Lawyers and their firms have been warned that they could face disciplinary action and administrative penalties of up to R50m for failing to comply with the Financial Intelligence Centre Act.

The centre will report lawyers and their firms who are non-compliant with the Act to the Legal Practice Council (LPC) where they face administrative penalties between R10m and R50m, says a Cape Argus report.

The LPC has warned legal practitioners that they could face disciplinary charges for breaching their code of conduct by failing to take all steps necessary to ensure compliance with the Act at all times.

The lawyers have been told that administrative sanctions range from a caution, reprimand, directive to take remedial action or make specific arrangements, restriction or suspension of certain specified business activities. They could also face financial penalties of R10m for ‘natural persons’ and R50m for ‘legal persons’.

According to the LPC, the Financial Intelligence Centre (FIC) conducted 207 compliance inspections and nine compliance reviews in the 12 months that ended on 31 March to assess the level of compliance by legal practitioners.

‘In respect of the 207 compliance inspections, approximately 80% of the legal practitioners were non-compliant, with the most common non-compliance relating to failure to register with the FIC, failure to have a risk management and compliance programme, failure to conduct customer due diligence and failure to report,’ reads an LPC advisory dated 17 June.

The FIC found that the majority of the reports submitted to it by legal practitioners were cash threshold reports, which indicated that cash was used to pay for legal services.

The 2 493 cash threshold reports indicated that there were increased risks of money-laundering in the legal fraternity. An average of 231 suspicious transaction reports were filed by lawyers during the same period.

The council has undertaken to improve compliance, notes the Cape Argus report.

‘The LPC will be issuing a series of advisories to raise awareness to legal practitioners in addressing the findings of non-compliance issued by the FIC, but legal practitioners are advised to ensure as a matter of urgency that they are aware of all their obligations under the FIC Act and that they become compliant before any further inspections are conducted,’ the council further warned.

The requirements to ensure compliance apply to all practising attorneys and trust account advocates in order to uphold the country’s international anti-money-laundering and combating the financing of terrorism obligations and commitments.

Full Cape Argus report