Money Laundering and Anti-Terrorist Risk Management for Lawyers

By on March 27, 2020

Executive Summary of an article written by
Timothy C. Stone and Martin J. Foncello
Exiger

In the world of anti-money laundering and counter-terrorist financing (AML/CTF) compliance, U.S. lawyers are not held to the same exacting regulatory standards as bankers. Nevertheless, it sometimes behooves lawyers to act a bit more like bankers. In 2019, the Financial Action Task Force (FATF), the independent inter-governmental body that develops policies to combat money laundering and terrorist financing, issued updated risk management guidance for lawyers. It lays out building blocks for a robust AML/CTF framework founded directly on principles of risk management.

As the FATF guidance recognizes, a risk assessment is the starting point for operational risk management. Risk assessments should be adapted to the size, nature and complexity of a legal practice, adding structure, documentation and an input for considering money laundering and terrorist financing risk. For a large firm that facilitates transactions across markets at high risk for corruption and other criminality, a risk assessment might involve not only individual assessments of risk when on-boarding a new client but also an annual firm-wide assessment of aggregate inherent and residual risk, tied to an informed judgment about the effectiveness of the firm’s AML/CTF controls.

In a profession where reputation is everything, lawyers have a compelling reason to understand and mitigate their financial crime exposure. FATF’s recent guidance outlines best practices for lawyers in identifying and managing AML/CTF risks.

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