New SRA Warning Notice on AML
The new Money Laundering Regulations came into effect almost two years ago, and yet there are concerns that a ‘significant minority’ of firms have not taken sufficient steps in response.
The regulator has a particular worry that firms are not producing (and keeping up-to-date) firm-wide risk assessments. It just so happens that failure to be able to produce one on demand is pretty easy for SRA investigators to identify as a breach.
Other issues that could land you in trouble include:
- failure to train staff properly
- under-reporting of AML concerns
- ineffective Client Due Diligence procedures
- lax Politically Exposed Persons procedures
Why it matters
When the SRA issues a Warning Notice, it means business. Compliance Officers, managers and MLROs are required to take action where necessary.
The firm-wide risk assessment is an important step in the compliance process. It sets the scene for your AML policy, training and procedures. It is designed to ensure that the firm focuses on the actual risks of financial crime in its particular business, rather than treating AML as a tick box exercise.
Having said that, it is always helpful to have a crib sheet to see what you need to do at-a-glance. You can download our free AML compliance checklist below.
We also think it is a good idea for firms not technically caught by the Money Laundering Regulations (non-transactional, litigation-only) to conduct the risk assessment. In that way you have a record of why you consider yourself to be outside the scope of the Regulations.
And you may identify other risks (sham litigation, high risk jurisdictions) that could otherwise pose an AML risk. It is easy for complacency to set it.
Don’t forget that even if the Money Laundering Regulations don’t apply to your firm, the Proceeds of Crime Act and Terrorism Act do!
Thinking about recording client calls? Read this.
Since the enhanced protections under GDPR came into effect last year, HMRC has unlawfully processed vast numbers of telephone calls authenticated by voice. Since ‘biometric data’ is afforded special protection under data protection law, the ICO has ruled that data should be deleted.
Callers to HMRC were neither given sufficient information about how their biometric data would be used, nor the opportunity to refuse consent.
An enforcement notice has been issued to HMRC.
Why it matters
We have seen an increased interest in firms’ appetite for recording calls. Perhaps against a backdrop of insurance claims and complaints.
That is all well and good, but if you are planning to record calls you must follow the Data Protection Act to the letter, and remember that voice recordings could be afforded ‘sensitive data’ status.
This has implications for your privacy notices, consent collection and documentation, and staff training.
Proceed with caution.
Solicitors and NDAs
Stories related to the inappropriate use of NDAs, particularly when imposed in sexual misconduct cases, continue to regularly make the news.
Legalfutures reports that the SRA is currently investigating twelve ‘complex’ cases involving NDAs. Provision has been made in the regulator’s prosecution budget to account for these – with more possibly anticipated.
Zelda Perkins, an ex-Harevey Weintein employee who was subject to one such NDA, has given evidence to the Women and Equalities Committee of the House of Commons that some firms are flouting the regulator’s warnings. Her evidence alleges that:
“As recently as last month, 12 top UK firms when approached were willing in principal, to draw up NDAs, which clearly break the SRA’s warning notices….There will be an in-depth article appearing shortly in the public domain with the facts that this investigative journalists finds, which I believe will be an important source of information for the committee to consider.”
We can expect further referrals to the SDT.
In a related case involving alleged abuse of power, a Freshfields partner has been referred to the SDT following allegations of sexual misconduct involving a junior employee.
Why it matters
It is right that the regulators are pursuing this course of action. Solicitors should not be complicit in the ‘gagging’ of victims of sexual misconduct – often described as a secondary abuse of power.
Solicitors must take great care when drafting NDAs, particularly when clients apply pressure to stop a whistle-blower.
There is in fact a good argument to say that all NDAs should be treated as high risk matters, and subject to compliance oversight or peer supervision. In the current climate, the potential for damaging regulatory and reputational fallout is high.
- Penalised for putting things right (Gazette) – Gregory Treverton-Jones QC comments on the recent disciplinary case of Howell Jones LLP, which involved an own interest conflict arising out of a ‘mistake’ made by the firm, which it tried – and failed – to remedy. The implications are significant – can a solicitor continue to act when they have made an error in the case, even if it is easily fixed?
- ‘UK Legal Services Consumer Research Report 2019’ (IRN) – (requires subscription – or try the free Legalfutures story instead) – the IRN report paints an interesting picture for price transparency skeptics (like me!). Apparently 77% of consumers prefer a firm that publishes prices over one that does not. It was always felt that the SRA’s Price Transparency Rules were pushed through with insufficient evidence behind them. Perhaps the regulators are on to something?
- Ian Johnson rebuked by way of Regulatory Settlement Agreement for not realising his client was deceased (and had been for seven years), when he purported to act for her.
- Trainee solicitor banned from the profession for failing to disclose a personal relationship with a police station client, and lying to her employers.
- Mohammed Riaz struck off following a conviction for perverting the course of justice.