Fifth of law firms fail on money laundering compliance, new research shows
The Solicitor Regulation Authority (SRA) is checking 7,000 law firms for compliance after its research revealed that too many were not complying with anti-money laundering regulations, and warned of strong action against those who continue to fall short.
After writing to 400 firms, asking them to demonstrate their compliance with the 2017 Money Laundering Regulations, the SRA found that 21 per cent (83) were not compliant, while a majority were using low quality templates to carry out their risk assessments.
The SRA revealed that the 83 firms that failed to demonstrate their compliance either did not address all the risk areas required (43), or they supplied something other than a firm risk assessment (40) – for instance, a client or matter risk assessment.
Of the firms that were using low quality assessments, many appeared to take a ‘copy and paste' approach, without thinking through the specific risks and issues faced by their firm.
"We were also concerned that many of the risk assessments (135, or 38 per cent) were dated recently. Although this could reflect an update of an earlier assessment, this suggests some firms may have only created one in response to our request and therefore some firms may not have an existing risk assessment," SRA said.
"We are engaging with firms to make sure they comply promptly. If they do not, they will face enforcement action."
The watchdog announced it will shortly be writing to the 7,000 firms that fall under the scope of the Money Laundering Regulations to ask them to confirm they have a firm risk assessment in place, and will be carrying out an extensive program of targeted, in-depth visits to firms.
"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," said Paul Philip, SRA chief executive.
Figures released in the SRA's annual risk outlook show that so far this year the regulator has opened 172 investigations linked to anti-money laundering compliance. In the last five years, 60 such cases have been taken to the Solicitors Disciplinary Tribunal, resulting in more than 40 solicitors being struck-off or suspended.