Law firms need to take further steps to tackle money laundering, according to the Solicitors Regulation Authority (SRA).The regulator, which oversees law firms in England and Wales, conducted a review of 50 law firms to assess the profession’s compliance with the more stringent demands of the Money Laundering Regulations, introduced last June. Eight firms were closed down in the past three years, the SRA said. Another 14 law firms had closed down voluntarily and it had referred 49 solicitors and two other firms to the Solicitors Disciplinary Tribunal. This has resulted in 12 strike offs, 13 suspensions and fines of more than £800,000.
Areas of concern included not all firms keeping records of their decisions - only 69 per cent of files reviewed had written evidence that the level of risk was assessed. Despite being a requirement, only a third - 17 firms - had a firm-wide risk assessment in place or were in the process of implementing one. At the time of the review firms had only had limited time to implement the new regulations, but we expect firms to move towards compliance as a matter of urgency.
The SRA said that as a result of the findings, 'we have issued a warning notice further highlighting potential indicators of money laundering or criminal activity. It warns firms to remain vigilant and look out for signs such as overly secretive clients, high value cash transactions and clients acting through third parties. Firms should report suspicious activity. To help firms better protect themselves, we have also issued guidance highlighting key changes in the regulations. These include the need to have records of all staff training, a Money Laundering Compliance Officer (MLCO) on the board of directors, and to identify domestic, as well as foreign, politically exposed persons.'
The National Crime Agency has said that money laundering is likely to cost the UK more than £24 billion a year, and is a major source of financing for criminal activity. SRA Paul Philip, SRA chief executive said: 'The credibility of law firms makes them an obvious target for criminals wishing to launder money. Tackling it is crucial not only to maintain trust in the profession, but also for the good of society. Money laundering is not a victimless crime - it helps fund terrorism and those involved in drug trafficking and people smuggling. We are encouraged that most firms seem to be on top of the issues, but all firms in scope must now comply with the new regulations. It is not enough to want to do the right thing. Weak processes or undertrained staff leave the door open for criminals. If firms do not step up and treat this issue with the seriousness it deserves, we will take action.'