- Publication Date
- 2023-07-13
An investigation was carried out into a law firm following a proactive antimoney laundering (AML) inspection. The investigation identified areas of concern related to compliance with the Money Laundering, Terrorist Financing (Information on the Payer) Regulations 2017 (MLRs 2017), the SRA Principles 2011, the SRA Code of Conduct 2011, the SRA Standards and Regulations 2019, and the SRA Code of Conduct for Firms 2019.
The firm did not have in place a compliant AML practice-wide (firm-wide) risk assessment, as required by Regulation 18 of the MLRs 2017, until October 2022 and therefore failed to have sufficient regard for the SRA’s warning notice issued in May 2019 on the same.
The firm also incorrectly made a declaration to the SRA in January 2020 that its risk assessment was compliant, in line with the requirements of Regulation 18 and relevant guidance, when it was not. The risk assessment the firm had in place failed to adequately consider its customers, the countries or geographic areas in which it operates, the products or services which it provides, delivery channels, and its transactions.
The firm did not have in place compliant AML policies, controls, and procedures (PCPs), as required by Regulation 19 of the MLRs 2017. The firm is required to have established and maintained such policies and procedures to mitigate and manage effectively the risks of money laundering and terrorist financing. Those AML policies, controls, and procedures were not compliant until October 2022 because they did not address how to identify and scrutinize complex and/or unusual large transactions, how to identify and scrutinize transactions that have no apparent economic or legal purpose, how to identify and scrutinize an unusual pattern of transactions, and ongoing monitoring including how ongoing monitoring is conducted by fee earners on an ongoing basis and at what intervals customer due diligence is being reviewed or re-evaluated.
The investigation revealed breaches of Regulation 28(12)(a)(ii) of the MLRs 2017. Four files were reviewed which did not have a documented client or matter risk assessment on file. The firm is required to have client and matter risk assessments to identify and assess the level or risk arising in any particular matter or for any particular client. Assessing the level of risk will inform the relevant level of due diligence and monitoring that should be applied on each matter.
The firm admits, and the SRA accepts, that by failing to comply with money laundering legislation up to October 2022, the firm has, from June 2017 to November 2019, failed to behave in a way that maintains the trust the public places in the firm and in the provision of legal services, failed to carry out the business effectively and in accordance with proper governance and sound financial and risk management principles, failed to have effective systems and controls in place to achieve and comply with all the Principles, rules and outcomes and other requirements of the Handbook, failed to identify, monitor, and manage risks to compliance with all the Principles, rules and outcomes and other requirements of the Handbook, and failed to comply with legislation applicable to the business, including anti-money laundering and data protection legislation.
From November 2019, the firm has failed to act in a way that upholds public trust and confidence in the solicitors' profession and in legal services provided by authorized persons, and failed to comply with all of the SRA’s regulatory arrangements, as well as with other regulatory and legislative requirements.