A London-based law firm has become the first to embrace the six-step client ‘gating process’ after an IBE taskforce argued it was desperately needed to change the profession’s reputation as a conduit for dirty money.
‘For several years we have been working to enhance the principles on which we base our business acceptance decisions, beyond the minimum regulatory criteria,’ said the firm’s risk and funding partner on its decision to adopt the gating process. ‘We urge other law firms to similarly endorse the principles.’
Established in the wake of Russia’s invasion of Ukraine to probe the role of solicitors in advising oligarchs and kleptocrats, the taskforce was led by Guy Beringer CBE KC (Hon), a former senior partner of a multinational law firm headquartered in London. The taskforce also reviews how UK law firms decide whom to represent in the context of “kleptocracy, state capture and grand corruption”.
The taskforce calls on firms, when considering whether to take on a client, to apply an ethical framework that goes beyond observing the letter of the law. Its view is that complying with anti-money laundering regulations is not enough on its own, and further steps are required to “return the legal profession’s responsibility to the public interest to the heart of the client acceptance process”.
In addition, the taskforce calls for a “legitimate provenance of wealth test”. This would require credible explanations for clients’ wealth and “address gaps in AML frameworks”. It is estimated that between $660bn and $1.26tn of illicit funds enter the global financial systems annually. This wealth is often facilitated by professionals working within legal frameworks but “at the edge of ethical boundaries”.
The taskforce stated that the profession should be leading the client vetting overhaul and that if improvement wasn’t forthcoming within two years, “alternative approaches” should be considered.
The Solicitors Regulation Authority and other regulators, however, must “articulate the principles by which law firms can reconcile their professional duties with the public interest”. This would include clarifying guidance in regard to how the principle of access to representation still “affords a law firm discretion over whether to act”.
“The recommendations do not aim to dismantle traditions; they mean to strengthen them”, said Taskforce leader Guy Berringer. “As lawyers, we must adapt to a rapidly changing world while upholding our longstanding responsibilities to society. Trust, accountability and responsible leadership are no longer optional. They must be placed at the heart of the profession if we wish to restore public trust and ensure a continuation of service. This report lays out a roadmap for change.”
At the standing-room-only launch, Beringer went on to discuss the threat of legislation if the profession did not take more prompt action. It was also noted that Labour peer Baroness Hodge is also calling for the creation of a new criminal offence that would see lawyers being prosecuted for failures to stop money laundering.
Law Society president Richard Atkinson stated, “Law firms often have sophisticated client onboarding approaches which factor in a whole range of issues. These approaches are underpinned by the firm’s own institutional values which should be rooted in strong professional and business ethics and adhere to the SRA framework of professional obligations, rules and guidance.”
Source: Clean up your own backyard: City law firms urged to overhaul client onboarding
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