Fifth Of SRA Regulated Firms Flounder In AML Regulation Quagmire

An SRA review has highlighted a deep issue of anti-money laundering non-compliance entrenched within the legal sector.

Over a fifth of firms reviewed by the Solicitors Regulation Authority (SRA) have failed to create the required firm risk assessment protocols to adequately protect against the proliferation of illicit money.

In the last year, a new annual Risk Outlook has found that the SRA has investigated 172 firms for money laundering failings in 2019.  Of this number, 60 were forwarded to the Solicitors Disciplinary Tribunal (SDT) with over 40 solicitors being struck off or suspended.

The SRA reminded firms that 400 were wrote to in March asking them to demonstrate compliance with the 2017 Money Laundering Regulations by sending the SRA their firm risk assessments.

Although the SRA received 400 responses, 21% (83) were not compliant. Over a tenth (43) failed to address all the required risks covered in the regulations, or they sent client or matter risk assessments (40), something different from what was requested.

64% were also seen to be using templates which were considered to be of a low quality or standard, frequently ‘copy and pasted’ rather than individualised to the firm’s needs, requirements and potential risks.

Furthermore, the SRA were anxious about the age of some risk assessment submissions (138 or 38% of the total) which were dated recently. The SRA suggested that this could indicate some firms made a retrospective risk assessment in response to the SRA request and may not have implemented them into their core policies or culture prior to the inspection.

The SRA are now writing to 7,000 firms that fall under the scope of the Money Laundering Regulations to confirm they have a firm risk assessment in place.

An extensive programme of targeted, in-depth visits will also be made in the coming months to ensure SRA regulated firms are compliant with current regulations and prepared for the EU Money Laundering regulations coming into force on 10 January next year.

Paul Philip, SRA Chief Executive, said:

“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 poor processes open the door to money launderers.

“A call from us should not be the prompt for a firm to get their act together. You need to take immediate action now if you are not on top of your money laundering risks. Where we have serious concerns, we will take strong action.”

Is your law firm compliant with all money laundering regulations? Do you find the shifting and updating nature of AML regulations confusing? Is more guidance needed on how to remain compliant?

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