- Publication Date
- 2022-10-27
The Solicitors Regulation Authority (SRA) conducted an investigation into the law firm following a referral from the AML Proactive Supervision Team, which had undertaken a desk-based review with the firm. The investigation identified areas of concern in relation to compliance with Money Laundering, Terrorist Financing, and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs 2017).
The MLRs 2017 came into force in June 2017. Regulation 18 of the MLRs 2017 requires relevant firms that do work in-scope of the MLRs 2017 to have a compliant AML practice-wide risk assessment. Regulation 19 requires firms to have AML policies, controls, and procedures (PCPs) in place to prevent money laundering.
A warning notice was publicised to the profession in May 2019, further highlighting the requirement to have a AML firm-wide risk assessment in place. The relevant lawyer and the law firm did not have a compliant AML firm-wide risk assessment in place until September 2020, which was only drafted after the AML Proactive Supervision Team had contacted the relevant lawyer. Therefore, compliance with the requirement in Regulation 18 to have a firm-wide risk assessment was achieved more than three years after it was introduced.
The relevant lawyer provided an updated and compliant AML firm-wide risk assessment to the SRA in June 2022. However, the firm did not have compliant AML PCPs, which are required to mitigate and manage effectively the risks of money laundering and terrorist financing. The PCPs examined by the SRA’s AML Proactive Supervision Team at the commencement of the inspection revealed that the PCPs had not been updated since 2015, contained references to old sources, failed to provide an analysis on complex transactions, and lacked information on how the firm conducts ongoing monitoring on files.
The AML policies, controls, and procedures were updated and deemed compliant following extensive guidance provided by the AML Proactive Supervision Team in November 2020. This update occurred only after the relevant lawyer had appointed a specialist external consultant to assist in drafting and updating the firm’s PCPs, subsequent to additional correspondence sent by the SRA in May 2022.
The relevant lawyer admitted that, by failing to comply with money laundering legislation, there was a failure to maintain the trust the public places in the firm and in the provision of legal services. Additionally, the relevant lawyer failed to carry out the business effectively and in accordance with proper governance and sound financial and risk management principles.
The conduct showed a disregard for statutory and regulatory obligations and had the potential to cause harm by facilitating transactions that could have led to money laundering or terrorist financing. This could have been avoided had the relevant lawyer established an adequate practice-wide AML firm-wide risk assessment and adequate policies, controls, and processes at the firm in a timely manner.
As the sole owner and manager at the firm, the relevant lawyer was the only person with the ability to ensure compliance with the statutory requirements of the MLRs 2017 and held all key compliance roles at the firm.
In deciding the level of the financial penalty, the SRA referred to its guidance on financial penalties, considering the nature and impact of the misconduct. The agreed outcome included a financial penalty of £1,200, reflecting the mitigation offered, remedy of the breaches, prompt admissions, and continuing compliance moving forward.