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Litigators aren’t Lawyers

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Most firms are still struggling with their interpretation of 2007 Money Laundering Regulations. Section 3(9) gives the authority for the statement that Litigators are not lawyers as a generality. When this is put alongside the Law Society guidance on privilege in chapter 6 of the guidance note of 22nd February 2008 you get to a risk based approach of not doing CDD [Client due diligence (sections 5-7)] in purely litigious matters unless there is something to trigger a specific concern. The problem is making sure that you have systems in place to ensure that if you then do regulated work for them subsequently or in the course of the existing matter you would then verify fully at that stage. Chapter 1 of the Law Society note gives guidance as activities not covered by the regulations and litigation is listed there as being not covered.


You should also be aware that the Solicitors Code of Conduct Rule 11 (in the notes) goes part way to saying you should check that a client is who they say they are so as not to mislead the court.


As to timing section 9(3) of the 2007MLR just says that CDD must be done as soon as practicable, and there is a statement in it that it can be completed during the case if this is necessary not to interrupt the normal conduct of the case (which easily covers most litigation or legal work) and there is little risk of a money laundering offence actually being committed. However, some firms have received written advise from the SRA that as soon as practicable means, in their interpretation, 48 hours. I can see no grounds for this in the regulation but I would also impress on people the need to complete checks where ever it is practical to do so as close to the outset of the matter as possible. I do not advocate waiting until the transaction phase of a matter is executed or ‘as and when’ before the matter is closed. No doubt this approach across a firm will go a long way to making sure that the regulator has confidence in the firm’s procedures.


Many firms choose to ignore the distinctions between regulated activities and non regulated on the basis that getting their lawyers to apply their minds to that definition when all around them is pressure to progress the matter is one step too far. Systems that allow for the checking of all new clients and the updating of that information are in my view far better implementations of a risk management policy than relying on lawyers to place money laundering at the top of their agenda when addressing the considerations of obtaining a new client.


Written by Andrew Hodges

April 24, 2009 at 10:19 am

Posted in Compliance

Tagged with , ,

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