Off the shelf AML policies put firms and clients at risk
The Solicitors Regulation Authority’s (SRA) 2022/23 anti-money laundering (AML) report warns of the risks posed by common AML issues. Find out what steps you and your firm can take to comply with your obligations.
The SRA carried out 177 law firm inspections and 73 desk-based reviews between April 2022 and April 2023.
One in three (30%) of firms inspected were fully compliant with their AML obligations, with just over half (51%) partially compliant.
But the SRA found 19% of firms to be non-compliant, resulting in corrective or enforcement action.
Alongside the Solicitors Disciplinary Tribunal (SDT), the SRA has:
submitted 24 suspicious activity reports to the National Crime Agency relating to assets totalling more than £75 million
levied fines totalling £137,402
suspended one individual and placed controls on employment on another
Common compliance issues
Although most firms take their AML responsibilities seriously, the SRA criticised what it sees as a “tick-box” mentality in some firms.
The SRA warned about the use “off-the-shelf” AML polices not tailored to firms and suggested that it will take further action to counter this risk.
Common AML breaches included:
lacking or inadequate AML policies and procedures
non-compliance with firm-wide risk assessments
failure to carry out robust client and/or matter risk assessments
inadequate identification and verification of clients
failure to check the source of funds
poor staff training
little-to-no ongoing monitoring of transactions
not reviewing or updating AML policies on a yearly basis
Conveyancing was highlighted as the highest risk area for AML procedural failure.
In addition, the SRA is increasing its focus to “ensure that all solicitors understand and meet the obligations of the financial sanctions regime”.
The SRA has issued guidance explaining the financial sanctions legislation, setting out risks and red flags, and outlining what a good control framework looks like.
It carried out spot checks on 23 firms to gather information about compliance with the sanctions regime.
Over the next year, the SRA will carry out sanctions inspections and desk-based reviews to check how well firms are managing their risk and complying with Office of Financial Sanctions Implementation licences.
What this means for firms
The SRA will take robust enforcement action where it finds serious or widespread issues.
In recent years, the SRA’s fining powers have increased significantly. In July 2022, the maximum fine the SRA can levy increased from £2,000 to £25,000.
Since June 2023, fixed penalties of up to £1,500 for “lower-level breaches” can be imposed.
However, the SRA has reiterated that it generally seeks to provide advice and ensure firms are complying with their obligations.
Article Credit: https://www.lawsociety.org.uk/topics/anti-money-laundering/off-the-shelf-aml-policies-put-firms-and-clients-at-risk