Monthly Archives: October 2019

SRA review shows fifth of law firms fail on money laundering compliance

  • Fifth of firms reviewed don’t have required firm risk assessment
  • 7,000 firms will be checked for compliance
  • New annual Risk Outlook highlights 172 money laundering investigations this year

The SRA today announced increased checks on law firms after it was found that too many were not complying with anti-money laundering regulations, and warned of strong action against those who continue to fall short.

In March, the regulator wrote to 400 firms asking them to demonstrate compliance with the 2017 Money Laundering Regulations by sending their firm risk assessments. They received 400 responses, but 21 percent (83) were not compliant, either not addressing all the risk areas required (43), or sending over something other than a firm risk assessment (40) – for instance, a client or matter risk assessment.

The majority of firms (64%) were using templates. These firms’ risk assessments were generally of lower quality. Templates can be helpful, but too many firms appeared to take a ‘copy and paste’ approach, without thinking through the specific risks and issues faced by their firm.

The SRA also expressed concerns that many of the risk assessments (135 or 38 per cent) were dated recently. Although this could reflect an update of an earlier assessment, this suggests some firms may have only created one in response to the SRA’s request and therefore some firms may not have an existing risk assessment.

The SRA have highlighted  their concerns in an updated warning notice and said that they will be engaging with firms to make sure they comply promptly. If they do not, they will face enforcement action.

The SRA will shortly be writing to the 7,000 firms that fall under the scope of the Money Laundering Regulations to ask them to confirm they have a firm risk assessment in place. An extensive programme of targeted and in-depth visits to firms will also be carried out.

Paul Philip, SRA Chief Executive, said: “Money laundering supports criminal activity such as people trafficking, drug smuggling and terrorism. The damage money laundering does to society means that every solicitor must be fully committed to preventing it. The vast majority would never intend to get involved in criminal activities, but poor processes open the door to money launderers.

“A call from us should not be the prompt for a firm to get their act together. You need to take immediate action now if you are not on top of your money laundering risks. Where we have serious concerns, we will take strong action.”

Figures released in the SRA’s annual Risk Outlook show that so far this year 172 investigations linked to anti-money laundering compliance have been opened. In the last five years, the regulator has taken more than 60 such cases to the Solicitors Disciplinary Tribunal, resulting in more than 40 solicitors being struck-off or suspended.

The Outlook also highlights that new EU money laundering regulations are due to come into force by 10 January 2020. This will mean firms need to update their processes to bring them up to date with the new legislation.

Money laundering is one of the nine priority risks for the legal profession in the SRA’s annual Risk Outlook. Other risks highlighted include solicitors getting involved in dubious investment schemes, and the risks of losing information or money to cybercrime.

SRA to conduct widespread checks and visits to firms amid concerns over ‘cut and paste’ approach to AML

SRA concerned at firms’ ‘cut and paste’ approach to AML

(The Law Society Gazette, John Hyde, 29 October 2019)

Thousands of firms are to be contacted by the Solicitors Regulation Authority within the coming weeks asking what measures they have in place to combat money laundering.

The widespread checks on 7,000 firms that fall under the scope of money laundering regulations follow fears that many are doing little or nothing to meet their obligations.

In March the SRA wrote to 400 firms asking them to demonstrate compliance with the 2017 regulations by sending their risk assessments. Of the responses, 83 were found not to be compliant: firms either did not address all the risk areas required or they sent over something other than a concrete risk assessment.

It was found the majority of firms (64%) were using templates, many of which were of low quality. The SRA believes too many firms appear to take a ‘copy and paste’ approach without thinking through the specific risks and issues they individually face.

The regulator is also concerned that around 135 of the risk assessments were dated recently, suggesting either that many firms had coincidentally updated their assessment in recent weeks, or they had only created one in response to the SRA’s request.

As well as writing to the 7,000 at-risk firms, the SRA now plans an ‘extensive’ programme of targeted, in-depth visits to firms and calling in more firms’ risk assessments.

Paul Philip, SRA chief executive, said: ‘Money laundering supports criminal activity such as people trafficking, drug smuggling and terrorism. The damage money laundering does to society means that every solicitor must be fully committed to preventing it. The vast majority would never intend to get involved in criminal activities, but poor processes open the door to money launderers.

‘A call from us should not be the prompt for a firm to get their act together. You need to take immediate action now if you are not on top of your money laundering risks. Where we have serious concerns, we will take strong action.’

Figures released in the SRA’s annual risk outlook, published today, show that so far this year it has opened 172 investigations linked to anti-money laundering compliance. In the past five years, the SRA has taken more than 60 such cases to the Solicitors Disciplinary Tribunal, resulting in more than 40 solicitors being struck off or suspended.

The regulator has highlighted its concerns in an updated warning notice and says it provides additional support including guidance, checklists and a suggested template for how to frame compliance methods.

New EU money laundering regulations requiring firms to update processes are due to come into force by 10 January 2020.

Recognising needs early is key for firms helping disabled consumers

New research has revealed what solicitor firms could do to improve access to their services for people with mental or physical disabilities.

And it found that early identification of needs and adjustments was vital if those with disabilities were to access legal services via solicitors. Commissioned by the Solicitors Regulation Authority (SRA), the research was undertaken by YouGov.

It saw more than 3,500 disabled people sharing their views on the challenges they face, and the reasonable adjustments firms could make to help them overcome these. More than half of those interviewed said they found accessing legal services difficult, with only one in four ever remembering being proactively asked if they need any reasonable adjustments to be made.

This problem is particularly acute for those whose disabilities are not immediately obvious, many of who say they lack the confidence to make requests themselves for information or services to be offered in a different way.

Once disabled people had hired a solicitor, their impression of the service was generally positive, with the most important factor influencing this being the attitude and flexibility of frontline staff working for a firm.

Key improvements the research suggested firms could make to be more accessible to disabled people included:

  • Proactively asking all clients if they need any reasonable adjustments to be made, with examples of what form these may take.
  • Introducing easier-to-navigate and more accessible websites, with dedicated information for those with disabilities.
  • Adding pictures of their offices on their website, to help people feel familiar with them and judge how accessible they will be before visiting.
  • Train staff in supporting vulnerable clients, and actively promote any relevant expertise, partnerships or accreditations.

SRA Chief Executive, Paul Philip, said: “All solicitors will recognise that disabled people often have multiple, complex and varying needs, that may not be immediately obvious. Accessing legal services can be complex enough without facing such added challenges, which is why it is so important that firms do all they reasonably can to help people overcome any difficulties.

“This research found that while some firms are clearly good at this, others have more to do. The insights should help firms to make the changes needed to support hundreds of thousands of people to access professional legal support when they need it.”

In compiling their research YouGov surveyed more than 3,500 disabled people through a combination of online surveys, one-to-one interviews and online forums. A workshop was also held with charities and stakeholder groups, alongside a review of existing literature published in this area.

Solicitors and law firms have duties under the Equality Act 2010 and the Code of Conduct to treat people fairly and without discriminating against them on the grounds of characteristics including disability.

Read the research on Reasonable adjustments in the provision of legal services.