The Solicitors Regulation Authority (SRA) has released its Anti-Money Laundering Annual Report for 2024-25, a year in which the organisation says it made significant progress in preventing and detecting money laundering.
With the government recently announcing the responsibility for overseeing anti-money laundering regulations will pass to the Financial Conduct Authority (FCA), the SRA’s chief executive Paul Philip said he is ‘disappointed [the SRA] will not be able to build on that work’, but said it will ‘work closely with the FCA, government and other stakeholders to ensure a smooth transition to the new arrangements’.
The report provides key insights into the SRA’s regulatory approach, along with specific areas of focus in ongoing efforts to combat financial crime. ‘Money laundering has an impact on the public and society’, Philip added.
“More than £100 billion is estimated to be laundered each year through the UK. According to the National Crime Agency (NCA) 4,500 organised crime groups are believed to be operating in the UK.”
During the period covered by the report (6 April 2024 to 5 April 2025), the SRA carried out 935 ‘proactive AML engagements’, up from 545 the previous year. Almost a third of firms were found to be non-compliant.
Of 317 inspections, 49 firms were compliant, 172 were partially compliant and 96 firms were not compliant. Of the 516 desk-based reviews carried out by the SRA’s AML enforcement team, 49 were compliant, 279 were partially complaint and 174 firms were found to be non-compliant.
Fines totalling £953,333 (including regulatory settlement agreements, or RSAs, and fines imposed by adjudicators) were issued for non-compliance: ‘We hold firms to account’, the SRA promised.
RSAs accounted for 58 of the penalties, totalling £661,2000, with 15 fines totalling £292,133 imposed by adjudicators totalling. All revenue is paid to HM Treasury.
Conveyancing, in particular residential conveyancing, remains the area of greatest risk. Of the 19 suspicious activity reports (SARs) submitted, with a total value of over £148 million in suspected criminal proceedings, 73% were linked to property transactions.
‘Conveyancing is vulnerable to vendor fraud and money laundering’, the SRA said in its report. ‘Strong client due diligence is essential’.
The report outlines three key themes the SRA believes contribute to breaches: inadequate importance placed on robust and compliant AML controls at a senior level within firms; inadequate supervision or training of fee earners; and systems and processes that allow events to continue unchecked, instead of automated stops being put in place if adequate due diligence is not performed.
‘We have seen an increase in basic, straightforward types of misconduct’, the SRA explained.
“We will continue to emphasise that scrutiny and analysis is critical, not just documentation.”
Inadequate firm-wide risk assessment (FWRA), a lack of or overly simplistic client/ matter risk assessment (CMRA) forms, no evidence of customer due diligence, and missing or inadquate source of funds and source of wealth (SoF, SoW) checks were all highlighted as the major causes of non-compliance.
Only half (47%) of the FRWAs reviewed were assessed as compliant, with 9% non-compliant. ‘Some firms [were] only putting in place a FWRA after we asked to see it’ the SRA noted.
“This is despite some of these firms having previously confirmed to us in January 2020 that they did have a FWRA in place.”
Using a template but not completing it correctly (for example, using a checklist or not including enough detail) or failing to tailor it to the firm was another common issue, as were failing to cover the five key risk areas required under regulation 18 MLR 2017 in sufficient detail, and failing to have a FWRA suitable to the size and nature of the practice.
The SRA continued:
“Many firms failed to expand on the risks identified, for example, we saw firms stating they often operated in high-risk jurisdictions but not setting out and assessing the applicable jurisdictions.
“Many documents focused on what the firm does not do (for example, setting out that the firm does not offer trust formation services or act for politically exposed persons). The focus should be on the AML risks the firm is exposed to in its day-to-day business.”
‘An FWRA is a living document and should be regularly updated’, the SRA advised.
A lack of a CMRA on file was the most common reason firms were referred for investigation in the reporting period, accounting for 135 of the 270 firms deemed to be non-compliant following an onsite inspection or desk-based review (50%).
The SRA explained:
“We continue to see firms using overly simplistic, template-based Client Matter Risk Assessment (CMRA) forms, where fee earners merely indicate whether a matter is high, medium, or low risk. In many instances, these forms lack explanatory notes or justification explaining how the risk rating was reached.
“It is important that the rationale for the risk level and level of due diligence is clearly recorded, along with what actions the fee earner will take to mitigate those risks.”
Although the report identifies CDD as a thematic risk, the SRA acknowledged the high level of compliance it found during the reporting period ‘shows that firms are taking their CDD obligations seriously’. Just 6% of the files reviewed did not contain evidence the client had been identified and verified.
Non-compliant SoF and SoW checks accounted for 20% of the non-compliant files identified during the reporting period, with the report adding:
“Where documents had been gathered, the source of funds had not been scrutinised in 18% of files we looked at.
“For example, we occasionally found firms would take a copy of their client’s savings account statement, which shows the availability of the funds for a residential property purchase. Often, these firms would have little understanding of how the funds in the account had accrued.
“In 8% of files we reviewed, we found the information gathered as part of firms’ source of funds checks did not match information contained on the ledger. Unexpected changes to the way a transaction is being funded is a potential red flag. Where identified, firms should consider whether there is a reasonable explanation for these changes.”
The rise in remote working and decentralised business models present a challenge in maintaining consistent AML standards, with the SRA advising firms to focus on strong onboarding, regular training and interventionist auditing and file reviews to combat risk.
New technology and an increasing reliance on AI presents risks on ‘a number of fronts’, the report warned.
“Firms must assess and mitigate risks under MLR2017 before adopting new technology. The key risks we see are in cybersecurity vulnerabilities, new funding platforms, [and] the use of AI to create video and audio deepfakes, raising issues in dealing with remote clients.”
Although responsibility is set to pass to the FCA, Philip pointed out the reform is subject to enabling legislation, confirmation of funding arrangements, and development of a detailed transition and delivery plan.
He added:
“We will work closely with the FCA, government and all other stakeholders to make sure there is a smooth transition to the new arrangements. In the meantime, we will continue our work to make sure solicitors and law firms are doing all that is needed to keep dirty money out of our society.”
Ongoing measures outlined by the SRA while it retains responsibility include a risk-based approach to inspections, desk-based reviews and sanctions; helping firms put strong controls in place to prevent money laundering; bringing enforcement action against firms not meeting their responsibilities under the regulations; targeted and timely guidance for firms through webinars and engagement; and the use of technology to monitor firms’ self-declared AML status.
Philip concluded:
“I am proud of the progress we’ve made and grateful to the many professionals who share our dedication to upholding public trust and driving meaningful change.”
Anti-Money Laundering Annual Report 2024-25
