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Lawyers and Notaries Under Scrutiny: Money Laundering Risks Emerge
A recent report has highlighted the vulnerability of lawyers and notaries to money laundering and terrorist financing (ML/TF) risks. The European Union’s directive issued in 2015 and the Financial Action Task Force’s (FATF) Recommendations 24 have included exceptions for legal professions, allowing them to maintain confidentiality and professional secrecy while performing their duties.
Exceptions and Concerns
However, this has raised concerns about the potential for lawyers and notaries to unwittingly facilitate money laundering activities. Criminals may seek out lawyers and notaries to add a layer of legitimacy to their illegal activities, using services such as company setup or conveyancing to launder funds. Furthermore, lawyers’ expertise in handling customer funds can enable them to “cleanse” tainted money without realizing it.
European Commission’s Concerns
The European Commission has identified lawyers and notaries as being highly exposed to ML/TF risks, citing ease of access to these professionals and the legal protections that come with professional privilege and secrecy.
Survey Findings in Croatia
In Croatia, a recent survey conducted by the Financial Inspection Agency found that:
- 41% of law companies and lawyers in the country believed they were obliged to implement anti-money laundering measures, compared to just 5.5% in 2011 and 2012.
- Real estate transactions were identified as posing the highest risk for ML/TF.
The survey highlighted a lack of awareness among lawyers about their obligations under anti-money laundering laws, with many believing that professional privilege and secrecy exempted them from compliance.
Indictments Filed
The Financial Inspectorate filed four indictments against lawyers during a recent supervision period, citing irregularities such as:
- Inadequate due diligence measures
- Lack of record-keeping
- Failure to monitor transactions
Call for Greater Vigilance and Education
The report’s findings have sparked concerns about the need for greater vigilance and education among lawyers and notaries to prevent money laundering and terrorist financing. As the sector continues to evolve, it is essential that these professionals are equipped with the knowledge and tools necessary to identify and mitigate ML/TF risks.
Conclusion
In conclusion, the report highlights the importance of lawyers and notaries being aware of their obligations under anti-money laundering laws and taking steps to prevent money laundering and terrorist financing. Greater vigilance and education are crucial in this regard, and it is essential that these professionals are equipped with the necessary knowledge and tools to mitigate ML/TF risks.