Lawyers Must Be Vigilant in Combatting Money Laundering and Terrorist Financing

New Regulations Require Lawyers to Conduct Customer Due Diligence and Report Suspicious Activity

In an effort to combat money laundering and terrorist financing, the Financial Intelligence Unit (FIU) has introduced new regulations requiring lawyers to conduct customer due diligence and report suspicious activity.

What are the New Requirements?

As part of these regulations, lawyers are required to undertake customer due diligence on clients who wish to engage in certain activities, such as:

• Incorporating a company
• Purchasing real estate

This includes identifying and verifying the identity of the client and any beneficial owners, as well as conducting background checks to ensure that there are no red flags.

What Constitutes Suspicious Activity?

Lawyers are also required to report any suspicious activity to the FIU, including:

• Unusual payment methods, such as cash or wire transfers
• Large transactions involving high-risk countries
• Multiple bank accounts or foreign accounts without good reason
• Instruction of a lawyer who is not familiar with the client’s business or financial affairs

How Can Lawyers Comply?

To help lawyers comply with these new regulations, the FIU has provided guidance on how to conduct customer due diligence and identify suspicious activity. This includes:

• Verifying the identity of the client and any beneficial owners
• Conducting background checks to ensure that there are no red flags
• Monitoring transactions for unusual patterns or large cash transactions
• Reporting any suspicious activity to the FIU

Record Keeping Requirements

In addition to these regulations, lawyers are also required to keep records of all customer due diligence and reporting activities. These records must be maintained for a minimum of five years.

Consequences of Non-Compliance

The FIU has stated that it will be monitoring compliance with these regulations closely and will take action against any lawyer who fails to comply without reasonable excuse.

Additional Resources

For further information about your obligations under the Act, or the FIU and its activities, contact:

• The FIU Office on (682) 29182 or email: intel@cifiu.gov.ck

Additional resources include:

• FATF Report on Money Laundering and Terrorist Financing Vulnerabilities of Legal Professionals
• United Kingdom Law Society
• A Lawyer’s Guide to Detecting and Preventing Money Laundering - A collaborative publication of the International Bar Association, the American Bar Association, and the Council of Bars and Law Societies of Europe.