One in five law firms is failing to comply with anti-money laundering rules, regulators have warned.
The Solicitors Regulation Authority (SRA) asked 400 firms for their risk assessments, to assess whether they were complying with the Money Laundering Regulations 2017. However, 83 of the firms (21%) were not compliant. They either did not address all the risk areas required (43), or they sent over something other than a firm risk assessment (40), such as a client or matter risk assessment.
The majority of firms (64%) were using templates, and their risk assessments were generally of lower quality. The SRA said that, while templates can be helpful, too many firms take a ‘copy and paste’ approach, without thinking through the specific risks and issues faced by their firm.
The SRA also expressed concern that 135 of the risk assessments (38%) were dated recently, suggesting some firms may have created one in response to the SRA’s request rather than having one already made.
Consequently, the SRA is now writing to all 7,000 firms affected by the regulations to ask them to confirm they have a firm risk assessment in place. It aims to carry out an ‘extensive programme of targeted, in-depth visits’ to firms to ensure the profession is complying with the rules.
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 SRA’s annual Risk Outlook, published this week, shows it has opened 172 anti-money laundering compliance investigations already this year. In the past five years, the SRA has taken more than 60 such cases to the Solicitors Disciplinary Tribunal, and more than 40 solicitors have been struck-off or suspended as a result.
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