Lawyers and accountants are not currently regulated under the US anti-money laundering (AML) regulations, but it is only a matter of time. The ENABLERS Act, a sweeping bill making its way through Congress, added an amendment that identifies lawyers and accountants as “gatekeepers.” This law will make professionals who facilitate covered transactions – which include company formations – subject to the same rules and regulations as financial institutions under the Bank Secrecy Act. While the road to passage for the ENABLERS Act may face obstacles along the way, what is clear is that it is not a matter if these types of regulations will come into force, but when. While legal and accounting firms with a global footprint are already implementing processes and procedures due to the strict AML regulations that have been in place in Europe for some years, US law firms need to act now in order to be prepared for the inevitable implementation of similar due diligence obligations in the United States.
Complying with AML regulations can be a huge undertaking. The landscape is dynamic and continuing to evolve. Decisions need to be made quickly. The three key cornerstones of an effective compliance plan should include process, people and technology.
- Process: One of the most important is the process for onboarding new clients. What checks will be performed to identify if a client or transaction is high risk? How will analysts identify and escalate concerns? How will professionals continue to monitor clients throughout their lifecycle? For example, what happens when an existing client buys property in a high-risk geographical location? Real estate lawyers must ensure that their processes include ways to identify risk when taking on new clients, as well as for conducting continued risk assessments of existing clients.
- People: Law firms and accountants must have people trained in anti-money laundering (AML) and know-your-customer (KYC) or customer due diligence (CDD) compliance, and continuously invest in training personnel, allowing them to focus on complex issues.
- Technology: The collection and analysis of multiple data streams is required under AML compliance, and doing so manually is time consuming and error-prone. Over the last decade significant software improvements have led to the automation of this process from start to finish. These time-saving improvements also allow compliance professionals to focus on high-value work, instead of being tied up with time consuming and repetitive tasks.
While the AML regulations can be overwhelming and intimidating, law firms and accounting firms are advised to act now to create and implement a plan to be prepared when these regulations are in place, and to prevent the costly mistakes that financial institutions who were slow to act have faced. By creating a comprehensive plan that includes processes, people, and technology, lawyers and accountants will have the systems in place that they will need to comply with anti-money laundering regulations and the ENABLERS Act.
Art Sales Vault was created as a risk management solution for fine art transactions, but the ASV processes and technology can be used by legal and financial professionals to meet AML compliance obligations, and implementation of KYC/due diligence best practices.