AML Firmwide Risk Assessment Case Study: CA89B-5FCF1-16F25

Publication Date
2024-03-22

assistant > The Solicitors Regulation Authority (SRA) undertook a review of the law firm’s Anti-Money Laundering (AML) compliance in mid-2022. This review identified various concerns regarding the firm's adherence to the requirements for a Firm Wide Risk Assessment (FWRA), Policies, Controls and Procedures (PCPs), and Client Matter Risk Assessments (CMRA). These issues were subsequently referred to the SRA’s AML investigation team.

The Money Laundering, Terrorist Financing, and Transfer of Funds (Information on the Payer) Regulations 2017 (the MLRs 2017) required the law firm to have documented and compliant AML arrangements. However, the law firm did not have a documented and compliant FWRA until April 2020 and did not implement fully compliant PCPs until December 2022. Additionally, four files sampled by the SRA lacked CMRAs as of April 2022. The law firm commenced assessing client/matter risks starting from April 2022.

The SRA identified two key allegations:

  1. The law firm did not have a FWRA in place from June 2017 to April 2020, violating Regulation 18 of the MLRs 2017. Furthermore, the firm failed to implement fully compliant PCPs between June 2017 and December 2022, breaching Regulation 19 of the MLRs 2017. This conduct, occurring before November 2019, breached Principles 6 and 8 of the SRA Principles 2011 and failed to achieve Outcome 7.5 of the SRA Code of Conduct 2011. For conduct post-November 2019, the law firm breached Principle 2 of the SRA Principles 2019 and Paragraphs 2.1(a) and 3.1 of the SRA Code of Conduct for Firms (2019).

  2. The law firm failed to have CMRAs in place between June 2017 and April 2022, contrary to Regulations 28(12) and 28(13) of the MLRs 2017. This conduct before November 2019 breached Principles 6 and 8 of the SRA Principles 2011 and failed to achieve Outcome 7.2 of the SRA Code of Conduct 2011. The conduct after November 2019 breached Principle 2 of the SRA Principles 2019 and Paragraphs 2.1(a) and 3.1 of the SRA Code of Conduct for Firms (2019).

In response to these findings, the SRA directed the law firm to pay a financial penalty of £9,993.40 and ordered it to pay costs of £1,350. The SRA deemed the law firm’s conduct serious due to its persistent regulatory breaches, disregard for SRA’s guidance and warning notices, and the potential harm to public interest and confidence in the legal profession. As a result, the firm’s conduct was placed in conduct band C, warranting a financial penalty of 1.6% to 3.2% of annual domestic turnover, with the firm positioned in the mid-range of this band at 2.4%.

Mitigating factors considered included the absence of evidence of actual harm, the law firm’s cooperation with the SRA, some admissions by the law firm, and remedial actions taken by the firm.