1 in 5 law firms ignore money laundering rules
29 Oct 2019
The Solicitor Regulation Authority (SRA) is planning to launch money laundering investigations into 7,000 law firms after they discovered that too many were not complying with anti-money laundering regulations
29 Oct 2019
There are strong penalties planned for those who fail to comply.
In March 2019 the SRA wrote to 400 firms asking them to demonstrate compliance with the 2017 Money Laundering Regulations by sending their firms’ risk assessments.
They received 400 responses, but 21% (83) 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) - 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- which showed more of a ‘copy and paste' approach, without thinking through the specific risks and issues faced by their firm.
The SRA were also concerned that many of the risk assessments (38%) were dated recently. This could reflect an update of an earlier assessment, or it suggests some firms may have only created one in response to the SRA request showing that some firms may not have an existing risk assessment.
SRA chief executive, Paul Philip 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.
Solicitor firms that fail to comply promptly to the SRA will face enforcement action.
Philip added: ‘The vast majority would never intend to get involved in criminal activities, but poor processes open the door to money launderers.’
Figures released in the SRA annual Risk Outlook show this year they have opened 172 investigations linked to anti-money laundering compliance.
In the last five years, we have taken more than 60 such cases to the Solicitors Disciplinary Tribunal, resulting in more than 40 solicitors being struck-off or suspended.
New EU money laundering regulations, the Fifth Money Laundering Directive, are due to come into force from 10 January 2020, although the government has still not responded to the consultation which closed in June.
The revised directive expands the scope of the current rules, bringing tax matters into the remit for the first time for accountants, tax advisers and auditors, who are already required to comply with version 4 of the directive.
The regulations are unlikely to be put into statute until after the general election.
The government is also reviewing the SAR regime and plans to complete this by December 2020. This is to improve and increase money laundering detection and prevention.
By 2020, all cryptocurrencies will be brought into the scope of the AML (anti money laundering) regime and the Financial Conduct Authority (FCA) will supervise crypto trading.
At the moment law firms must carry out checks on any clients who use these systems.