PLA says AML regulations and punitive fines are suffocating conveyancers, as it launches campaign for reform

In a lengthy and highly critical document released to launch the campaign, the organisation commented:

“Property lawyers must acquire in-depth working knowledge of AML laws and regulations via extensive, regular training, which detracts from their core legal practice. They must also ensure their staff receive training. Property lawyers must devote significant amounts of their precious time to creating and updating written AML policies, procedures, and other mechanisms and verifying, recording, evaluating, and reporting on evidence gathered in compliance with AML controls.

“This is on top of mastering the law in their chosen specialist areas and acquiring and developing the necessary commercial and other skills to run their legal practices successfully. There is no remuneration for such mandatory activity. Instead, substantial fines for non-compliance are paid. For small and medium law firms in particular, the burden of compliance is crippling. It takes up a disproportionate share of a law firm’s resources.”

The PLA has been scathing about the approach being taken by the Solicitors Regulation Authority (SRA) and the culture of fear it is instilling with its ‘oppressive AML regime’:

“Over the last year, mandated by OBPAS (the Office for Professional Body Anti-Money Laundering Supervision), the SRA has been investigating compliance with AML laws and regulations and issuing substantial fines to firms whose compliance measures were determined by the SRA to have fallen short, not just from today, but dating back to 2017, when the AML regime became operative.

“Fines for small to medium firms range from £12,000 to £120,000. They are significantly higher for the largest firms. Solicitors are fearful of this punitive fining regime. Even firms that have worked hard to do their best to comply with the rules, if found wanting, are still fined, even where there is no evidence that any AML offences have been committed. This oppressive AML regime, so resented by solicitors, has driven the profession’s trust in the SRA to an all-time low. This is not conducive to a positive regulatory relationship.”

And, the PLA points out, while the government is openly critical of how long conveyancing takes, and consumers frequently cite delays as the fault of property lawyers, the rules require conveyancers to stop work if suspicious activity is suspected – but prevents them from informing the client.

“The solicitor gets blamed by everyone. The lawyer’s reputation is likely to be damaged. Why should the lawyer be in this position?”

The costs of the ‘excessive AML controls’ are ‘choking’ conveyancing, the PLA adds, and says requirements have snowballed ‘way beyond all reasonable measures’.

“All law firms must have an independent audit of their AML controls. This has created a whole new industry of compliance experts. The resources required to commission an independent audit for a small law firm with, say, three partners, are typically in the region of £3,000. In addition, days of otherwise productive fee-earning time must be dedicated to the audit.

“This extraordinary expense is on top of the regular costs of necessary training and the time spent implementing AML laws and regulations. It places a heavy burden on small and medium-sized law firms, whose client base is often unexceptional.”

The PLA is calling for the government and OPBAS to enter into ‘meaningful discussions’ with property lawyers, which it says could include:

• The commissioning of an independent cost/benefit analysis of the impact of the existing AML regime on homebuying and the wider economy.
• An investigation into why the approach by OPBAS to PSBs is so inconsistent.
• The establishment of an independent commission to advise the government as to which AML laws and regulations fail the test described above and so could be repealed.

Solicitors are angry, the PLA warns, and adds the public are ‘collateral damage’ and the ‘unintended victims’ of the AML process:

“Solicitors have, unfortunately, become chastened, fearful, overburdened, overstretched, and demoralised. Many struggle to make a living in a highly competitive market for their legal services. So, because of an oppressive AML regime,are solicitors now ‘fish in a barrel’?

“Solicitors are among the most highly qualified individuals in homebuying but are shackled to a bureaucratic AML regime that undermines their business, their transactions and their clients’ trust in them. And all the while, they are scapegoats for delays in the home-buying process.”