Jurisdiction(s):
United Kingdom

Underground Banking and IVTS: UK Law Firms' AML Risks and Red Flags, LSAG Guidance, MLR 2017 Obligations and SAR Reporting (including Chinese Underground Banking and Daigou)

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Practice notes

This Practice Note concisely outlines underground banking, covering its background, present applications and the risks that inevitably accompany it. It is directed especially at law practices within scope of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017), SI 2017/692, and the linked duties to identify and evaluate risk, keep policies, controls and procedures to mitigate those risks, and report conduct that creates suspicion of money laundering or terrorist financing. In March 2023, the Legal Sector Affinity Group (LSAG) also issued an Advisory Notice concerning Chinese underground banking and money originating from China. It clearly sets out the specific dangers presented by Chinese underground banking and the regulators’ expectations around robust due diligence and source-of-funds verification.

What is underground banking?

Underground banking is an umbrella expression for the supply of predominantly informal financial services—especially money remittance—to private and corporate clients, commonly operating within defined ethnic communities. Such systems operate across numerous communities, regions and locations worldwide, though they are most closely linked with South East Asia, the Middle East and the Far East. As these arrangements typically sit beyond the formal banking system, they are unlawful in many jurisdictions. Underground banking is...

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Laurence Howland

Buckles Solicitors LLP

Laurence Howland is the Director Risk and Compliance of Buckles Solicitors LLP, with overall responsibility for the firm’s Anti-Money Laundering and Regulatory Compliance. Before joining Buckles, Laurence spent three years as a Senior Financial Investigator with the Solicitors Regulation Authority; prior to this, he served for thirty years with HM Revenue & Customs (previously HM Customs & Excise) as an accredited financial investigator leading criminal investigation teams dealing with money laundering, restraint and confiscation cases. Between 2010 and 2014, he was Fiscal Crime Liaison Officer appointed to the British Embassy in Beijing. He has spoken and written extensively on Informal Value Transfer Systems and underground money movements from the Far East and has given expert witness evidence on this subject. In 2021 Laurence was awarded an MSc in Financial Investigation with Distinction from the University of Central Lancashire. He was also presented with the...

Web page updated on 22/05/2026

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