- Publication Date
- 2023-01-04
The Solicitors Regulation Authority (SRA) conducted an investigation into the law firm following a proactive anti-money laundering (AML) inspection. The investigation identified areas of concern in relation to the firm’s compliance with the Money Laundering, Terrorist Financing Regulations 2017 (MLRs 2017).
The firm did not have in place a compliant AML practice-wide risk assessment as required by Regulation 18 of the MLRs 2017 until August 2022. The firm incorrectly declared in May 2020 that its AML firm-wide risk assessment was compliant with Regulation 18, when it was not. The MLRs 2017 set out key risk areas which must be assessed, including its customers, geographic areas, products or services, delivery methods, and transactions. These areas were not fully assessed.
The firm failed to address risks related to conveyancing and controlling client money, a significant area of work, on their AML firm-wide risk assessment. Additionally, the firm-wide risk assessment did not sufficiently regard the Legal Sector Affinity Group guidance, the SRA’s sectoral AML risk assessment, and the warning notice.
The firm did not have in place compliant AML policies, controls, and procedures (PCPs) as required by Regulation 19 of the MLRs 2017. These AML policies, controls, and procedures were not compliant because they did not address simplified due diligence, reporting to Companies House, training, reliance, record keeping, suspicious activity reporting, and the roles of the Money Laundering Reporting Officer (MLRO) and Money Laundering Compliance Officer (MLCO).
The firm admits, and the SRA accepts, that by failing to comply with money laundering legislation up to August 2022, the firm has failed to act in a way that upholds public trust and confidence in the solicitors' profession. They also failed to comply with all of the SRA’s regulatory arrangements and other regulatory and legislative requirements, and failed to keep up to date with and follow the law and regulation governing their work.
The conduct showed a disregard for statutory and regulatory obligations and had the potential to cause harm by facilitating dubious transactions that could have led to money laundering or terrorist financing. This could have been avoided had the firm established an adequate practice-wide risk assessment before August 2022, especially given that over half of the firm’s fee income is derived from conveyancing, a high-risk area of work.
The SRA considered that the lack of compliance demonstrated an AML control environment failing at the firm. The firm assisted the SRA throughout the investigation, admitted the breaches, and showed remorse for its actions. The firm did not financially benefit from the misconduct.
The SRA has decided that a financial penalty is appropriate to maintain professional standards and uphold public confidence in the solicitors’ profession. The firm will pay a financial penalty of £2,000 and the costs of the investigation amounting to £1,350.