Regulators subject to economic crime prevention measures
The government is introducing a new regulatory objective to the Legal Services Act 2007, focusing on promoting the prevention and detection of economic crime.
This change, outlined in the Economic Crime and Corporate Transparency Bill published in September, aims to affirm the duties of regulators and the regulated communities to uphold the economic crime regime.
According to the government, it “will put beyond doubt that it is the frontline regulators’ duty to carry out such regulatory action, as is appropriate to uphold this objective”. It will also enable the Legal Services Board, as the oversight regulator, to performance manage frontline regulators against this economic crime objective.
The aim is more effective enforcement action from legal services regulators, as well as reduced challenge of any type to regulators carrying out proportionate monitoring and enforcement activities to ensure economic crime compliance.
The government said that, while it could be “inferred” from the existing objectives that regulators should ensure lawyers were not breaching the economic crime regime, it was not set out as an explicit duty in current legislation.
“As a result, frontline regulations may have different interpretations of the extent of their duties relating to economic crime, and unequal effectiveness in monitoring and enforcing compliance. Regulators can also face challenge to their compliance activity, making monitoring and enforcement costly.”
It observed that the crisis in Ukraine had “shone a light on the exposure of professional services sectors to economic crime”, with the legal services sector assessed by the last Treasury national risk assessment of money laundering and terrorist financing as at high risk of abuse for money laundering purposes.
The bill also includes a measure to remove any limit on the fine that can be issued by the Solicitors Regulation Authority for cases relating to economic crimes such as money laundering, fraud and breaches of international sanctions.
