For those of you fixed with the responsibilities of regulatory anti-money laundering compliance for your business, one might easily argue that life is already stressful enough without the last minute introduction of new legislation – particularly when the penalties for failing to follow that legislation are potentially, so severe. Nonetheless, all 120 pages of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 were passed on Thursday 22nd June 2017, with just one working day
before they became effective on Monday 26th June 2017.
Fortunately, the final legislation did not change a great deal from that originally consulted upon and was intended only to be a “top up” to the existing 2007 regulations. One new area however is found in regulation 21 which introduces a requirement to screen employees both before their employment starts and periodically afterwards. The requirement is not absolute and is tempered by applying only “where appropriate with regard to the size and nature of” your business. Further, the requirement is to screen “relevant employees”; not all employees.
So your starting point is to consider and decide a) whether the requirement is appropriate to apply to your business and b) if it is, which employees are “relevant employees”. As always, you will need to document that consideration, your decision and your reasons for making it as you did.
Predictably, guidance from both the Law Society and the Solicitors Regulation Authority is scant. According to the Law Society, the SRA has expressed an intention to take a “sensible and pragmatic approach to AML supervision” and to “allow a period of time to adapt [to] the new requirements”. However, what this means in practice is unknown so getting to grips with the requirements of the legislation as soon as possible is advisable.
Questions over whether it is appropriate for a law firm to screen employees having regard to the “size and nature” of the business are likely best to be answered with a review of work types carried out and an assessment of the potential for money laundering to be involved in those work types.
Similarly, those firms that decide that it is appropriate for them to screen employees will need then to consider which categories of employees should be subjected to that screening. Again, in the context of anti-money laundering processes, that question is probably best answered with reference to the responsibilities of that employee and the extent to which they might be able to participate – either with or without knowledge and also willingly or otherwise – in money laundering activities.
If the business does decide it needs to screen employees, it will need to take a view as to what that screening process will involve and whether the process will differ depending on whether it is a first time screen carried out before employment commences or a “refresher”. Again, in the context of anti-money laundering processes, the screening is likely to focus on areas related to integrity, honesty and financial vulnerability such as criminal records checks, credit checks, qualifications etc.
Finally, those business that decide they are required to carry out screening will then need to consider whether they need to start a “catch up” process with existing employees. Of course, even without the anti-money laundering legislation, there is a school of thought that says that screening of employees is simply good practice. The professional prestige associated with law firms might tend to suggest that such businesses should be screening employees as a matter of routine. Clients might expect that a law firm would set such high standards. Some might insist on it. A specific set of circumstances (such as the existence of a criminal record or significant financial problems) may not be fatal to employing a particular individual, but they may be helpful and relevant when considering supervision arrangements or allocation of role and responsibilities. Similarly, while there may be an expectation that existing employees will disclose any relevant change of circumstances, businesses should at least consider the desirability of carrying out regular screening of existing employees as a means of encouraging voluntary disclosure by employees. In addition, a more comprehensive and frequent approach to screening reduces the risk that employees change roles from time to time – perhaps through career progression – but in doing so, move from a category where screening is not necessary to one where it is.
For further information on how your business can benefit from employee screening, or for details and pricing on our anti-money laundering screening services specifically designed for law firms, please contact us by telephone on 0333 207 6552 or alternatively, email us at enquiries@arl-ps.co.uk