Regulator to ramp up compliance checks in wake of review
One in five law firms are failing to maintain adequate systems to prevent money laundering, a review undertaken by the Solicitors Regulation Authority (SRA) has found.
The regulator wrote to 400 firms earlier this year, asking them to demonstrate their compliance with the current money laundering regulations by sending their firm risk assessment. All firms responded but 83 (21%) were not compliant. They either did not address all the risk areas required (43) or they sent over something other than a firm risk assessment (40), for instance, a client or matter risk assessment.
The SRA found the majority of firms (64%) were using risk assessment templates which were “generally of lower quality”. While acknowledging these can be helpful, the regular said too many firms appeared to take a “copy and paste” approach without considering the specific risks and issues faced by their firm.
The regulator also expressed concern that over a third of the risk assessments (135) were dated recently. Although accepting it could simply reflect an update of an earlier assessment, it said that this suggested some firms may have only created one in response to its request and therefore some firms may not have an existing risk assessment.
Paul Philip, SRA chief executive, said: “Money laundering supports criminal activity such as people trafficking, drug smuggling and terrorism. The damage money laundering does to society means that every solicitor must be fully committed to preventing it. The vast majority would never intend to get involved in criminal activities, but poor processes open the door to money launderers.
“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.”
In light of the findings, the regulator said 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.
Elsewhere, figures released in the SRA’s annual Risk Outlook, published today, show that it launched 172 investigations linked to anti-money laundering compliance so far this year. In the last five years, the regulator has taken more than 60 such cases to the Solicitors Disciplinary Tribunal (SDT), resulting in more than 40 solicitors being struck-off or suspended.