An Solicitors Regulation Authority (SRA) review has shown that a significant minority of law firms are not doing enough to prevent money laundering, with some falling seriously short. The SRA review has resulted in 26 firms entering disciplinary processes.
Range of breaches
The review did not find evidence of actual money laundering or that firms had any intention of becoming involved in criminal activities. However, it did find a range of breaches of the United Kingdom’s 2017 money laundering regulations, as well as poor training and processes. This means firms could be unwittingly assisting money launderers. One of the biggest areas of concern was firms’ risk assessments. A firm risk assessment is required in legislation and should be the backbone of a firm’s anti-money laundering approach. The SRA found that more than a third (24) of firms reviewed fell short in this area, including four that had no risk assessment at all. There were also issues around appropriate customer due diligence. This included inadequate processes in almost a quarter (14) of firms to manage risks around politically exposed persons, known as PEPs. However, in some instances effective customer due diligence did result in firms turning down work. Fifteen firms had done this, with one of the main reasons being evasive clients.
As a result of the review, the SRA has put 26 firms into our disciplinary processes. They have also published a warning notice reminding the profession of their obligations, particularly in relation to firm risk assessments. A further review of 400 other law firms to check compliance with the 2017 money laundering regulations is being initiated. This review will be led by a new dedicated anti-money laundering unit, being set up to bolster resources to prevent and detect money laundering. Paul Philip, SRA chief executive, said “Most solicitors take their responsibilities seriously, but too many firms are falling short. Those firms should be on notice that compliance is not optional. They need to improve swiftly. Where we have serious concerns that a firm could be enabling money laundering, we will take strong action."