Internal money laundering reporting
This guide is for solicitors who are not their practice’s money laundering reporting officer (MLRO) or deputy. MLROs should refer to our guidance on suspicious activity reports.
If you think you’ve identified signs of money laundering, you may need to report your suspicions to comply with anti-money laundering legislation.
The Proceeds of Crime Act 2002 (POCA) applies to everyone, but imposes additional obligations backed by criminal sanctions on those working in the regulated sector.
If you work in a practice that performs regulated work, as defined in Schedule 9 of POCA (which mirrors regulation 12 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017)), you should be aware of your obligations to make reports.
Even if your practice performs unregulated work, you may have an MLRO in place to receive reports of suspicious activity.
Reporting a client or third party
Failure to disclose offences
Your reporting obligations will differ depending on:
- your role within your practice
- whether you carry out regulated or non-regulated work
You could commit one of the ‘failure to disclose’ offences if you choose not to make a report to your MLRO if you work in the regulated sector (section 330 POCA).
Read more about failure to disclose and associated defences in sections 6.6 and 6.7 of the anti-money laundering guidance for the legal sector.
Reporting to your MLRO
You should consult your practice’s MLRO if you have any concerns about your client or the retainer.
You risk committing a principal money laundering offence if you have knowledge or suspicion of money laundering and carry on with a prohibited transaction without making a report.
You also risk committing a failure to disclose offence. The type of offence you may commit depends on whether you carry out regulated or non-regulated work.
You must report to your practice’s MLRO if:
- you know, suspect or have reasonable grounds for knowing or suspecting that another person is engaged in money laundering, and
- the information on which the suspicion is based comes in the course of business in the regulated sector
If your practice has an MLRO or nominated officer, you must report to them if you have actual knowledge or a suspicion that another person is engaged in money laundering.
If your practice does not have an MLRO, you many need to make a report to the NCA.
In either case, once you’ve made a disclosure to your MLRO, they should review the facts and advise you on the next steps.
If they form a suspicion of money laundering, they may be obliged to make a suspicious activity report (SAR) to the National Crime Agency (NCA).
If you want to continue with a transaction that you suspect may involve criminal property, you should ask your MLRO to request a defence against money laundering (DAML) from the NCA.
Reporting to the NCA
MLROs and their deputies
An MLRO must make a SAR if, as a result of a disclosure made to you in the course of your work in the regulated sector, they form a suspicion that another person is engaged in money laundering.
Read more on forming a suspicion of money laundering
Sole practitioners
If you work in the regulated sector but you do not employ any people or act in association with anyone else, you will not have an MLRO so will need to consider reporting directly to the NCA.
You must make a SAR if you know, suspect or have reasonable grounds for suspecting that another person is engaged in money laundering.
Read our guidance on suspicious activity reports
Non-regulated sector
If you work in the non-regulated sector, your practice may not have an MLRO or other nominated officer for reporting money laundering.
To comply with the MLR 2017, you must make a report to the NCA if you know or suspect that another person is engaged in money laundering.
Reporting a colleague or other regulated person
Whistleblowing
Your practice should have a structure in place for individuals to report concerns about misconduct, regulatory breaches, or other malpractice.
You should consider whether you can make a report internally if you suspect that your colleagues or firm are involved in or concealing evidence of a:
- principal money laundering offence
- failure to disclose offence
If your practice has a formal whistleblowing policy, you should use this to determine whether and how you can report your concerns safely.
Read our practice note on raising concerns and whistleblowing
Reporting to the SRA
Under rule 7 of the SRA Code of Conduct for Solicitors, RELs and RFLs, you must promptly inform the Solicitors Regulation Authority (SRA) of any facts or matters that you reasonably believe:
- are capable of amounting to a serious breach of its regulatory arrangements by any person regulated by the SRA (including you)
- should be brought to its attention so that it can investigate whether a serious breach of its regulatory arrangements has occurred or otherwise exercise its regulatory powers
The definition of a ‘serious breach’ is likely to include conduct relating to a criminal offence, such as money laundering or a breach of the MLR 2017.
Contact the SRA’s Red Alert Line if you know or suspect that another regulated person or their employee is involved in dishonest or serious misconduct.