice Direction 3.2.1 (PD 3.2.1) – Prevention of Money Laundering and Financing of Terrorism.
The aim of the inspections is:
- to ensure our law practices take steps to identify, assess and understand the money laundering risks they may be exposed to;
- to confirm that our law practices adhere to the requirement under the legislation on client due diligence (CDD) and (where applicable) enhanced client due diligence (ECDD);
- to encourage all law practices to have internal written policies, procedures and controls for the prevention of money laundering and financing of terrorism; and
- to emphasise the importance of continued training and awareness in anti-money laundering, including the understanding of filing suspicious transactions reports.
The inspections are now a feature of our legal landscape and our members are familiar with the process. The good news is our law practices have become more aware of the anti-money laundering framework in Singapore and have taken steps to formulate rigorous policies and procedures to adhere to the regulations. However, there is still room for improvement. Over the years, some patterns have emerged during the annual inspections, namely:
- Some law practices are of the view that because they do not handle client’s monies, there is no risk of money laundering. This is incorrect. Whilst the abuse of client accounts is a significant money laundering risk, there are other important money laundering risks that they need to be aware of, e.g. dealings in real estate interest, sale of businesses and companies, and setting up of structures to conceal the identity of beneficial owners.
- Some practitioners have expressed the view that they do not need to worry about money laundering since they do not have foreign clients. This is incorrect, There have been cases where Singapore clients have used lawyers to facilitate money laundering.
- Some practitioners are not aware that a sample client due diligence checklist is available on the Society’s AML Portal accessible here: https://www.lawsociety.org.sg/for-lawyers/aml/ Please access it, familiarise yourselves with it and adopt it in your practice, making whatever changes that are necessary for your practice. The checklist allows you to properly record and assess the money laundering risks associated with each file.
- Many law practices do not bother to document their AML policies and procedures. Others just rely on the AML Rules or the Council Practice Direction without more. Members are reminded that pursuant to rule 18 of the AML Rules, it is mandatory for each practice to have an AML programme that includes internal policies, procedures, and controls including management procedures. It is advisable that this programme be in writing.
- There remains uncertainty about the status and reach of who is considered a politically-exposed person (PEP). A PEP is not limited to the politically-exposed person themselves, but includes his or her immediate family members and close associates. The formal definition is found in section 70A of the Legal Profession Act. Further guidance can be found from the FATF Guidance on the Law Society’s AML Portal.
- Many practitioners do not appreciate their obligation to make a suspicious transaction report (STR) with the Suspicious Transaction Reporting Office.1See section 70D legal Profession Act and section 39 Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act They should not be deterred by commercial or cultural considerations from doing so. For example, it appears that some practitioners, when suspicious that a retainer may involve money laundering, discharge themselves or refuse the retainer, without appreciating that this is not adequate.
- Some foreign law practitioners are not aware that they are subject to the regulatory framework in Singapore in respect of AML/CFT as they take the position that they do not fall under the regulations here. This is a reminder to foreign law practices and foreign lawyers in Singapore that the AML/CFT regime found in the Legal Profession Act and the AML Rules apply to them.
Practitioners who have queries on AML matters may contact the Law Society secretariat by writing to [email protected].
|↑1||See section 70D legal Profession Act and section 39 Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act|