Draft proposals to underline the important role of legal services regulators in tackling economic crime have been published today by the Legal Services Board (LSB). This follows a new legal duty being placed on the LSB and the legal services regulators to ‘promote the prevention and detection of economic crime’. The Economic Crime and Corporate Transparency Act 2023 introduced this as a new regulatory objective under the Legal Services Act 2007.
Although regulators already play a part in upholding the UK’s economic crime regime, this was not previously set out as an explicit duty in legislation. The LSB has drafted guidance to ensure regulators understand how to meet this new duty. The LSB is now consulting on this guidance.
LSB Chief Executive, Craig Westwood, said:
‘Our goal is to bring about a step change in efforts from legal services regulators to tackle economic crime. This is essential to securing a legal sector that benefits the public and is built on strong foundations that uphold the rule of law.
‘Legal services regulators can play a crucial role in preventing economic crime, and the public harm it causes, by ensuring the profession adheres to high ethical standards and knows how to identify and prevent unlawful activities. By providing clear and practical guidance, we aim to help regulators develop effective processes and resources. This consultation is a critical step in ensuring that the legal sector remains vigilant and proactive in the fight against economic crime.’
Economic crime includes money laundering, sanctions evasion and fraud. When lawyers are implicated in such activities, it undermines the integrity of the legal profession. It poses a threat to public confidence in legal services. An ethical legal profession is essential to building economic confidence. It fosters trust across other industries and stimulates growth in sectors that rely on legal services.
The draft guidance includes requirements for regulators to:
- Understand and take appropriate actions to address risks that may lead to the regulated sector knowing or unknowingly facilitating economic crime.
- Ensure that legal professionals understand how to identify and avoid economic crime risks.
- Monitor legal professional’s compliance with standards developed by regulators.
- Regularly evaluate standards and procedures to ensure they continue to be fit for purpose.
The consultation will run from 15 November 2024 to 7 February 2025. To participate, see the consultation document.
About the Economic Crime and Corporate Transparency Act (ECCTA)
As part of the ECCTA, the government introduced a new regulatory objective to the Legal Services Act 2007 focused on promoting the prevention and detection of economic crime.
The purpose of the new objective was to:
- affirm the duties of regulators and the regulated communities to uphold the economic crime regime, and beyond doubt that it is frontline regulators’ duty to carry out such regulatory action, as is appropriate to uphold the new objective; and
- enable the Legal Services Board, as the oversight regulator, to performance manage frontline regulators against this economic crime objective.
- The new objective was also introduced in light of HMT’s National Risk Assessment of money laundering and terrorist financing identifying legal services as being at high risk of abuse for money laundering.