7,000 firms in SRA's firing line in AML compliance drive

A fifth of law firms are failing to comply with anti-money laundering regulations, according to the Solicitors Regulation Authority (SRA) who warned of “strong action against those who continue to fall short”.

Following a review, the SRA has pledged to increase compliance checks on law firms – with 7,000 firms in the firing line.

The regulator asked 400 firms to send their firm risk assessments earlier this year to demonstrate compliance with the 2017 Money Laundering Regulations.

It found 64 per cent of firms are using templates which were generally found to be “of lower quality”.

“Templates can be helpful”, the SRA said, “but too many firms appeared to take a ‘copy and paste' approach, without thinking through the specific risks and issues faced by their firm.”

Of the 400 firms reviewed, 83 were not compliant because they did not address all the risk areas required (43), or they gave the regulator something other than a firm risk assessment (40), for example, a client or matter risk assessment.

The SRA also expressed concerned that 135 of the risk assessments (38 per cent) were dated recently.

Though this could reflect an update of an earlier assessment, it suggests some firms may have created one in direct response to its request so some firms may not have had an existing risk assessment.

The SRA has now issued an updated warning notice highlighting its concerns.

It has also provided additional support, including guidance, checklists and a suggested template reflecting what the SRA has taken from its review.

The regulator said it is engaging with firms to make sure they comply promptly. “If they do not, they will face enforcement action. We 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.

“We will also be carrying out an extensive programme of targeted, in-depth visits to firms and calling in more firms' risk assessments.”

"Money laundering supports criminal activity such as people trafficking, drug smuggling and terrorism,” said SRA chief executive Paul Philip.

“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.”

He added: "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."