The Law Society of England and Wales has hit back at proposals to place ‘substantial new burdens on legal practitioners’ over plans to require firms to conduct greater due diligence on pooled client accounts as part of draft amendments to Money Laundering, Terrorist Financing (Amendment and Miscellaneous Provision) Regulations 2025 (MLRs) Statutory Instrument (SI).
Responding to the HM Treasury consultation on the draft MLRs, the Law Society says it is concerned that requiring full due diligence on pooled client accounts may result in delays, increased costs and reduced access to justice for the public.
Law Society president Richard Atkinson (pictured) said the body supported effective, risk-based money laundering procedures but the proposed changes would impose ‘blanket obligations that are disproportionate, operationally burdensome and inconsistent with previous policy.’
It is also concerned full due diligence would be required on all clients, regardless of the assessed risk level and safeguards already inherent in pooled account structures, and by removing the possibility of Simplified Due Diligence (SDD), the UK’s defences against economic crime would be undermined.
Atkinson commented:
“By eroding the risk-based approach – where solicitors have the option of applying SDD in low-risk circumstances – the UK’s defences against economic crime would be undermined and compliances resources diverted away from higher-risk cases, while creating unnecessary work in low-risk contexts.
“We urge HM Treasury to retain the option of applying SDD in pooled accounts, where the risk assessment supports it.”
Atkinson said firms are already familiar with pooled client accounts as part of conveyancing, probate and corporate matters and already have ‘robust controls and oversight’ in place. In addition, firms complete risk-based due diligence on clients in line with the risk they present. He concluded:
“Full due diligence on pooled accounts would impose a significant administrative and financial burden on legal practices – particularly on small and medium-sized firms. The result of which could mean increased cost, delays and reduced access to justice for the public.”
“To date no compelling evidence has been provided that the current approach to pooled accounts presents a systemic risk to the UK’s AML regime. Without clear evidence of abuse or regulatory failure, the proposed amendment appears disproportionate and misaligned with the principles of better regulation.
“By engaging further with the legal sector and practitioners, HM Treasury would be able to assess the practical and operational implications of the proposed changes before moving ahead. We encourage HM Treasury to engage with stakeholders to ensure the final regulations strike the right balance between protecting the financial system and maintaining access to high-quality legal services.”
