The Practical Lawyer


Money laundering signs – Law Society guidance

Money laundering is a constant spectre for law firms and a regular topic, most recently in our December 2019/January 2020 edition (p2). With the official guidance on 5MLD some months away, the Law Society’s updated practice note is timely (‘Money laundering warning signs’ 20/01/2020). Many of the points made in the practice note look familiar – but firms must ensure that this does not breed contempt.
Common warning signs of money laundering
  • Unusual and secretive clients – why has the client chosen this particular firm?
  • Unusual transactions – clients trying to launder funds will often try to carry out an unusual transaction.
  • Unusual source of funds – see ‘Professional’ section below.
  • Third-party funding – why are the funds coming from a third party?
  • Sudden changes in instructions – consider whether there is a reasonable explanation for any changes to the retainer.
Practitioners will not be surprised to note the services considered to be high risk are:
Trust and company formation. Take care where trust and company services are provided in conjunction with the other services identified as high risk and involve high-risk jurisdictions. Warning signs include:
  • secretive or suspicious behaviour by the client;
  • formation of a shell company in an offshore jurisdiction without a legitimate commercial purpose;
  • interposition of an entity in a transaction without any clear need; and
  • unnecessarily complex corporate structures.
Conveyancing – warning signs include:
  • rapid succession of transactions relating to the same property;
  • use of cash or third-party intermediaries without adequate commercial explanation;
  • use of overseas trusts or companies to conceal property ownership; and
  • unexpected early repayments, for example of a mortgage.
The operation of a client account – warning signs include:
  • instructions to act as a bank or escrow agent, or pay bills unrelated to the matter;
  • instructions to return overpayments to a client or a third party;
  • instructions to pay out funds at intervals;
  • transactions aborted for no clear reasons; and
  • the presence of cash in a transaction.
The practice notes goes on to consider steps to reduce the chance of money laundering happening and the need to make suitable enquiries before making a report to the MLRO or NCA. The practice note concludes with the reminder that ‘You cannot have money laundering if there is no existing criminal property.’ It is vital for firms to ensure that regular training to all staff is given on these issues – staff can unwittingly become complacent about the warning signs and action to take. Reinforcement is key to mitigating the risk for a firm of falling victim to money laundering. Source:

Most-read articles

Capacity – wills; disclosure
Monday, 09 March 2020
The Society’s guidance, Access and disclosure of an incapacitated person’s will, gives important clarification around the circumstances in which a solicitor can disclose a copy of a client’s... Read more...
Source of funds – Law Society guidance
Monday, 09 March 2020
We mentioned above the new Law Society practice note on signs of money laundering. A constant refrain for conveyancers – but one which should be heard more widely – is the importance for firms of... Read more...
MIB injury on private land – update
Monday, 09 March 2020
We reported in our July/August 2019 edition (p31) on the case in which the CA held that MIB was liable to pay compensation to someone injured in a car accident on private land. The injured party was... Read more...
Provisional damages – underused?
Monday, 09 March 2020
An interesting article reminds PI practitioners of the underused solution of provisional damages, which are provided for in s32A of the Senior Courts Act 1981. In PI and clinical negligence cases,... Read more...
Tate peeping – CA decision
Monday, 09 March 2020
We reported in our March 2019 edition (p24) on the case brought by the owners of luxury flats adjacent to the Tate Gallery. They applied for an injunction to prevent members of the public from... Read more...
RICS – code for leasing business premises
Monday, 09 March 2020
The RICS has launched the first edition of its Code for Leasing Business Premises which comes into force on 1 September 2020. It will replace the voluntary Code for Leasing Business Premises in... Read more...
Boundary disputes – the essentials
Monday, 09 March 2020
Boundary disputes can mean different things to different practitioners – conveyancers will hate them and seek to avoid at all costs; property litigators will no doubt take a different view! An... Read more...
Procedure – coronavirus
Monday, 09 March 2020
The author raises an urgent issue for family lawyers: how should they take the coronavirus into account in the work they undertake for their clients, particularly international clients or those with... Read more...
Parental bereavement – in force?
Monday, 09 March 2020
The Parental Bereavement (Leave and Pay) Act 2018 should come into force in April 2020. Regulations as to the detailed operation of the Act are awaited but the government’s consultation response... Read more...
Sentencing – judge’s remarks
Monday, 09 March 2020
The appellants were convicted of a money laundering offence under s328 POCA following a sophisticated, multimillion-pound, cross-border money laundering operation. S was sentenced to eight years in... Read more...


IAG International
In House Lawyer
MSI Global Alliance
Join the IBA now!