According to the CFATF Mutual Evaluation Report June 2016 “there is no evidence that the legal profession complies with AML/CFT measures in Trinidad and Tobago. This is a serious deficiency having regard for the significant role played by these professional as financial intermediaries (gatekeepers) in introducing and facilitating such a large percentage of financial transactions”.
Gatekeepers are professionals who can facilitate the entry of illicit money into the financial system . These professionals include: Accountants, Auditors, Lawyers, Notaries, Company Formation Agents.
In AML CFT terminology, lawyers fall under the umbrella term DNFB-Designated Non Financial Businesses and Professions.
The First Schedule of the Proceeds of Crime Act (POCA) captures lawyers as listed businesses but states that the lawyer is only accountable when performing the following functions on behalf of a client:
a)Buying and selling real estate;
b)Managing of client money, securities and other assets;
c)Management of banking, savings or securities and other assets;
d)Organization of contributions for the creation, operation or management of companies;
e)Creation, operation or management of legal persons or arrangements, and buying and selling of business entities.
Lawyers are susceptible to being used as a conduit to money launderers to facilitate their nefarious purposes.1
It is therefore imperative that local attorneys understand their AML/CFT obligations and comply with the FIU to safeguard their practice and to retain their reputation.
Which lawyers are at risk?
Sole practitioners, small firms and large firms are all plagued by the risk of being used by money launderers and perpetrators of other financial crimes. A risk assessment ought to be conducted to ensure that measures are put in place that are commensurate with the risks posed by the customer.
What are attorneys required to do?
- Register with the FIU;
- Create a Compliance Program;
- Appoint a Compliance Officer;
- Submit a Fit and Proper Form for the Compliance Officer to be approved by the FIU;
- Train staff on the Compliance Program;
- Receive internal suspicious activity and transaction memos from staff;
- Report Suspicious Activity in the SAR/STR to the FIU;
- Undergo Continuous training;
- Conduct an annual internal review of the Compliance Program;
- Conduct annual external review of the Compliance Program.
How do money launderers use the legal and professional services law firms and sole practitioners to launder their funds?
- Creating corporate vehicles and complex legal entities such as trusts. These obscure the links between the proceeds of crime and the perpetrator.2
- Buying and selling property can be used in the layering stage, or in the integration stage where the asset is purchased and retained.3
- Performing financial transactions on behalf of a client (making deposits, issuing cheques, making and receiving wires, buying and selling stock).4
- Providing financial and tax advice. Criminals may pose as wealthy individuals who need help sheltering wealth from tax.5
The issue of lawyers providing advice to their client is controversial, as they have a confidential relationship with their clients.6
According to the CFATF Mutual Evaluation Report June 2016 at paragraph 260 “Financial Institutions (FIs) have indicated that they have particular concerns with doing business with real estate entities and lawyers that buy and sell real estate due to concerns that there is inadequate AML/CFT understanding and application of the requirements such as CDD”.
The Evaluators at paragraph 282 of the MER requested that there be collaboration between the FIU and the Law Association to make the legal fraternity aware the AML/CFT legislative requirements as well as their obligations to implement these requirements.
The Evaluators noted at paragraph 317 of the MER that there appears to be a gap in the registration of lawyers. The majority of lawyers opined that they did not qualify for inclusion as a listed business since their services did not fall withAre Lawyers required to comply with Financial Intelligence Unit (FIU) in Trinidad and Tobago? clearly identify who should be registered.
For the offence of Money Laundering, the penalty :
- On summary conviction, is a fine of $10M & to imprisonment for 10 years
- On Indictment, to a fine of $25M & to imprisonment for 15 years under POCA, S 53 (1)
For the offence of the Financing of Terrorism the penalty,
- On conviction on indictment for Individuals $5M & 25 years imprisonment;
- On summary conviction Legal entities $5M & 5 years imprisonment under Anti Terrorism Act s 22 A (3) (4) .
When must legal practitioners conduct Customer Due Diligence(CDD)?
When the services provided to the client falls under those services described in the First Schedule of the POCA. This CDD must be applied on a risk sensitive basis when lawyers establish a “business relationship” with a client, when attorneys carry out an occasional transaction, when they suspect money laundering, when they suspect terrorist financing or when they doubt the veracity of identification documents.7
When must legal practitioners conduct Enhanced Due Diligence (EDD)?
For ongoing matters that present a higher risk of money laundering or terrorist financing, where the client has not been physically present for identification purposes or where the client is a Politically Exposed Person (PEP).8
Kevin Shepherd back in 2002 stated that “Some believe that the special relationship between lawyers and their clients gives lawyers an early inside view into crimes that could make their insights invaluable in the war on domestic and international criminal activity.”9
Lawyers as gatekeepers must start the Know Your Customer (KYC) process. “There is just no other current way of ensuring that the information an Financial Institution (FI) receives is not just a big cobweb of complexities created by a lawyer, helping the customer protect personal identification and corporate ownership information”.10
The time is coming when lawyers will be closely observed by the regulators as powerful and effective gatekeepers. Please get your affairs in order.
The author is an internationally certified Anti Money Laundering specialist and attorney at law in Trinidad .
Please see the website : http://asydneygroup.com and the associated social media pages
1 – http://www.telegraph.co.uk/money/criminal-activities/anti-money-laundering-solicitors-front-line-defence