Episode Summary:

Most AML/CTF enforcement action against lawyers does not stem from deliberate wrongdoing, but small everyday decisions that go unchallenged and unchecked. This episode explores UK enforcement cases to show how Australian practitioners can recognise risk earlier, strengthen compliance and avoid the mistakes of their UK counterparts.

Guest:

• Dr Katie Benson, Senior Lecturer in Criminology, University of Manchester
• Associate Fellow, RUSI Centre for Finance and Security, with a background in UK law enforcement
• Expert in the role of lawyers in facilitating illicit finance and regulatory responses
• www.linkedin.com/in/katie-benson-b36029a4/ | research.manchester.ac.uk/en/persons/katie.benson

Host:

• Artemis Evangelidis, Law Institute of Victoria
• [email protected] | www.linkedin.com/company/law-institute-of-victoria

Episode Overview:

Drawing on UK’s AML/CTF enforcement cases against lawyers, this episode examines how the decisions and actions in day-to-day legal practice can lead to serious legal consequences. It highlights key risk areas, including client account compliance, property transactions and source of funds due diligence. Dr Katie Benson brings a research-driven perspective, grounded in case analysis and industry interviews, to explain how situational pressures and organisational context shape decision making. For lawyers preparing for AML/CTF compliance Australia, this episode provides practical guidance on identifying early warning signs, avoiding complacency and strengthening firm-wide risk management practices.

Topics & Timestamps:

• 00:04 Intro and AML reforms context
• 01:02 Types of AML enforcement cases involving lawyers
• 03:00 Criminal and regulatory pathways
• 05:00 High-risk areas including property and client accounts
• 09:27 Differences in culpability and enforcement outcomes
• 14:58 Red flags and suspicious client behaviour
• 19:45 Practical guidance for Australian lawyers
• 23:31 Final reflections on risk and accountability

Key Takeaways:

• AML/CTF enforcement action against lawyers in the UK does not often stem from deliberate misconduct
• UK cases show client accounts and property transactions are consistent high-risk areas
• Source of funds and source of wealth checks are critical and increasingly scrutinised
• Demonstrating active compliance, not just policies on paper, is essential[IF1]
• Situational pressures and firm culture influence how lawyers respond to risk
• Early intervention and questioning client narratives can prevent escalation
• Compliance must be embedded across the firm, not left to individuals

Resources & Links:

• LIV AML/CTF Hub – Central resource for Tranche 2 readiness and compliance guidance | www.liv.asn.au/amlhub
• LIV Compliance and Professional Standards – Practical guidance on regulatory obligations for lawyers | www.liv.asn.au/compliance
• SRA AML Annual Report – UK enforcement trends and insights into compliance failures | www.sra.org.uk/sra/research-publications/aml-annual-report-2023-24/
• University of Manchester profile – Dr Katie Benson – Research overview and publications | research.manchester.ac.uk/en/persons/katie.benson
• AUSTRAC AML/CTF guidance – Australian regulatory framework and expectations | www.austrac.gov.au
• Dr Katie Benson’s 2020 book, Lawyers and the Proceeds of Crime
• From money laundering to illicit finance – Comparative research on evolving AML regulation in the UK and Australia (2025) | www.tandfonline.com/doi/full/10.1080/10345329.2024.2443702#abstract
• Complementarity, tension and proportionality in the anti-money laundering regulation of law firm client accounts (2026) | link.springer.com/article/10.1007/s10611-025-10252-3
• Occupation, organisation, opportunity and oversight: law firm client accounts and (anti-)money laundering (2024) | link.springer.com/article/10.1007/s10610-024-09581-1

About This Podcast:

Cross-Examined is a new podcast from the Law Institute of Victoria. Tune in to hear experts discuss hot topics in the law and the changes shaping the legal profession. Regular episodes will cover everything from AI and cyber threats to ethical dilemmas, workplace taboos and practice management insights.

This podcast is recorded on the traditional lands of the Wurundjeri people of the Kulin Nation. The Law Institute of Victoria acknowledges the Traditional Custodians of Country across Australia. We pay our respects to Elders past and present.

Disclaimer:

This podcast is for informational purposes only and is not intended to replace professional legal advice. The views expressed in this podcast do not necessarily reflect the views of the Law Institute of Victoria (LIV). The LIV is not responsible for any losses, damages or liabilities that may arise from the use of this podcast. Listeners should seek independent legal advice for their matters.

Production Information:

• Produced by: The Law Institute of Victoria
• Producer and audio editor: Garreth Hanley
• Music: Garreth Hanley
• Copy and show notes: Louise Surette

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Welcome to Cross-Examined a podcast by the Law Institute of Victoria

Australia’s recent AML/CTF Tranche 2 reforms came into effect on the first of July, but in other jurisdictions, like the UK, lawyers have been part of the regime for some time.

There are many lessons Victorian solicitors can take from the experience of their UK colleagues – the moments that matter, where things went wrong and strategies to avoid similar mistakes.

I’m Artemis Evangelidis, and my guest today is Dr Katie Benson, who is dialing in from the University of Manchester, where she is a Senior Lecturer in Criminology. She is the author of Lawyers and the Proceeds of Crime, a key empirical study of how lawyers become entangled in money laundering.

Katie, welcome to Cross-Examined.

Thank you. It’s lovely to be here.

In your academic research, you have documented numerous AML enforcement actions against lawyers, primarily in the UK. Could you share with us the types of circumstances that tend to precede an enforcement action – not just the extreme cases, but the more commonplace patterns? Are there particular trends that you see in your research?

Thank you. Yes. So, I’ve looked at both criminal cases, where lawyers were convicted for their role in the facilitation of money laundering, and regulatory enforcement cases, where firms or individual lawyers were sanctioned by the Solicitors Regulation Authority or the Solicitors Disciplinary Tribunal. So, in the UK, lawyers who have facilitated money laundering can be convicted under the Proceeds of Crime Act, under either general money laundering offences or under an offence of failing to report suspicions of money laundering, which is specifically for sectors subject to the money laundering regulations.

Criminal investigations of lawyers will be initiated in various ways, for various reasons. So first, if a lawyer is identified through an investigation into the predicate offender or group – and, for example, there was a recent case in Sydney where a solicitor was arrested on the back of an investigation into a large-scale fraud and charged with knowingly dealing with the proceeds of crime, as well as other offences.

I think the allegations relate to the solicitor’s role in the purchase of property – tens of millions of dollars’ worth of property. Second, a criminal investigation might be initiated by a lawyer being identified to law enforcement by the regulator or professional body if they have suspicions of misconduct. And also, law enforcement have, particularly in more recent years, worked with input or data from civil society – so investigations carried out by anti-corruption organisations or investigative journalists, for example, which often look at cases of corruption, tax evasion, sanctions evasion, and identify various professional service providers that have played a role at different points of the life cycle of the illicit activity.

We don’t see a huge number of criminal convictions, and there are various reasons for that. In the 20 cases I looked at of convicted solicitors, there were clear examples of the solicitor being knowingly concerned in the money laundering, where they knew that they were facilitating transactions involving criminal proceeds and intended to do so. There were cases where the solicitor appeared to have turned a blind eye to knowledge or suspicion of money laundering, or failed to ask appropriate questions to check the legitimacy of transactions, the source of the funds being used, etc. And there were also cases where the solicitor’s involvement was described by the judge or disciplinary tribunal as unwitting or unknowing, and where no criminal intent was identified – but they were convicted under the failure to disclose offence for regulated sectors, as that has a lower mens rea threshold.

So, in these cases, we see a variety of actions and behaviours. Many of them involve the purchase or sale of property – so, lawyers conducting the conveyancing for property being bought with criminal proceeds – and that’s a real risk area for lawyers, unsurprisingly. Real estate is a common means of laundering criminal proceeds, and also those involved in criminal activity want to buy houses or apartments to live in, to invest in, and real estate transactions inherently involve various professional service sectors, including lawyers. There were also examples of other high-value goods being purchased, including a jet in one case.

Obviously, where a lawyer is facilitating a property transaction or purchase of a jet or other asset, or certain commercial transactions, funds will inevitably pass through the client or trust account. But these accounts can also be used more purposefully to launder the proceeds of crime, if the lawyer so wishes. There have been cases where the proceeds of mortgage frauds, VAT frauds, for example, have been transferred into a solicitor’s client account and then dispersed out again to multiple bank accounts, as a way of adding an extra layer of complexity to the movement of the money, and adding that veneer of legitimacy that comes with a law firm client account. We also see corporate vehicles – companies, trusts, etc. – and offshore accounts playing a role in some of the cases. So, for example, a solicitor who transferred his client’s proceeds of corruption into offshore trusts and shell companies, and then used these companies to buy the jet, in order to conceal the ownership of the jet.

So that’s a bit about the criminal cases. What do we see in regulatory enforcement cases? The majority of what we see in regulatory enforcement cases relates to firms not having the required AML/CTF policies, controls and procedures in place, or not meeting their risk assessment or due diligence obligations. A key thing to note that we are seeing in enforcement action is that it’s not just about having the right documents and the right policies in place. It’s about being able to show how these are actually being used – how these are being put into practice to prevent money laundering. So, in many cases, we might see an issue related to a particular client, or a particular transaction or series of transactions, and the regulator will identify issues – for example, where a transaction has been processed, or a service has been provided to a client, where there were notable red flags, real concerns that this had the potential to enable money laundering, but the solicitor or firm clearly didn’t do the due diligence required, or didn’t take adequate measures to check the source of funds being used.

But these cases related to individual matters often start with not having those fundamentals in place – of understanding the money laundering risks relevant to your practice – and having processes and procedures in place that all members of the firm know about, to make those decisions in individual matters easier, and easier to justify.

And that’s another important point, I think. It’s no good having a compliance team or compliance officer in the firm who is completely on top of all this, if no one else is. It’s the solicitors, the fee earners themselves, who are often the ones making a decision about taking on a client or progressing a matter, so they need to be aware of this all the time as well.

One thing that is coming up more and more in recent regulatory enforcement cases – and we see particularly in cases that have been referred to the Solicitors Disciplinary Tribunal, so those more serious cases – is issues related to the management of risk in relation to politically exposed persons, or the kind of high-risk transactions that would require enhanced due diligence and enhanced ongoing monitoring. There have been a number of recent cases where firms have been accused of either not correctly identifying that a client or transaction was high risk in this way, or identifying that and then not carrying out adequate, sufficiently thorough or in-depth checks into, a) the source of funds being used in the transaction or b) the overall source of wealth of the client. And this is something that the regulator is becoming increasingly focused on, I think, rather than just those higher-level requirements around policies and procedures.

Katie, thank you for that in-depth exploration. I wanted to ask, do the enforcement and regulatory responses to negligent, deceived or deliberately corrupt lawyers differ?

I don’t think those clear distinctions exist. It’s often not clear cut. There are a lot of grey areas, and the boundaries between different levels of intent or knowingness can be blurred. So, there isn’t a real clear differentiation in how different cases are dealt with like that. So, just to kind of talk about the nature of lawyers’ involvement and those kind of issues around knowledge, intent, complicity – so, at one end of the spectrum, there will be lawyers who knowingly and wittingly enable money laundering, or terrorism financing, or sanctions evasion or other forms of criminality on behalf of their clients. They may act for multiple criminal actors or groups. And there could be various reasons for this, or ways that they have got to this position.

They might have personal or familial or community-based relationships, or existing business relationships with individuals involved in criminal activity, which leads to their involvement. They may be offered the opportunity to make some money for themselves by facilitating certain transactions. They may be coerced in some way, through blackmail or threats. They may be compromised themselves in some way, through their own private lifestyle choices or personal problems.

So, lawyers can end up in a situation where they are knowingly enabling criminal activity over a period of time through a series of decisions – like a slippery slope. Perhaps initially they felt under pressure to take on a certain client or act in a certain transaction. That could be explicit pressure from the client, or from someone more senior in their firm, or it could be more about the pressure of trying to prove themselves in the job – bring in clients, get business, hit their billable hours target – so those other kinds of pressures that exist in law firms and in the legal sector more broadly.

Once that early decision has been made, perhaps subsequent decisions just seem like one thing extra or just a final request. And this can snowball – If you do something that is potentially problematic, that can put you in a situation that is difficult [and] that can put you in a situation that is difficult to get out of.

Where a lawyer has been knowingly or actively involved in facilitating money laundering or other forms of illicit finance, these are the most appropriate cases for criminal prosecution. And there are lawyers who have been criminally prosecuted for knowingly facilitating the laundering of the proceeds of corruption, VAT fraud, etc.

Perhaps the next step down in terms of culpability would be what we might call wilful blindness. Wilful blindness is about a conscious avoidance of the truth – it’s a deliberate failure to make a reasonable inquiry of wrongdoing, despite suspicion or an awareness of the high probability of its existence.

In these cases, something about the transaction or the client has raised suspicions, but these suspicions have been ignored, or further questions which could have confirmed or allayed the suspicions have not been asked and the transaction has been completed, or the service or advice has been provided, or the client has been onboarded. So, this is about turning a blind eye to suspicions – not asking the right questions or paying sufficient attention to AML obligations, not checking the legitimacy of the client or their source of funds. And again, there may be reasons for this – commercial considerations, you know, wanting or needing the client’s business, etc.

If we look at cases where legal professionals or law firms have been involved in some way in facilitating money laundering, we can see the various points of decision making which can lead to this facilitation and the various factors or contexts that can shape decision making at these points.

So, to go back to the question about whether these cases are treated differently – ideally they would be, and ideally we would be focusing law enforcement criminal justice action on the most egregious cases, the most serious cases, where the lawyer was knowingly or actively involved in facilitating money laundering, and regulatory enforcement action on those cases where it was more about a breach of the regulations, or more unwitting kind of involvement. As I say, sometimes it’s very difficult to know the level of a lawyer’s or a law firm’s complicity, knowledge or intent.

I’m going to flip this a little bit and ask you now, with regards to clients who deliberately draw lawyers into situations that put them in breach of AML/CTF compliance, they often construct very plausible narratives. In your experience, what might those look like? And is there a point where a lawyer’s internal alarms should be triggered, regardless of the story that they are being told?

Yeah, that’s a really interesting question, and it’s quite a tricky question to give a definitive answer to. Often transactions, services, etc. that facilitate money laundering are exactly the same as those that are carried out with legitimate funds, for legitimate clients, every day, as part of lawyers’ routine work. If it was just about having to watch out for someone dodgy looking wanting to buy a house with a suitcase of bank notes, it would be much easier.

The narrative of someone wanting to launder criminal proceeds, or of someone wanting to conduct transactions with corrupt wealth of some kind, will obviously be different depending on the circumstances. But I think you could say that the narratives would be around justifying the source of the funds for the transaction, or their broader wealth or assets, or justifying inconsistencies or things that are unusual within the transaction or wider matter.

For example, if payments are coming from a third party, or the source of funds doesn’t make sense based on the lawyer’s experience, or the transaction seems unusual for a client in their position, or for the practice’s normal work, or a transaction is aborted partway through, or the parameters shift in some way – if the client changes what they are asking for, or changes the source of the funds, or changes the value of the transaction.

These are just some examples of things that might raise concerns, might be considered red flags, but will also have to be justified by the client in some way – through their narrative. Or if the client seems to be particularly focused on obfuscation, or the transaction involves particularly complex chains of bank accounts or companies or trusts – unnecessarily complex structures, with multiple legal entities or structures aimed at trying to keep the true identity of the individuals controlling the funds hidden.

These are all things to look out for and may need to be justified by the client – and there may be legitimate justifications, but also there may not be. And I guess it’s about lawyers using their judgment and being really honest about whether justifications that have been provided to them by the client actually stand up. And this is complex – it’s not always easy – but I think questions can be asked, and a willingness to lean into those questions and not turn a blind eye when things don’t seem right.

What then happens if something doesn’t seem right is another question, and that comes back to the culture of the firm. What firms should be trying to do, if possible, is making it as little about individual lawyers’ decision making as possible, because that can be challenging – so, trying to have those processes in place that make decisions and judgments easier, based on a real understanding of the nature of the services that the firm is providing and their risks.

And one of the things that I always highlight is that every case is really different and the circumstances are really different. In some cases, it is really complex – in some cases you have millions of dollars of corrupt wealth being moved around, chains of bank accounts, shell companies, trusts all being involved. And in some cases, it is a High Street solicitor who is doing the conveyancing for a local drug dealer, or something like that. So, the different ways that lawyers can facilitate money laundering is so varied.

And it’s challenging, you know – it’s challenging sometimes to know which questions to ask, which questions to ask when, what should be considered unusual or suspicious. And it can be challenging to really understand, for example, the source of funds for a transaction, or the source of a client’s wealth. And sometimes you need to understand complex corporate or financial constructions and get to the bottom of beneficial ownership. So, a lot of it is about making the wrong decision – but in the moment, it can be quite difficult sometimes to know what the right decision is to make, unless it’s something really obviously suspicious.

Katie, what advice would you give Victorian practitioners who are just beginning to get their heads around the new AML/CTF regime?

I think it’s important to get the fundamentals right. So, this is about, first of all, really understanding and documenting the potential risks for your particular firm. The risk assessment needs to be context-specific, not just following a generic template. Every firm will be different.

There needs to be real thought and consideration of the firm’s specific business and the risks that entails. And then thinking about what unusual would look like to you, what suspicions might look like in your context – thinking about these things honestly. And going back to that point about decision making – thinking about the decision-making points within your organisation, within the kinds of transactions or matters that you deal with, where are the points where you could ask certain questions or make different decisions that could make you more or less vulnerable?

What are the questions that you could be asking at those points? What are the different decisions you could be making? Is there a way of thinking about these things and developing strategies or processes that reduce the risk of somebody making a bad decision, or turning a blind eye, or not asking the right questions, in the moment, when they’ve got all those pressures that we’ve talked about bearing down on them? If you can think about those things in the context of your particular firm, I think that could be really helpful.

I think another important thing is to make sure that this is a firm-wide endeavour. This isn’t just about the compliance officer or compliance team being on top of this and then leaving it to them. Fee earners are making decisions about individual clients and matters every day. They need to know what the risks are and what their obligations are. They need to have a sense that there’s a reason that they are doing this – that it isn’t just an annoying tick-box exercise, that there are real harms in the background of money laundering and illicit finance. And they need to have an understanding of what they should be looking out for, what they should be checking, and when they should be asking questions if they are unsure of something.

There also needs to be a culture where people can seek advice and ask questions if they are unsure of something – or, importantly, if they think they might have made a mistake or a bad decision. And make sure everything is documented – the risk assessments, policies, controls, training logs, but also the decision making.

When you are making a decision about a client or a matter, at any point of the life cycle of the relationship or matter, make sure that’s recorded – why that was considered high or low risk, why the decision was made to go ahead with that matter, why that process was used to identify source of wealth or source of funds, and why that particular information was relied upon. I think having everything documented is really important. In a lot of the regulatory enforcement cases that we are seeing coming through, a lot of it really comes down to these decisions that have been made – whether the firm or the lawyer or the compliance team feel like they’ve made, feel like they’ve taken adequate measures to understand the source of wealth, for example, of a particular client, but this isn’t considered to be adequate by the regulators.

So, it’s no good just doing everything and making the decisions that you think are correct. If you make sure everything is documented, then you have that evidence to back up decisions if any questions are raised, or if it later turns out that a client that you’ve been involved with was involved in some kind of criminal activity.

What I find most curious about the stories you’ve shared, Katie, is that while most lawyers would describe themselves as ethical and diligent practitioners, if they aren’t asking the right questions, they may find themselves in a very difficult situation. The risk is clearly present for everyone. The networks we are up against are sophisticated, and we must all be on our guard. Thank you, Katie, for being here with us today and for sharing your expertise.

Thank you for having me.

And thank you for joining us today on Cross-Examined. The show notes for this episode include links to published SRA enforcement notices, VLSB+C regulatory guidance, and resources from the Law Institute of Victoria to help you get your practice ready. If you found our mini-series on AML/CTF valuable, please share it with other practitioners in your network and hit the subscribe button. Until next time, thanks for listening to Cross-Examined.