A 5th Money Laundering Directive came into force on the 10th January and a 6th is planned for later in the year. In addition to that, the Government is to introduce compulsory registration of most Trusts in the spring in a similar regime to that pertaining to Companies.  IR 35, which puts the burden on larger employers to ensure that third party contractors and consultants are actually paying their own tax and National Insurance, (or otherwise they will be liable) also comes into effect in April. When will the ratcheting up of regulatory responsibilities ever end?   There is no doubt that governments lacking the resources to ensure compliance with the law by the state are pushing more and more responsibility onto employers and advisors.  Platitudes about reducing burdens on business are quite frankly fatuous nonsense.

As good citizens, we want to help with the fight against crime to ensure we have a society where we do play by the rules; so we do our best to try and comply with whatever is thrown our way. I have recently been examining the cost of regulation to our business. It is clear that the scope of the regulatory risks we face enlarges year on year.  I have mentioned Anti Money Laundering (AML) but data protection is also an area where the risks to business have increased exponentially with very large fines now being levied by the Information Commissioner.  

Anti-bribery and anti-slavery legislation is also a big worry especially for those doing business or sourcing products internationally. For a professional advisory business, it gets worse. We can easily become part of the fraudulent activity of those we are advising and now face serious consequences if we become involved either intentionally or inadvertently. Yet more polices and staff training is required to make sure we are never on the wrong side of that line. None of this legislation is wrong and is a proper response to many of the evils of this world.

For legal businesses it gets even more complicated. We have to comply with our professional duties which includes a duty to keep our clients affairs confidential.  In addition to that, our legal advice is protected by Legal Professional Privilege. We are the only people in this complex system that can receive information from clients about their activities for the purposes of receiving independent legal advice in the sure knowledge that this private information will stay with their lawyer. 

The 6th Money Laundering Directive will contain a duty to ‘Prevent Money Laundering’.  As lawyers we can do just that. Part of our terms of business contains a full explanation of our duties under AML legislation. We have duty to advise our clients about AML issues and if we do so, the client can change their minds about their criminal intent or we can determine not to get involved because of the problems we may suspect might arise down the line. Everyone else involved in the system, must at that stage make a Suspicious Activity Report to the National Crime Agency but as lawyers me may well be in breach of our professional duties should we do so. One of the new duties under the 5th Directive is to make a report to Companies House if we discover that the real ownership of a company is not expressed correctly at Company House.  I am still awaiting guidance on how that obligation interplays with our duty of client confidentiality.

We will certainly have to advise our clients to do the right thing but if they do not do so, can we breach their confidence? I think the answer must be no.

So this is all interesting stuff, but a nightmare for those of us involved in the complex decision making matrix surrounding these important issues.  Get it wrong one way and our professional regulator will be after us, error on the other side and we are committing criminal offences with all the consequences that brings.  Oh well, we can only do our best, take the best advice and rely on our own judgement to get it right.