Preventing money laundering through law firm client accounts

• In Event: Money laundering: the role of facilitators and financial intermediaries

Abstract

Law firms hold ‘pooled client accounts’ (also known as client trust accounts) to administer funds that belong to their clients. Client accounts are used, for example, to receive fees and deposits, issue or cash cheques, facilitate funds transfers, and make disbursements to or on behalf of the client. Client accounts have been identified as a vector of risk in relation to money laundering due to the façade of legitimacy they provide to client funds, and there has been increased attention on improving the mechanisms for monitoring these accounts, both by law firms themselves and by the financial institutions that hold the accounts. This paper explores how law firm client accounts can create opportunities and/or vulnerabilities for money laundering, potential weaknesses in the credible oversight of such accounts, and recent measures intended to address their weaknesses. It analyses cases involving actual or potential money laundering through client accounts in the UK (and elsewhere), alongside data from interviews with law firm compliance officers, members of supervisory bodies, and anti-money laundering experts. It also analyses the evolving anti-money laundering regulatory framework around law firm client accounts.

Authors

• Katie Benson, Lecturer in Criminology at the University of Manchester

• Diana Bociga, PhD candidate University of Manchester