New data has revealed that only 27 law firms in England and Wales have signed up as verification agents following the launch of the Register of Overseas Entities last year.
The information emerged in response to warnings from the Law Society that solicitors could face legal action if they sign off on submissions that later turned out to be false, according to the Law Society Gazette.
Solicitors have been advised to exercise caution before offering to vouch for the validity of such entries. At the Law Society’s rick and compliance conference last week, Macfarlanes’ Dominic Sedghi cautioned that law firms risk committing a criminal offence.
“As things stand, the Law Society’s guidance has made it hard for firms to justify getting involved,” said Compliance expert Jonothon Bray:
“The Law Society provided stark warnings about solicitors’ exposure to criminal and regulatory penalties in its July 2022 guidance. It suggests that there is a danger that practitioners will take on verification work under the mistaken assumption that ‘verification’ under ECTEA is the same as ‘verification’ under the Money Laundering Regulations.
Quite rightly, the guidance makes it clear that this would be incorrect and could lead to disastrous consequences for the solicitor. However, it goes so far the other way in highlighting risks – way beyond the BEIS official guidance – that it is no wonder that most law firms have chosen to give this work a wide berth. It would be strange if this was the professional body’s intention. If we accept that increased transparency is a legitimate way to make the UK a less desirable jurisdiction in which to park illicit money, and recognise that private sector verification plays a pivotal role, then the full involvement of the legal sector is certainly desirable.”
Recent analysis from Thirdfort discovered that 146 companies had signed up with Companies House to act as UK-regulated agents that could complete verification checks on beneficial owners. The research showed that 27 of these businesses are law firms.
Moreover, 75 accountancy firms and one estate agency are among the remaining 199 registered agents. According to Thirdfort, the remaining businesses are a mix of wealth management, company formation, and other financial services providers.
