2012 Olympics: where is the money laundering threat for solicitors? – The London Olympics this summer will provide a fantastic opportunity to showcase the best of the UK in terms of sport, culture, business and national heritage.

However in order for events to run smoothly, firms across the UK are busy preparing for disruption to business as usual; whether that be through staff absence, travel disruption, out of hours only deliveries, or increased opening hours and customers.

Many firms will also be considering the risks posed by terrorist threats, demonstrations or cyber attacks. But have you considered the potential risks of increased financial crime and money laundering?

With so many people visiting London for the games, all competing for reduced resources, and with many visitors being unfamiliar with their surroundings and legal requirements in the UK, many individuals could find themselves more vulnerable to fraud.

Examples already highlighted in the press are the risk of frauds relating to ticket purchases (whether for the Olympics or related events) holiday lettings and holiday packages.

Organised criminals may also seek to:

1. cash in on high profile brands associated with the Olympics by selling fake goods
2. make more use of counterfeit currency hoping that due to increased trading activity retail staff will not have time to check currency
3. utilise increased betting activity as a way of laundering money from other criminal enterprises or engage in spot fixing for the purposes of making illicit gains through betting.

While all of these points may be very interesting in a general sense, what are the key potential risk areas for solicitors?

Cloning of law firm websites to lend credibility to scams

A key feature of any fraud, particularly online frauds, is to present a picture of legitimacy to the victim. Organised criminals may target law firms by attempting to clone their websites for use in communications perpetrating frauds.

By regularly undertaking internet searches for your firm you should be able to detect any cloned or fake websites.

If you find that your website has been cloned you should make a report to Action Fraud, the SRA and your insurer.

Possible increased risk of fraudulent passports

During the Olympics there will be an increase in people from a wide range of nationalities visiting the UK .

There is a possibility that organised criminals may seek to use this opportunity to make use of false foreign passports or identity documents created in document factories in the UK in money laundering enterprises.

There may be the hope that firms who mainly deal with domestic clients will not find instructions from foreign clients unusual during this period and therefore may not undertake as much scrutiny of the identity documents as they might otherwise.

Solicitors are not expected to be forgery experts, but should take the usual precaution of actually looking at the passport for any obvious signs of forgery and checking it is consistent with information about the client.

Increased visits to the country by foreign politically exposed persons (PEPs)

While clearly the vast majority of WHAT are not corrupt or engaged in money laundering during their visit, firms are required by the Money Laundering Regulations to have in place a risk based approach for assessing whether they are being instructed by a PEP .

With the potential for an increased number of PEPs and their associates visiting the UK during the summer, now may be a useful time to review your firm’s procedures and ensure that fee earners appreciate their obligations.

Increased sham disputes

With the expected increase in fraud, lawyers are likely to see an increase in litigation relating to those frauds.

Organised criminals may take this opportunity to create sham disputes as a way of moving large amounts of money obtained from other types of crime during or shortly after the Olympics.

Even where you are satisfied that you are dealing with a genuine dispute, you should still consider whether the dispute really is just a civil matter, or if there are criminal offences and as a result there are proceeds of crime involved.

Returning property to a victim or having them compensated for the loss is not money laundering, while genuine litigation is not entering into an arrangement for the purposes of s328 of the Proceeds of Crime Act 2002.

However, your client may be just one of many victims and law enforcement may be able to help locate the criminals and recover the funds.

In discussion with your client, you can consider reports to the Serious Organised Crime Agency (where there are existing proceeds of crime); Action Fraud (where a fraud has occurred) or either to Trading Standards or your local police (where intellectual property rights have been breached).

Importance of asking: Why?

Solicitors are encouraged to remember the importance of asking the question: ‘Why’ when assessing the risks of money laundering or other criminal activity for each retainer. Firms should consider closely any answer along the lines of ‘Well I was just in the country for the Olympics and while I was here thought I would …”.

This is particularly if the retainer in question includes activities such as purchasing a property or two, setting up a company or establishing a trust. While some people may combine business trips with sightseeing or other cultural activities, consider whether this particular client’s proposed activities are consistent with the client’s background and really do make sense under all of the circumstances.

Finally, stay alert to the types of scams already being highlighted in the press and take care to ensure that your fee earners are not inadvertently drawn in to involvement in any such fraud. Knowing who your clients really are, what it is the client really wants you to do and why, will help mitigate the risk of being used in a crime.

http://www.lawsociety.org.uk/newsandevents/news/view=newsarticle.law?NEWSID=446374