The Solicitors Regulation Authority are contacting thousands of firms to ask 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 worries that many are not doing enough to meet their obligations. Over a fifth of firms reviewed by the Solicitors Regulation Authority (SRA) have failed to create the required risk assessment protocols to sufficiently protect against money laundering. A new annual Risk Outlook has found that the SRA has investigated 172 firms for money laundering failings in 2019. Of this number, 60 were forwarded to the Solicitors Disciplinary Tribunal (SDT) with over 40 solicitors being struck off or suspended.
In March 2019, 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 actual risk assessment. It was found that the majority of firms (64%) were using templates, many of which were of low quality or using a ‘copy and paste’ approach without thinking through the specific risks and issues they face. The regulator is also concerned that around 135 of the risk assessments were dated recently, suggesting either that many firms had 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.” 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.
The president of The Law Society of England and Wales, Simon Davis said: ‘The SRA’s revised warning notice to the profession and the additional resources published highlight the importance of tailoring money laundering compliance to the specific risk-profile of each practice. We provide a variety of resources to help our members comply with the Money Laundering Regulations and welcome the additional detail about some of the common issues the SRA have identified in firm-wide risk assessments. The new SRA guidance, checklists and templates will help members to understand and prepare for the level of detail that the SRA clearly expects. We encourage members to read these with care alongside the legal sector AML Guidance. Where a specific question is not answered by these resources, members are welcome to call our Practice Advice Service for free and confidential advice.’
New EU money laundering regulations requiring firms to update processes came into place on 10th January this year and an extensive programme of targeted, in-depth visits will be made in the coming months to ensure SRA regulated firms are compliant with current regulations.
Redbrick Solutions provide Anti Money Laundering and ID checks and are all fully compliant with the FCA, HMRC and SRA and proof of ID can be accepted electronically via our secure portal. Checks can be performed against an individual with name, date of birth and address details. Passport, driving license and national insurance details can also be added for a more comprehensive search. For Company business reports the checks include: Statutory information, Directory information, Risk information, Ownership details, Major Shareholders, Summary of mortgages, charges and satisfactions, Profit & Loss Account, Balance Sheet, Cash Flow, Accounts Notes, Ratios, Growth Rates, Company/Industry Comparisons, Filing History and Director information. Redbrick Solutions stores all results electronically against the client, meeting the requirement to store results for a minimum of 5 years. Results are accessible at any time without the need to call up a file from storage. Redbrick Case Management also enables firms to run compliance reports e.g for matters that have not completed or failed anti-money laundering checks. These reports can be set to run automatically in the background and delivered via email to a nominated person at selected intervals. All of which will assist firms to be compliant with the new regulations.