Money Laundering Regulations 2017—the risk-based approach—law firms
Money Laundering Regulations 2017—the risk-based approach—law firms

The following Practice Compliance guidance note provides comprehensive and up to date legal information covering:

  • Money Laundering Regulations 2017—the risk-based approach—law firms
  • Firm-wide risk assessment
  • Risk-based approach methodology
  • Risk-based approach under the MLR 2017
  • Implementing a risk-based approach
  • Limitations of the risk-based approach

Forthcoming changes: The UK has voted to leave the EU and this will take place on exit day as defined in section 20 of the European Union (Withdrawal) Act 2018. This has implications for law firms. This Practice Note is likely to be affected. It will be updated as and when relevant implementing legislation is published. For more on Brexit, see Practice Notes: Brexit—anti-money laundering and counter-terrorist financing—law firms and Preparing for Brexit—key considerations and action planning—law firms.

The risk-based approach is a core concept of the underlying EU Directive (the Fourth Money Laundering Directive—4MLD) and therefore of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017), SI 2017/692, which came into force on 26 June 2017.

The general concept of a risk-based approach is simple: you cannot monitor everything done by each member of staff for every client all the time. You should therefore identify where your greatest risks lie and apply your resources appropriately.

Firm-wide risk assessment

You should not confuse your firm-wide risk assessment with the risk-based approach.

If the MLR 2017 apply to your firm, you must take appropriate steps to identify and assess your firm's money laundering and terrorist financing risks, ie conduct a firm-wide risk assessment. For guidance on conducting a risk assessment, see Practice Note: Money Laundering Regulations

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