In recent months the Solicitors Regulation Authority (SRA) has issued record fines to firms for compliance and anti-money laundering (AML) failings. The Law Society has issued new guidance to help its members.
Law Society of England and Wales president Nick Emmerson said:
“It is almost two years since the Ministry of Justice raised the SRA’s internal fining powers for solicitors and traditional law firms from £2,000 to £25,000, despite our strong opposition to the change.
“The fines we have been seeing issued range from around £12,000 to £23,000.
“We acknowledge that firms or individuals which have failed to follow their professional obligations, should face appropriate sanctions, but we remain seriously concerned about the SRA acting as investigator, prosecutor and judge.
“We maintain that the Solicitors Disciplinary Tribunal (SDT) remains the most suitable jurisdiction for more serious and complex matters. It guarantees greater transparency and objectivity and in addition to its unlimited fining powers it can suspend or strike off a solicitor.
“The Law Society is continuing to advocate for our members and are actively engaging with the Legal Services Board on their review of regulators’ enforcement and disciplinary powers.
“We also published new guidance* on investigation and enforcement and what to expect from the SRA and the SDT and support available to solicitors or firms facing disciplinary action.”
LSAG guidance was updated last year, in a bid to assist firms in monitoring their employees.
Employee checking for AML under the LSAG guidance
Section 9.4 in the LSAG guidance expands on screening relevant employees both before and during their employment.
Within this section, the LSAG emphasises the importance of conducting thorough background checks on prospective employees. This involves verifying their identities, checking references, and assessing their previous employment history. By implementing robust screening processes, law firms can mitigate the risk of hiring individuals with a history of financial misconduct or involvement in illicit activities.
Firms must uphold a vigilant approach and address any signs of suspicious behaviour exhibited by employees, which is why Section 9.4 also highlights the significance of ongoing monitoring and screening of employees during their tenure. This involves conducting regular assessments to ensure that employees continue to meet the required standards of integrity and remain compliant with anti-money laundering regulations.
Today’s Conveyancer released a podcast earlier this year with Sebastian Haller, Deputy Director of Anti-Money Laundering at the Council for Licensed Conveyancers sharing the regulator’s views on the challenges conveyancers and property lawyers face when it comes to anti-money laundering (AML).
Heller shared his own insight and experience as a regulator and provides some useful pointers for firms when it comes to compliance with AML protocols. Sebastian also shares the most common areas of non-compliance he sees daily in his role with the regulator.
Whilst he is at pains to point out that many firms are now fully compliant with the regulatory requirements of AML, he still finds firms failing to robustly check their clients and adequately assess the risk posed by the client and/or transaction.
Source of funds and source of wealth, two related but different profiles, remain key areas of non-compliance, as is the practice wide risk assessment (PWRA) which was referred to directly by the Solicitor’s Regulation Authority (SRA) Warning Notice in October 2023 and acknowledged here by Sebastian as an issue the CLC regularly identify as an area of weakness in conveyancing practices.
This discussion provides insight into the regulator’s approach to dealing with AML in CLC regulated practices, provides reminders for firms regulated by the SRA, and is a must listen for law firm leaders, COLP’s, HOLP’s, MLRO’s and those responsible for AML process in their practice.
