Diane McGiffen

The thematic review found examples of best practice, alongside notable opportunities for practices to improve in this critical area of AML compliance. In response to the findings, the Society’s AML team has provided additional supplementary guidance within the report and launched a refreshed AML PCP template for practices to use.

All practices in scope of the money laundering regulations are recommended to fully consider the findings of the report and review their AML PCPs accordingly.

Launched in June 2022, the thematic review sampled PCPs across 40 practices in order to better understand how the profession complies with its obligations under the money laundering regulations and the Legal Sector Affinity Group (LSAG) guidance.

Working collaboratively with practices, the review enabled the AML team to gain a better, more detailed understanding of the products and services that may be exposed to use and abuse for illicit purposes, and use the data to provide further information and support to members to help mitigate AML risks inherent in this type of work.

The AML team was encouraged by some of the data identified through the thematic review. However, a number of significant deficiencies were highlighted, including:

• An absence of PCPs that clearly demonstrate that customer due diligence should be holistic in nature – and the importance of documenting the nature, background and circumstances of the client/matter.
• Inadequacy in documented and practical guidance in relation to record keeping requirements.
• A lack of practical guidance to staff on red flags in relation to the identification of money laundering and terrorist financing.

An absence of documented and practical guidance in relation to the ongoing monitoring of clients/matters.
While the sample of practices in the thematic review represents a small proportion of the supervised population, the report aims to provide useful guidance for all practices on areas that require further focus.

Diane McGiffen, chief executive of the Law Society of Scotland, said: “Our focus on money laundering is part of our strategic goal to be a modern and effective regulator acting in the public interest. We continue to invest in this work to protect the public, and ensure our members meet the highest legal and ethical standards in this area.

“This thematic review of a selected number of practices AML PCPs has allowed us to gain a better insight into our supervised population’s compliance with the money laundering regulations, as well as the LSAG guidance.

“We would like to thank the 40 participating practices for their cooperation while this review was taking place.

“As we work with members to develop reviews and reports that help us to be robust in our anti-money laundering work, we appreciate our members’ feedback on how we can best support and regulate anti- money laundering in Scotland. It’s never been more important.”