Tougher anti-money laundering controls risk obstructing justice
As the Institute of Business Ethics calls for City law firms to apply much tougher anti-money laundering controls to prospective clients, Ellen Gallagher argues that over-compliance risks depriving individuals of access to justice.
Stringent financial crime controls already apply across the UK regulated sector, including for lawyers and financial services firms. The regulations promote an excess of caution, and a low threshold for off-boarding customers. The FCA recently confirmed that 408,000 UK banking customers were “debanked” in the last year due to compliance with financial crime controls.
The FCA’s CEO has warned that banks may “err on the side of caution” when applying risk-based financial crime controls, resulting in customers wrongly losing access to an account.
The increasing complexity of anti-money laundering (AML) controls is driving soaring compliance costs. UK financial institutions spend an estimated £38bn a year on compliance with financial crime controls (contrast this with the £19.6bn total allocated to police funding in March 2025). The cost is borne disproportionately by smaller firms, harming competition.
The IBE report proposes that law firms go beyond compliance with the already complex regime of law and regulation in favour of signing up to applying a “legitimate provenance of wealth test”. It argues that they should also consider the public’s perception of their potential client before agreeing to act for them.
But lawyers’ primary duty is not the detection of financial crime but the administration of justice. The report acknowledges that this means that they should be free to accept clients in criminal matters, irrespective of status or character. But why should this principle not apply equally to lawyers representing clients in a divorce, or a child access dispute? Or to those defending themselves in a civil claim? The report does not explain.
Over-compliance with the AML regime by banks caused the scandal of “debanking”. While “de-lawyering” might sound attractive to some, the consequence would be the restriction of access to justice – making the UK a less attractive place to do business and a less civil society.
Ellen Gallagher is a financial crime partner at Vardags