Ethics Hub

A new duty to prevent and detect economic crime

In 2023, a new regulatory objective of “promoting the prevention and detection of economic crime” was added to the Legal Services Act 2007, following the Economic Crime and Corporate Transparency Act 2023 coming into effect. This new objective places a duty on the CLSB and Costs Lawyers to promote the prevention and detection of economic crime.

Costs Lawyers have a duty, reflected in principles in the Code of Conduct, to take action to prevent and report economic crime, and to comply with legislation and regulation aimed at preventing economic crime. The CLSB has a duty to take disciplinary action if you are found to have breached your obligations in this regard.

What is economic crime?

The UK government defines economic crime as “activity involving money, finance or assets, the purpose of which is to unlawfully obtain a profit or advantage for the perpetrator or cause loss to others.” This includes criminal activity that damages the UK financial system and the UK’s position as an international financial centre, and criminal activity that poses a risk to the UK’s prosperity, national security and reputation. It includes – but is not limited to – criminal activity such as money laundering, terrorist financing and breaching financial sanctions.

The new regulatory objective is similarly broad in scope. It extends beyond the confines of the formal anti-money laundering regime to other types of economic crime, such as fraud and non-compliance with economic sanctions.

Although Costs Lawyers are prohibited from handling client money, criminals may still attempt to use your services to move criminal property from one individual to another without attracting the attention of law enforcement. There are several activities that Costs Lawyers carry out on behalf of their clients that carry risks associated with economic crime. These include activities like conducting the costs aspects of litigation, advising on transactions relating to costs (such as settlement agreements) and making representations to the court on a client’s behalf (for example, about the source of funds used to meet a costs award).

Resources

• Our Guidance Note on Economic Crime sets out Costs Lawyers’ obligations regarding the prevention and detection of economic crime, key legislative requirements, and the steps you can take to guard against risks in this area.
• Our risk chart maps the types of work that Costs Lawyers carry out against the risk of economic crime and non-compliance with the sanctions regime.
• The Legal Sector Affinity Group (LSAG), which includes all the legal sector supervisors for money laundering, has produced detailed guidance for lawyers on anti-money laundering.
• The National Crime Agency provides lots of resources relating to anti-money laundering and terrorist financing, including guidance for making a Suspicious Activity Report.
• Protect is the UK’s whistleblowing charity, providing free and confidential advice to support whistleblowers in reporting wrongdoing in the workplace.