Fairbrother & Darlow: A case study on regulatory breaches and sanctions in AML compliance

Fairbrother & Darlow, a law firm, found itself in the spotlight as it faced penalties for serious and persistent breaches in adhering to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs 2017).

The firm, which had been engaged in in-scope work since 2010, underwent scrutiny in March 2022 when the Solicitors Regulation Authority's (SRA) Anti-Money Laundering (AML) Proactive Team conducted a desk-based AML review. The findings revealed significant deficiencies, notably the absence of a compliant firm-wide risk assessment (FWRA) and policies, controls, and procedures (PCPs) as required by MLRs 2017.

Further, the firm failed to conduct client/matter risk assessments on four in-scope files, a violation of MLRs 2017. Additionally, Fairbrother & Darlow erroneously declared compliance in January 2020, leading to inaccurate information provided to the SRA regarding its FWRA status.

The consequences were substantial. The SRA found the firm in breach of regulatory obligations, persisting for an unreasonable duration, displaying a pattern of non-compliance, and demonstrating recklessness. The firm failed to heed the SRA's guidance and warning notices, ignoring the risks and regulatory consequences associated with AML non-compliance.

In light of the seriousness and potential harm to public interest and confidence in the legal profession, Fairbrother & Darlow faced a penalty of £16,052.80 and costs of £1,350. The sanction aligned with the SRA Enforcement Strategy, categorising the conduct in band C, warranting a financial penalty ranging from 1.6% to 3.2% of annual domestic turnover. Mitigating factors, such as the absence of significant harm, the firm's admissions, cooperation, and remediation efforts, contributed to the final fine.

This case serves as a stark reminder to legal practitioners about the paramount importance of robust AML compliance, not only to meet regulatory standards but also to safeguard public trust and the integrity of the legal profession. It underscores the need for continuous diligence, adherence to guidelines, and swift remedial actions when shortcomings are identified.