The Human Cost of Money Laundering: The Challenge for the Legal Sector

As money laundering tactics grow ever more sophisticated, the legal sector faces a mounting responsibility to stay vigilant and proactive in its safeguards.

Mev Dzihic, technical lead behind Verify 365, the complete AML, KYC & client onboarding platform, shares his expert insights on this critical issue, shedding light on the global impact of money laundering, the integral role conveyancing firms play in combating it and the real-world consequences for firms that fail to implement AML protocols.

In this article, Mev navigates through the complex threats posed by financial and criminal networks, emphasising how an effective AML policy, backed by the latest technology, is essential for firms looking to stay one step ahead. By exploring the regulatory landscape, the devastating effects of organised crime, and the crucial role of compliance and client verification, he provides an essential roadmap for conveyancers to protect both their clients and their businesses.

The Human Cost of Money Laundering & The Impact on Your Business
Let’s begin by discussing the cost of money laundering and the devastating impact it has on the legal sector, as well as the global damage and rippling effects it can cause. Staggering statistics from the United Nations Office on Drugs and Crime (UNODC) show that between 2% and 5% of global GDP is laundered each year, equating to between EUR 715 billion and 1.87 trillion. This is hugely concerning and demonstrates the devastating impact of money laundering.

Money laundering can have a major impact on your business if you fail to have the correct measures in place. An effective AML policy with efficient procedures in place ensures you meet your legal obligations. However, the truth is failure to prepare, prepare to fail, and your business will suffer the consequences. While it may be unintentional, you could be fuelling organised criminal networks if you’re not completing your checks and tasks diligently.

Fines and sanctions handed out by regulatory bodies, if they find you have breached any regulations, can cause severe reputational damage and loss of clients and will certainly negatively impact your brand. Although it may seem like I’m exaggerating, there is the possibility that the impact could swell so much that it could cause your firm to close and your career to be lost entirely.

How Money Laundering Fuels Organised Crime
Money laundering has a devastating impact on society, but it’s quite literally what organised crime networks thrive on. Money Laundering plays a crucial role within these networks, with a string of crimes, including human trafficking and, in some extreme cases, terrorism, unfortunately at the forefront. Criminals will go to any length to conceal assets to ensure their illicitly gained finances are protected and go undetected by the authorities. They will utilise things such as offshore accounts, shelling companies and unconventional investments in a bid to protect their assets and provide further challenges for investigative bodies attempting to close them down.

The Role of The Legal Sector & Your Obligations
The legal sector is in the best position to combat money laundering, but if firms don’t have the correct procedures in place, they could inadvertently open a gateway to criminal activity and money laundering, which will have significant repercussions for your business.
However, law firms can become the gatekeepers to ensure criminal networks are shut down and suspicious activity is reported to the correct authority figures. That is why having the correct measures in place can be game-changing. There are common practices your firm must have including practice-wide risk assessments, AML policies, reporting and training for your whole team.

The purpose of a firm-wide risk assessment is to help you identify the money laundering risks your firm is, or could be, exposed to while also curating a plan on how to combat these and protect your firm. Essentially, it will help your firm to take a risk-based approach to preventing money laundering. Having a firm-wide risk assessment in place will also help you to develop appropriate policies, controls and procedures.

The policies you implement should follow the same ideology while also meeting the compliance obligations set by your regulatory body. With guidelines regularly updated, your risk assessments and policies should follow suit, but you should also be recording assessments in case there are concerns.

Helping your team understand exactly what they need to look out for when completing checks on clients and new matters. Education is a key to success given the more nurturing your team receives, the easier it will become to spot the signs, report the activity and protect your business from potential threats.

Stay Ahead of the Game to Remain on Top
It’s all about staying ahead of the game and meeting your legal obligations and key responsibilities in your firm to protect you and your staff.

Solutions are out there, but implementing firm-wide risk assessments and AML policies is still a must, and that element must not be forgotten. Innovations in technology have meant the legal sector is in the middle of a technology boom with a vast range of legal technology products available to combat various challenges with firms, and Verify 365 is one of those.

Verify 365 is supporting firms in the fight against money laundering, with biometric identification checks to validate an individual’s identity as well as a winning combination of open banking technology, advanced AI analytics and source of funds questionnaire to help solicitors analyse financial data and confirm the true source of funds and in some cases the source of wealth. This technology helps firms stay ahead of the game. While I know the challenge will always remain, it’s crucial solicitors are vigilant but also adaptable to changes and willing to consider viable options such as legal technology to combat money laundering challenges.
To learn more about Verify 365, part of tmgroup, click here or pick up a free copy of Verify 365’s Anti-Money Laundering guide here.