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Learning by Doing: The Key to Effective ML/TF Risk Management for Attorneys-at-Law

As attorneys-at-law navigate the complex landscape of money laundering and terrorist financing (ML/TF) risks, it is essential that they adopt a proactive approach to identifying, assessing, and mitigating these threats. A recent guideline issued by the Financial Intelligence Unit emphasizes the importance of “learning by doing” in this regard.

Proactive Approach

According to the guideline, attorneys-at-law are encouraged to pay close attention to their practice and apply defensive measures proportionate to the risk faced at any particular time. This requires allocating necessary resources to gather and interpret information on ML/TF risks, both at the country and institutional levels, and developing procedures and systems to ensure effective risk management.

Key Considerations

The guideline highlights several key considerations that should inform all due diligence actions:

  • Nature and scale of the business: The complexity, volume, and size of transactions
  • Type of client: (e.g., whether ownership is highly complex, whether the client is a Politically Exposed Person (PEP), etc.)
  • Delivery channels: (e.g., internet banking, wire transfers to third parties, remote cash transactions)
  • Geographical area: (e.g., whether business is conducted in or through jurisdictions with high levels of drug trafficking or corruption)
  • Value of business and frequency of transactions

Regular Review and Testing

To effectively identify and assess ML/TF risks, attorneys-at-law are advised to regularly review their AML/CFT systems and test them for effectiveness. This includes:

  • Reviewing records to ensure that all existing customer records are current and valid
  • Identifying the true beneficial owner (UBO) of client assets

Investment in Training and Resources

The guideline emphasizes the importance of investing resources and training in order to identify and maintain an understanding of ML/TF risks faced by the sector, as well as specific to their services, client base, jurisdictions where they operate, and effectiveness of controls in place.

Risk Assessment Approach

Attorneys-at-law are encouraged to apply a risk-based approach (RBA) that takes into account various factors, including:

  • Activities undertaken: By them
  • Type and identity of the client: Type and nature of the client relationship
  • Nature and origin of the client relationship:

The guideline also highlights several categories of risk that attorneys-at-law should consider when assessing ML/TF risks, including:

  • Country or geographic risk
  • Client risk
  • Transaction risk

These categories provide a framework for managing potential risks by enabling attorneys-at-law to subject each client to reasonable and proportionate risk assessment.

Conclusion

Ultimately, the key to effective ML/TF risk management is “learning by doing,” which requires continuous monitoring, updating of procedures, and adaptation to changing circumstances. By adopting this approach, attorneys-at-law can ensure that they are well-equipped to identify and mitigate ML/TF risks in their practice.