Monthly Archives: May 2019

SRA probes 26 firms over money laundering

Almost half of firms placed under extra scrutiny by the Solicitors Regulation Authority for potential money laundering breaches could now face disciplinary proceedings after alleged failures were exposed.

Paul philip 16

Paul Philip: ‘compliance is not optional’

The regulator reviewed 59 firms that provide trust and company services – seen as a particular risk for criminals laundering money – and is now investigating 26 for possible rule breaches.

The review found no evidence that firms had actually laundered money or that they had any intention of becoming involved in criminal activities. But red flags were raised at more than a third of firms under review about their lack of adequate risk assessment. In four cases, firms had no risk assessment at all.

While 15 firms had turned down work following due diligence, a similar number were found to have inadequate processes in place to manage risks around politically exposed persons (PEPs), individuals whose prominence in public life could make them vulnerable to corruption.

SRA chief executive Paul Philip said: ‘Most solicitors take their responsibilities seriously, but too many firms are falling short. Those firms should be on notice that compliance is not optional. They need to improve swiftly. Where we have serious concerns that a firm could be enabling money laundering, we will take strong action.’

The SRA’s message has been repeated several times in recent years, but the prospect of sweeping prosecutions involving dozens of firms is intended to drive home the message that action is required.

The net is set to be cast wider in the coming months, with the regulator beginning a further compliance review of 400 firms, led by a new dedicated anti-money laundering unit.

Around 7,000 firms do work that falls under the scope of the government’s money laundering regulations. In the past five years, 60 cases have been brought before the tribunal linked to potential improper money movements, with more than 40 solicitors struck off.

A Law Society spokesperson said: ‘The SRA’s findings will help us pinpoint those elements of the regulations that members still find challenging and tailor our support services to member needs. The findings also help members understand and prepare for the level of detail that the SRA clearly expects to see in firms’ compliance procedures.

‘Chapters 2, 3 and 4 of the legal sector AML guidance deal with most of the challenges identified by the thematic review. Where a specific question is not answered by the guidance, members should call our Practice Advice Service for free and confidential advice.’

(Source: The Law Society Gazette, 13th May 2019)

SRA review shows too many law firms falling short on anti-money laundering

  • Review results in 26 firms entering disciplinary processes
  • SRA issues warning to profession about money laundering

A review has shown that a significant minority of law firms are not doing enough to prevent money laundering, with some falling seriously short.

Go to the review

The SRA’s review focused on 59 law firms providing trust and company services. The creation and administration of trusts and companies on behalf of clients has been highlighted by the government as one of the legal service areas at highest risk of exploitation by criminals to launder money.

The review did not find evidence of actual money laundering or that firms had any intention of becoming involved in criminal activities. However, it did find a range of breaches of the 2017 Money Laundering Regulations, as well as poor training and processes. This means firms could be unwittingly assisting money launderers.

One of the biggest areas of concern was firms’ risk assessments. A firm risk assessment is required in legislation and should be the backbone of a firm’s anti-money laundering approach. The SRA found that more than a third (24) of firms reviewed fell short in this area, including four that had no risk assessment at all.

There were also issues around appropriate customer due diligence. This included inadequate processes in almost a quarter (14) of firms to manage risks around Politically Exposed Persons, known as PEPs. However, in some instances effective customer due diligence did result in firms turning down work. Fifteen firms had done this, with one of the main reasons being evasive clients.

As a result of the review the SRA have put 26 firms into its disciplinary processes. The SRA has also published a warning notice reminding the profession of their obligations, particularly in relation to firm risk assessments. And the SRA has begun a further review of 400 other law firms to check compliance with the Government’s 2017 Money Laundering Regulations. This review will be led by a new dedicated anti-money laundering unit, being set up to bolster resources to prevent and detect money laundering.

Go to the warning notice

Paul Philip, SRA Chief Executive, said: “Money laundering damages society, supporting terrorists, drug dealers and people traffickers. The stakes are too high for solicitors to be anything but fully committed to preventing money laundering and the crime its supports.

“Most solicitors take their responsibilities seriously, but too many firms are falling short. Those firms should be on notice that compliance is not optional. They need to improve swiftly. Where we have serious concerns that a firm could be enabling money laundering, we will take strong action.”

In the last five years, the SRA has taken more than 60 cases, linked to potential improper money movements, to the Solicitors Disciplinary Tribunal. These cases have seen more than 40 solicitors being struck off, voluntarily coming off the roll, or suspended from practising.