IPReg’s view on the application of the Money Laundering Regulations 2007 (“the Regulations”)
As you may already be aware, IPReg was concerned about the continuing application of previous (2009) guidance in this area, and has now obtained specialist advice.
IPReg has concluded, taking into account changes in the structure of the regulatory regime since guidance was previously issued, that the Regulations do apply to Patent and Trade Mark Attorneys.
IPReg considers that, in the course of providing legal services, Patent and Trade Mark Attorneys fall within the scope of the Regulations, because they participate in transactions involving the management of client assets. Patent and Trade Mark Attorneys “participate in a transaction” where they assist in the planning or execution of a transaction, or otherwise where they act on behalf of a client in a transaction involving client assets, which would include patents or trade marks; 2014 guidance from the recently-formed National Crime Agency defines criminal property to include “intangible and incorporeal property”.
As a result, Patent and Trade Mark Attorneys are required to have procedures in place to detect and prevent money laundering.
A copy of Counsel’s Opinion can be found here.
On 23rd September 2014, IPReg held a webinar for the profession on the application of the Money Laundering Regulations 2007.
The slides can be found here.
A further webinar on 24th October 2014 dealt with some of the practical implications for the profession.
The slides can be found here
Each webinar referred to the following:
The recent CIPA and ITMA webinar on ABS contained very useful guidance on anti-money laundering measures.
The Law Society has issued an extensive and practical Practice Note on Anti-Money Laundering. Although the nature of patent and trade mark practices are different, the principles that underpin any risk based approach to compliance are the same. We encourage you, therefore, to refer to the Practice Note when issues arise.
What is “money laundering?”
Money laundering is generally defined as the process by which the proceeds of crime, and the true ownership of those proceeds, are changed so that the proceeds appear to come from a legitimate source.
What is a risk based approach?
A risk-based approach means that you focus your resources on the areas of greatest risk. The resulting benefits of this approach include:
- more efficient and effective use of resources proportionate to the risks faced
- minimising compliance costs and burdens on clients
- greater flexibility to respond to emerging risks as laundering and terrorist financing methods change
- assessing your firm’s profile
- assessing your client demographic
- assessing individual risk
No matter how thorough your risk assessment or how appropriate your controls, some criminals may still succeed in exploiting you for criminal purposes. But an effective, risk-based approach and documented, risk-based judgements on individual clients and retainers will enable your firm to justify your position on managing the risk to law enforcement, courts and professional supervisors (oversight bodies).
What systems policies and procedures do I need?
You should develop systems to meet your obligations and risk profile in a risk-based and proportionate manner. Policies and procedures supporting these systems mean that staff apply the systems consistently and firms can demonstrate to oversight bodies that processes facilitating
You must have a Nominated Officer. IPReg would expect that person also to be the Head of Finance and Administration where one has been appointed.
The Joint Business Committee of CIPA and ITMA (now CITMA) may be able to assist with template documents (also see below) but key factors are:
- Training given to staff and guidance notes issued (which are readily accessible) to staff
- Clear lines of authorisation within the practice for the opening of files
- A comprehensive log of situations brought to the attention of the Nominated Officer, queries from staff and reports made.
What are the warning signs?
Because money launderers are always developing new techniques, no list of examples can be fully comprehensive; however, here are some key factors which may heighten a client’s risk profile or give you cause for concern.
- A new client who cannot property explain why you have been selected – for example a litigation instruction as a first instruction
- A new client with no reason to select your practice geographically
- A desire to lodge unnecessarily large amounts of money “on account”
- Unusual instructions such as a dispute which is settled very easily as this may indicate sham litigation
- Secretive clients who do not want to meet you
- “Urgent” and changing instructions; clearly urgent instructions from an established client have a quite different risk profile to urgent instructions from an established client.
Support and advice for the profession
IPReg has now appointed its Assurance Officer who will be able to provide guidance on client account management and money laundering compliance.
Provided below are examples of Anti-Money Laundering Policies that registered / licensed firms have in place:
Please note that we do not require you to use these documents as fixed templates; they are set out to assist you when drafting your firm’s Anti-Money Laundering policy to reflect your own internal procedures.
The commentary on applicability contained within the first example policy by way of a link to CIPA and ITMA’s “Business Practice Guidance – Money Laundering” is not consistent with IPReg’s view but we do endorse the guidance on the Regulations. IPReg’s view on applicability of the Regulations is set out within Counsel’s Opinion that can be found here.
These links lead to useful external sites: