OUR SPECIALISM
AML COMPLIANCE

The legal profession is particularly exposed to the risks of money laundering, and Clearshield Compliance is here to assist law firms in meeting their AML obligations through effective training and expert guidance. Our purpose is to ensure that your firm is fully equipped to identify, deter, and prevent financial crime.

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The professional credibility and trust placed in law firms make them attractive targets for those seeking to launder illicit funds. Inadequate procedures or insufficiently trained staff are, in effect, an open invitation to exploitation.

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If there is any reason to suspect that money launderers have sought to, or have in fact, made use of your firm’s services, it is imperative that your Money Laundering Reporting Officer (MLRO) submits a Suspicious Activity Report (SAR) to the National Crime Agency.

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Should you serve as an MLRO and be uncertain whether a situation warrants reporting, please contact us. Clearshield Compliance will provide the clarity and professional support you require to act with confidence and in full compliance with your legal duties.

 

How we can help with AML compliance?​

 

Money laundering and terrorist financing present clear threats to public safety and the integrity of a well-functioning society. They often serve to sustain and conceal other serious criminal activities.

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Legal professionals therefore play a crucial part in upholding the rule of law and ensuring that their firms do not, even inadvertently, facilitate illicit financial transactions.

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At Clearshield Compliance, we have assisted hundreds of legal professionals through expert guidance and comprehensive training in anti-money-laundering (AML) compliance. Our aim is to equip you with the knowledge and confidence to meet your regulatory obligations and protect your practice.

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Explore our range of services to discover how we can support your AML compliance, or contact us directly to speak with one of our specialists, who will be pleased to provide all the information you require.

Get in touch

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The Definition of Money Laundering

 

Money laundering is the process of changing and disguising the origins of money generated through criminal activity into appearing to be from legitimate sources. The Proceeds Of Crime Act (POCA) has a broader definition that includes passive possession of criminal property.

 

Money laundering typically consists of three distinct phases – placement, layering, integration – and legal professionals could be targeted at any of these stages. 

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Placement

 

This is moving cash into circulation through financial institutions and businesses and is the point at which criminal activity is most at risk of detection.

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Layering

 

Once placed, the money is moved through complex transactions to obscure the origins and make it more difficult to detect laundering activity.

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Integration

 

The layered money is integrated into the economy through investments such as property, company purchases, or trusts, making it appear legitimate.

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There are a series of regulations and directives that have shaped the way the legal sector has to respond and adapt policy and process to prevent money laundering activity.

 

The Money Laundering Framework

 

1. Financial Action Task Force (FATF)

 

The Financial Action Task Force on Money Laundering was established in 1989 by the G7 countries and built on related UN treaties of 1988 and 1990. There were 40 recommendations released in 1990 with a further nine released between 2001 and 2004, and an additional revision in 2012 – each set of changes were followed by a European Union directive.

 

2. First Money Laundering Directive

 

The First Money Laundering Directive, issued by the European Commission to comply with the FATF recommendations, was incorporated into UK law in 1991 as part of the Criminal Justice Act. Applicable to financial institutions, it made money laundering a criminal offence.

Having identified a susceptibility of finance professionals to money laundering activities, the first directive established certain preventative measures including:

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Customer/client identification

Record-keeping

Centralised systems of reporting suspicious transactions

 

3. Second Money Laundering Directive

 

The Second Money Laundering Directive amended and updated the First Directive on the prevention of the use of the financial system for the purpose of money laundering by refining the existing provisions and filling the gaps in the legislations.

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It included a broader definition of money laundering, incorporating underlying offences such as corruption and proposed to extend the provisions of the Directive to the lawyers involved in financial or corporate transactions.

Following a backlash amid concerns over client confidentiality rules, the Second Directive was not extended to cover legal professionals.

 

4. Third Money Laundering Directive

 

The Third Directive did finally incorporate lawyers and other professionals such as accountants, real estate agents, and notaries within its scope. It followed on from the FATF’s revised anti-money laundering and counter-terrorist financing standards of 2003.

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In addition to the application of the directive to non-financial businesses and professions including lawyers, it also extended due diligence measures to require enhanced due diligence in certain circumstances with simplified customer due diligence procedures for low-risk transactions.

 

5. Fourth Money Laundering Directive

 

The Fourth Money Laundering Directive addressed changes in requirements following the revision of FATF recommendations in 2012. The key new developments in the Directive include:

Regulated entities are required to have written risk assessments

Changes to the application of simplified due diligence

Beneficial ownership provisions changes

Enhanced due diligence extended to domestic PEPs

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6. Proceeds of Crime Act 2002 (POCA)

 

While the Proceeds of Crime Act, applies to everyone, the offences involving failing to report and tipping off are only applicable to those engaging in regulated sector activities.

POCA was amended in 2007 to adopt the Money Laundering Regulations 2007 definition of the regulated sector. These regulations were then replaced in June 2017 with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer Regulations 2017.

Schedule 9 of POCA references key business services or activities that could be relevant to independent legal professionals. These include:

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Tax advice by a practice or sole practitioner

Legal or notarial services concerning the buying and selling of property or business entities

Managing client money or other assets

Creating, operating, or managing trusts or companies

Opening or managing bank or savings/securities accounts

 

7. The Money Laundering Terrorist Financing and Transfer of Funds (information on the payer) Regulations 2017

 

The Fourth Money Laundering Directive addressed changes in requirements following the revision of FATF recommendations in 2012. The key new developments in the Directive included:

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The Money Laundering Terrorist Financing and Transfer of Funds Regulations attempt to restrict money laundering in the professional services sector by placing greater emphasis and obligation on better knowledge of clients.

They implement the Fourth Directive, setting out requirements of the regulated sector in anti-money laundering, providing a scope for CDD. They also replaced the Money Laundering Regulations 2007. 

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The Regulations apply to independent legal professionals as described in Regulation 8.  This is defined as “a firm or sole practitioner who by way of business provides legal or notarial services to other persons” but doesn’t include those working in-house or under the employ of a public authority. 

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These Regulations apply when certain activities are undertaken by a legal professional that have a risk of money laundering occurring such as:

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The buying and selling of real property or business entities

The managing of client money, securities or other assets

The opening or management of bank, savings or securities accounts

The organisation of contributions necessary for the creation, operation or management of companies

The creation, operation or management of trusts, companies, foundations or similar structures

When determining if you are within the regulated sector and therefore fall under the scope of the Regulations, you should consider if you are providing services that could be defined as tax adviser, insolvency practitioner, or trust/company service provider.

 

If you’re not sure or need further guidance in this area, then get in touch with us directly for advice.

Click below to access the High-Risk Jurisdiction List.

High Risk Jurisdiction List (September 2025 update)

 

Risk-Based Approach to Money Laundering 

 

There is a high risk for independent legal professionals in being targeted and used for money laundering and terrorist financing. This can lead to a number of significant consequences including:

Criminal sanctions for the legal practice and/or individual employees

Civil action against individuals or the practice as a whole

Loss of business as a result of reputation damage

 

It is vital, therefore, that you fully understand the risks so they can be addressed and mitigated to give you the best chance of preventing money laundering in your practice.

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Taking a risk-based approach can help to minimise compliance costs and burdens on clients, give greater flexibility to deal with emerging risks, and provide a more efficient and proportional use of resources.
Your risk-based processes should be framed by a consideration of the activities you undertake, any relevant rules and regulations you are subject to, and how susceptible your firm’s activities are to money laundering.

You are obliged under Regulation 18 (1) to undertake and maintain a full risk assessment – this is an area we can help with if you need advice or guidance on the best practice for risk assessments.