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Lawyers and Notaries Face Increased Scrutiny in Anti-Money Laundering Efforts
A recent directive from the European Union has highlighted the importance of implementing anti-money laundering (AML) and terrorist financing (TF) measures for lawyers, notaries, and other independent legal professionals who provide material aid, assistance, or advice on tax matters as a principal business or professional activity.
EU Directive Requirements
The EU’s 2018/843 Directive requires these professionals to:
- Apply customer due diligence
- Identify and verify the identity of their customers
- Monitor transactions for suspicious activities
However, some lawyers and notaries have been slow to adopt these measures, citing concerns about legal professional privilege and professional secrecy.
Report Findings
A report by the Ministry of Finance in Croatia found that:
- While there has been an increase in awareness of AML/TF risks among lawyers and notaries, many still fail to implement adequate measures to prevent money laundering.
- The sector is at medium risk of ML/TF, with transactions related to real estate purchases and sales posing the greatest risk.
The report also identified several irregularities, including:
- Inadequate due diligence measures
- Lack of transparency in beneficial ownership
- Failure to file suspicious transaction reports (STRs)
Consequences
Four indictments were filed during the supervision period between 2014-2018, highlighting the need for greater vigilance among lawyers and notaries.
The report also noted that many lawyers and notaries fail to:
- Conduct adequate risk assessments
- Monitor transactions
- Maintain accurate records
Furthermore, some have been found to engage in high-risk activities, such as:
- Doing business with non-transparent beneficial ownership customers
- Providing services online without proper verification
Croatian FIU’s Response
In response to these concerns, the Croatian FIU has sent questionnaires to all law companies and lawyers in Croatia, seeking information on their compliance with AML/TF regulations. The results show a significant increase in risk perception among lawyers, with 41% stating they are obliged to implement AML/TF measures.
Conclusion
The EU’s directive emphasizes the importance of protecting the financial system from money laundering and terrorist financing activities. As such, it is crucial that lawyers and notaries take proactive steps to ensure compliance with AML/TF regulations and prevent these illegal activities from occurring in their sector.