Abogacía | 14.10.2019

Note on the 2019 FATF Guidance for a risk-based approach for legal professionals

Countering money laundering and the financing of terrorism

During the Plenary meeting under the U.S. Presidency in Orlando on 19-21 June 2019, the Financial Action Task Force (FATF) - an independent inter-governmental body that develops and promotes policies to protect the global financial system against money laundering (ML), terrorist financing (TF) and the financing of proliferation of weapons of mass destruction - approved the “Guidance for a risk-based approach for legal professionals” (2019 Guidance).

The FATF has reviewed its “Guidance for a risk-based approach for legal professionals” adopted in October 2008, in order to bring it in line with the FATF 40 Recommendations (the global AML/CFT Standards, which were adopted in 2012) and to reflect the experience gained by public authorities and the private sector over the years in applying the risk-based approach (RBA). The 2019 Guidance - that replaces the version of 2008 - applies to legal professionals when they prepare for, or carry out, transactions for their clients concerning certain specified activities. The term “legal professional” refers to lawyers, civil law notaries, common law notaries, and other independent legal professionals.

The non-binding 2019 Guidance aims to support the implementation of the RBA, taking into account national ML/TF risk assessments and anti-money laundering/combating the financing of terrorism (AML/CFT) legal and regulatory frameworks.

The RBA is at the core of the FATF 40 Recommendations. It ensures that competent authorities, supervisors and legal professionals identify, assess and understand the ML/TF risks to which legal professionals are exposed, allowing them to prioritise resources on areas where risks are highest.

The development of the ML/TF risk assessment is a key starting point for the application of the RBA. It should be commensurate with the nature, size and complexity of the law firm. The most commonly used risk criteria are country or geographic risk, client risk and service/transaction risk.

The 2019 Guidance acknowledges that legal professionals operate within a wide range of business structures - from sole practitioners to large, multi-national firms and provide a variety of services in different jurisdictions. Given the diversity in scale, activities and risk profile, there is, therefore, no one-size-fits-all approach.

The 2019 Guidance highlights:

• that it is the responsibility of the senior management of legal professionals to foster and promote a culture of compliance. They should ensure that legal professionals are committed to manage ML/TF risks when establishing or maintaining relationships;

• that legal professionals should design their policies and procedures so that the level of initial and ongoing client due diligence (CDD) measures addresses the ML/TF risks to which they are exposed. The 2019 Guidance thus explains the obligations for legal professionals regarding identification and verification of beneficial ownership information and provides examples of standard, simplified and enhanced CDD measures based on ML/TF risk;

• the role of self-regulatory bodies responsible for supervising and monitoring the compliance of legal professionals with their AML/CFT obligations.

The FATF developed the 2019 Guidance with significant input from the legal profession, including through a public consultation in March 2019, to ensure that it reflects their practical expertise and good practices.

Barbara Bandiera
President of the UIA Compliance and AML Sub-committee
Studio Legale RCCD, Milan, Italy