Majority of law firms submitting no Suspicious Activity Reports – study

New research has revealed that just two in five law firms submitted any Suspicious Activity Reports (SARs) over the last two years on average.

The study – conducted by risk management platform Thirdfort – found solicitors in the UK submitted 3,436 SARs in 2021/2022. Meanwhile, there were 9,813 registered law firms at the end of March 2022, according to the Solicitors Regulatory Authority.

So, if each firm were to submit just one SAR, this would account for just 35% of law firms. Yet if certain firms are submitting numerous SARs, the actual proportion of firms submitting reports could be “significantly lower”, said Thirdfort.

Overall, it’s said solicitors make up 0.3% of the total number of SARs submitted across all sectors. Indeed, the number of reports by law firms is “low in comparison to other regulated sectors”, said Harriet Holmes, AML Services Manager at Thirdfort.

This low SAR submission rate comes even though HM Treasury and the Home Office assessed lawyers at “high” risk for money laundering, said Thirdfort, with conveyancing reportedly one of the areas presenting the highest risk.

However, Thirdfort’s research also revealed the total number of SARs submitted by solicitors increased by 20% in 2021/2022 compared to the previous year, rising from 2,875 to 3,436 respectively.

*Defence Against Money Laundering SARs. Source: Thirdfort

“Solicitors and law firms are at a high risk of money laundering, but at most only around two fifths are submitting SARs on average,” said Harriet Holmes. On why the number of reports is low, she commented:

“There may be several reasons, from a lack of adequate information to solicitors only reporting SARs when they feel they must or differences in the client relationship. But, whatever the reason, firms must recognise regulators are more focused on SARs than they used to be.

Law firms should take a thorough approach to their anti-money laundering obligations and encourage employees to engage with the compliance process and raise issues when they spot them.

Taking a more proactive approach to AML will enable law firms to stay on the right side of the regulations far beyond SARs submission alone. By maintaining internal records of internal queries, concerns and issues, firms may alleviate some of the concerns around low reporting.”