In May 2021 the SRA issued £800 fines (plus costs) to six law firms:
- Charles Hoile Limited
- JE Bennett Law Limited
- Fairhurst Menuhin and Co Ltd
- Alister Pilling (sole practitioner)
- Morrison Spowart Ltd
- Cartwright Solicitors Ltd
Their crime? Failure to provide the required declaration of AML compliance to the SRA in time.[Update July 2021: Seven further law firms were sanctioned for similar breaches:
- Crawford & Company Legal Services Limited
- Hole & Pugsley
- Law Together LLP
- Lake Jackson
- Smooth Law Limited
- AB Corporate LLP
- Picasso Legal Limited
We expect to see ongoing SRA sanctions.]
The implications for law firms
The size of the fines is neither here nor there. These sanctions are the low hanging fruit for the SRA.
It is the regulator’s willingness to take further action on minor AML breaches that is more interesting. It is a shot across the bow for all regulated law firms.
We could see the SRA lose patience with firms and increase the level of fines. Disciplinary action against law firm leaders is possible in more serious cases.
And breaches of the Money Laundering Regulations carry potentially criminal liability.
AML sanctions could also damage a firm’s reputation with commercial and public sector clients. This would far outweigh any regulatory fine.
AML compliance is a priority for the SRA
As the profession’s AML supervisor, the SRA has steadily moved anti-money laundering compliance up the regulatory agenda. They have expanded the AML supervision team.
‘Knocking on doors’ is increasingly commonplace.
The 2017 Money Laundering Regulations significantly extend the administrative burden of AML compliance. All firms subject to the Regulations must keep a firm-wide risk assessment, risk assess each client and file, undertake client due diligence, train staff and so on.
Earlier this year, the Legal Sector Affinity Group (LSAG) produced its guidance to the Regulations for the legal profession. We wrote about the LSAG guidance here. If your Money Laundering Compliance Officer is not up to speed with the latest guidance, they need to take action now in order to protect the firm from unwanted regulatory attention.
Most firms also have to conduct an independent audit (‘Regulation 21’) of their AML controls. Lots haven’t. This is likely to be the next focus for SRA attention.