The fifth anti-money laundering directive has come into force today, 10 January.

An estimated 7,000 financial firms regulated by the Solicitors Regulation Authority will now need to re-assess their anti-money laundering processes.

The new directive places an increased importance on the acceptable use of electronic verification methods in confirming identity, without the need for passports or utility bills.

The Legal Sector Affinity Group has published a summary of changes to the regulations, which includes:

• A duty to collect proof of registration for entities, such as trusts and companies • A duty to inform the registry of any discrepancies in their information • Changes to client due diligence and enhanced due diligence

Late last year it was revealed that a fifth of law firms were failing to comply with existing anti-money laundering rules, with the Solicitors Regulation Authority opening 172 investigations in the year to October.

Solicitors Regulation Authority chief executive Paul Philip says: “Money laundering supports criminal activity such as people trafficking, drug smuggling and terrorism.

“The damage money laundering does to society means that every solicitor must be fully committed to preventing it.

“The vast majority would never intend to get involved in criminal activities, but the reality is that poor processes can open the door to money launderers.

“This new legislation aims to further reduce the risk of law firms being used to launder money. Working with the Legal Sector Affinity Group, we will be providing a range of support to firms to help them comply.”

SmartSearch managing director Martin Cheek adds: “The government and the EU are right to want to see more use of electronic verification. It has been shown to be more reliable, quicker and more cost effective than manual checks.

“Plus, firms can have highly efficient screening and ongoing monitoring for ‘politically exposed persons and sanctions’, all of which are a requirement of the anti-money laundering rules.

“It is a pity the regulations did not appear until so late in the day, but it is imperative that firms take action now to show they comply with the new regulations or else they could face a significant fine.

“There is increased national and international focus on the scourge of money-laundering and terrorist financing and electronic verification is an easy way to help prevent this.”