The Solicitors Regulation Authority (SRA) revealed that there was a 43% increase in money laundering reports in the opening nine months of 2018.
In 2017, 152 reports of money laundering allegations were made against SRA regulated law firms. Unfortunately, this increased to 218 between January and September last year.
The findings were released as part of the Upholding Professional Standards 2017/18 report.
The statistics will also be unfortunate reading for the SRA who were aware of anti-money laundering (AML) compliance issues following a sample audit carried out in May.
26 SRA regulated firms out of a sample size of just 59 law firms providing trust and company services (TCSP) were placed into the SRA’s disciplinary process for inadequate money laundering procedures. The suggestion that over 200 firms are currently non-compliant will highlight the need for greater guidance on AML compliance.
The review in May focused on the creation and administration of trusts and companies on behalf of clients, an area of law the Government deemed to be at most significant risk of money laundering as criminals look to exploit the system and launder their ill-gotten gains.
The SRA speculated that two thirds of its regulated firms needed to comply with Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 (MLR 2017). 44% of firms who are legally required to comply with MLR 2017 were failing in their obligatory requirements to some extent.
The report also found that too many risk assessments, which are considered as vitally important to MLR 2017, were viewed as inadequate.
In total, over a third of firms (24) had failed to create robust risk assessments with many areas of the regulatory strands missing completely. Worryingly, 4 law firms had failed to create any risk assessments at all.
Firms were accused of failing to complete the necessary customer due diligence (CDD), especially concerning Politically Exposed Persons (PEPs) and Suspicious Activity Reports (SARs). Only a sixth of the sample (10 firms) had completed a suspicious activity report (SAR) in the past two years.
Anna Bradley, Chair of the SRA Board, commented:
“The standards we set are critical to establishing and maintaining public confidence in the rule of law, the administration of justice and, of course, solicitors’ professional practice. Standards like integrity, confidentiality, independence and acting in the best interests of clients are what people expect of solicitors and what we try to assure. In this new report, we set out how we uphold these standards through our enforcement activity.
“Most solicitors and law firms do a good job, providing high-quality legal services to the public and to businesses within a robust ethical framework. But, when things go wrong, we have to take firm and fair action to make sure that standards are upheld and that the public can continue to place confidence in both individual solicitors and the profession as a whole.
“Our primary purpose in taking action is to protect current and future users of legal services, and we will pursue the most effective and efficient way to do so.”
Is there enough guidance to help law firms confirm with AML regulations? Do you think more should be done to ensure law firms are compliant with AML regulations?
