Legal Profession (Prevention of Money Laundering and Financing of Terrorism) Rules, 2015

Legal Profession (Prevention of Money Laundering and Financing of Terrorism) Rules, 2015, provides insights into the measures to be implemented by legal professionals to combat ML/FT and report suspicious transactions.

The Council of Law Society of Singapore, with the approval of the Minister for Law, made the Legal Profession (Prevention of Money Laundering and Financing of Terrorism) Rules 2015 effective from 23^rd May 2015.

The said rules apply to the following “legal practitioners”:

a. Every advocate and solicitor who —

• has an active practising certificate, or
• is a director, a partner, a consultant, or an employee of law practice, irrespective of whether the person holds a practising certificate.

b. Every foreign lawyer who is a regulated foreign lawyer.

Legal professionals must not establish a business relationship or undertake any transaction when there are reasonable grounds to suspect that the client is involved in money laundering or terrorism financing. Further, such suspicion must be reported to the Suspicious Transaction Reporting Officer (in case the suspicion is related to money laundering) or the Police Officer/Commercial Affairs Officer (in case of a client associated with the financing of terrorism).

The rules require legal professionals and law practices to undertake adequate customer due diligence before or in the course of establishing a business relationship aligned with the client’s ML/FT risk profile.

The legal professionals must apply the customer due diligence measures, such as –  

• identifying the client and seeking client identification documents,
• verifying the identity using reliable, independent sources,
• legal structure, if the client is a legal person,
• understanding the ownership or control structure and identifying the beneficial owners, controlling parties and authorized representatives,
• verifying the identity of the directors and senior managerial persons of the entity,
• determining whether the client is a Politically Exposed Person (PEP) or associated with any PPE,
• obtaining details about the registered and principal place of business, in case of a corporate client,
• understanding the client’s nature of business,
• applying enhanced measures in case the client is from a FATF-defined list of high-risk countries, where the client is PEP or associated with PEP or is suspected of being involved in any money laundering or terrorism financing activity.

The Legal Profession (Prevention of ML and FT) Rules, 2015 requires the legal professions and law practices to apply the following enhanced measures in case of clients categorised as high-risk:

• obtaining the source of funds and source of wealth of the client and the beneficial owners,
• obtaining senior management approval before onboarding any client or executing a transaction, and
• enhanced ongoing monitoring of such clients and transactions thereof.

The rules exempt legal professionals and law practices from applying the customer due diligence measures when the client is Ministry or any Government department, a company listed on the regulated stock exchange, the client is a relevant Singapore Financial institution, etc.

The rules mandate that legal professionals ensure adequate staff training around AML/CFT regulations and the framework necessary to mitigate the risk.

All the AML/CFT-related documents and records must be maintained for a minimum of 5 years. For client and transactional records, the 5 years is suggested to start from the end of the business relationship or occasional transactions, as the case may be.

The rules also lay down the guidelines around the following:

• legal professional acting as a “Trustee”,
• relying on third parties for the performance of customer due diligence measures,
• assessing the ML/FT associated with the use of new technologies or starting of new business practices,
• implementation of the AML/CFT policies and processes across the group – branches and subsidiaries, including the ones located outside Singapore.