The Solicitors Regulation Authority (SRA) has rolled out a new AML (Anti-Money Laundering) Questionnaire, and if you’re involved in managing compliance for a law firm, this is something you’ll want to pay close attention to.
The questionnaire is designed to gather detailed information about your firm’s approach to AML, including your risk assessments, policies, and training procedures. Here’s a breakdown of the key sections of the AML part of the questionnaire, what they entail, and some tips on how to approach them.
- Firm-Wide Risk Assessment
The first major section of the questionnaire focuses on your firm-wide risk assessment. The SRA is asking whether you have a compliant risk assessment in place that covers all relevant aspects of your firm’s operations, in accordance with Regulations 18 and 18A of the Money Laundering Regulations.
Key Points to Consider:
- Comprehensiveness: Your risk assessment should be thorough and specific to your firm. It should cover the types of clients you serve, the geographical areas you operate in, and the nature of the work you undertake.
- Recent Updates: The SRA asks when you last updated your risk assessment. It’s advisable to review this document at least annually, and more frequently if there have been significant changes in your firm or in the regulatory environment.
- Proliferation Financing: Don’t forget to include an assessment of proliferation financing risks, as this is now a requirement under the updated regulations.
If your firm hasn’t updated its risk assessment in the last 12 months, now is the time to do so. Not only will this ensure compliance, but it also positions your firm to better manage the risks associated with money laundering and terrorism financing.
- AML Policies, Controls, and Procedures
Next up, the questionnaire delves into your AML policies, controls, and procedures, asking whether they are compliant with Regulation 19. This is where the SRA wants to see that your firm has robust measures in place to prevent money laundering and to detect suspicious activities.
Common Gaps to Address:
- Simplified Due Diligence: Do you have clear guidelines on when simplified due diligence is appropriate? This is an area where many firms fall short.
- Reliance on Third Parties: If your firm relies on third parties to conduct due diligence, you must have a policy outlining this practice, even if you rarely or never actually do so.
- Record-Keeping: Ensure that your record-keeping practices are not only comprehensive but also compliant with both AML and data protection regulations. Many firms struggle with destroying records within the required time frame.
Make sure your policies are up to date with recent changes, such as those related to domestic politically exposed persons (PEPs) and the FATF high-risk country lists.
- Employee Training and Awareness
The final section focuses on the training your employees have received regarding AML. The SRA is particularly interested in ensuring that all relevant employees—not just fee earners—are up to date on their training.
Training Considerations:
- Frequency: The Law Society’s guidance suggests that training should be provided at least annually. If your firm’s training records show that not all relevant employees have been trained within the last year, it’s crucial to address this immediately.
- Scope: The term “relevant employees” should be interpreted broadly. It’s not just fee earners who need to be trained; support staff, receptionists, and anyone else who might encounter potential money laundering activities should also be included.
- Content: Your training should cover not just the basics but also specific risks and procedures relevant to your firm. This includes understanding how to identify suspicious activities and knowing the process for filing SARs (Suspicious Activity Reports).
If you haven’t conducted comprehensive training in the last year, now is the time to do so. Ensure that all employees understand their role in preventing and detecting money laundering, and make sure that your training program is robust enough to meet regulatory expectations.
Final Thoughts
Completing the SRA’s AML Questionnaire is not just a box-ticking exercise; it’s an opportunity to ensure that your firm’s AML framework is both compliant and effective. By carefully reviewing your firm’s risk assessment, policies, and training procedures, you can not only satisfy the SRA’s requirements but also better protect your firm from the risks associated with money laundering.
The SRA is clearly stepping up its scrutiny of law firms, and now is the time to make sure your house is in order.
Amy Bell is a Director at Teal Compliance Limited
