Rule 61 Rules of Professional Conduct for Legal Practitioners

Rule 61 of the Rules of Professional Conduct for Legal Practitioners (RPC) 2023 is about Risk based approach. It is under Part III (Risk Based Approach and Client Due Diligence) of Chapter 2 (Guidelines and Rules on Anti-money Laundering and Combating Financing of Terrorism for Legal Practitioners) of the Rules. It provides as follows:

(1) A legal practitioner shall identify, assess, and understand the money laundering, terrorism financing and proliferation financing risks they may be exposed to on a given transaction, and take reasonable and proportionate measures effectively and efficiently to mitigate and manage such risks.

(2) A legal practitioner shall in identifying and maintaining an understanding of the money laundering and terrorism financing risks, understand the money laundering, terrorism financing sector risks specific to its services
and its client base, and create an effective control mechanism in place in mitigating any such risks.

(3) A legal practitioner and law firm shall—
(a) develop internal policies, procedures, and controls, including appropriate compliance management arrangements, and adequate screening procedures to ensure high standards when hiring employees ; and
(b) develop and provide ongoing employee training programmes commensurate with the complexity of their responsibilities.

(4) The following steps shall be adopted by legal practitioners and law firms to minimize money laundering and terrorism financing risks on every transaction they are instructed to carry out by clients.

(5) The steps referred to in paragraph (4) of this rule include—
(a) legal practitioners or law firms shall as far as reasonably possible —
(i) identify and verify the identity of their clients, whether natural or artificial, their addresses whether permanent or temporary, as well as their beneficial owners, and ascertaining true beneficiaries of the transaction being instructed to be carried out, and
(ii) obtain an understanding of the source of funds and source of wealth of the client and the purpose of the transaction ;

(b) legal practitioners or law firms shall know the exact nature of the service that they are providing and understand how that work may unwittingly facilitate the movement or obscure the proceeds of crime and take necessary mitigating steps as provided in these Rules ;
(c) where a legal practitioner lacks the requisite expertise to determine the nature of work and to identify money laundering risks and terrorism financing, he shall seek expert assistance to comply or may decline such client instructions without prejudice.

(d) a legal practitioner or law firm shall take steps to understand the commercial or personal rationale for the work to be done, provided that the legal practitioner or law firm is not obliged to objectively assess the commercial or personal rationale of every transaction if it appears reasonable and genuine on the face of the instruction ;

(e) a legal practitioner or law firm shall be attentive to red flag or indicators by exercising vigilance in identifying and carefully reviewing aspects of the transaction to determine if there are reasonable grounds to suspect that funds provided in a transaction by a party may be the proceeds of a criminal activity or related to terrorist financing, and documenting this process shall suffice for the legal practitioner to be seen to have complied to assist in interpreting red flags or indicators of suspicion.

(f) a legal practitioner or law firm shall consider what action, if any, needs to be taken and create a plan to implement such action ;
(g) the outcomes of the action plans, including the comprehensive risk assessment of a particular client or transaction will dictate the level and nature of the evidence or documentation collated under a firm’s Client Due Diligence (CDD) or Enhanced Due Diligence (EDD) procedures (including evidence of source of wealth or funds). ; and

(h) a legal practitioner shall adequately document and record steps taken under this paragraph.