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Lawyers risk prosecution for failure to report suspicion of financial sanctions breaches

Treasury reporting requirements updated to include ‘independent legal professionals’

10 August 2017

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Solicitors are among those who could be prosecuted for failing to report information that could undermine the UK’s financial sanctions regime following an amendment to regulations on reporting requirements earlier this week.

New financial sanctions regulations that came into force on Tuesday (8 August) have expanded the scope of the reporting requirements in the original European Union Financial Sanctions Regulations 2017 to cover specific businesses and organisations, including ‘independent legal professionals’.

Current rules only require a ‘relevant institution’ to report to HM Treasury, with ‘relevant institution’ defined in a way that they effectively apply only to financial institutions.

In addition to lawyers, the new statutory instrument extends the list of organisations covered to accountants, auditors, trust or company service providers, estate agents, dealers in precious metals and stones, and casinos.

The amendments extend to these businesses the criminal offences associated with a failure to comply with the duty to inform HM Treasury “if they know or have reasonable cause to suspect that a person has committed an offence under the relevant regulations or is a person who is the subject of an asset freeze for the purposes of the relevant EU financial sanctions regime”, the notes to the rules say.

The list covers about 20 countries including Egypt, Tunisia, Libya, Lebanon, and Zimbabwe – some appearing twice where they fall within the scope of different sanctions regimes, such as Iran and Ukraine. It also includes ISIS and Al-Qaeda.

“The new financial sanctions regulations mean legal firms are obliged to comply with the reporting regime,” said SRA policy director Crispin Passmore. “These regulations, and the approaching Financial Action Task Force inspection, are further reminders of the importance the UK and global community places on tackling terrorist financing.

The list of risk-countries covered suggests that smaller law firms with no international connection are statistically less likely to be affected, but they should be on their guard nevertheless, Passmore said.

“Risks exist for every single solicitor and law firm whether conveyancing on the high street or handling global transactions, and each should be thinking about their responsibilities for tackling these issues.”

The Office of Financial Sanctions Implementation (OFSI) has updated its Guide to Financial Sanctions to reflect the changes.

Jean-Yves Gilg, editor-in-chief

jean-yves.gilg@solicitorsjournal.co.uk | @jeanyvesgilg

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Risk & Compliance International