From the Russian mafia to the Arab Spring – SRA records big rise in money laundering reports

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5 March 2014


Oh those Russians: concern over money laundering

The number of law firms suspected of involvement in money laundering trebled last year, with some solicitors mixed up with the Russian mafia as well as “inappropriate transactions” following the Arab Spring, the Solicitors Regulation Authority (SRA) revealed yesterday.

In the latest update to its Risk Outlook, the SRA said money laundering was a “serious and increasing” risk facing the profession, naming these two particular issues to highlight the range of problems it is currently dealing with.

Reports of firms perpetrating or facilitating money laundering went up from 24 in 2012 to 68 in 2013, with a further 70-80 reports received about possible breaches of the Money Laundering Regulations, Proceeds of Crime Act and Terrorism Act.

The SRA identified some methods employed by money launderers targeting law firms, such as exploiting failures to conduct identity checks, disguising the true source of funds –  particularly where it concerns so-called politically exposed persons – infiltrating law firms, involving or exploiting more than one firm, and persuading a law firm to provide a banking facility.

The regulator said firms are being infiltrated through identity theft, false credentials, “targeting inexperienced solicitors for partnership”, remaining in jobs for a very short time, and targeting specific roles that have, for example, access to case files but do not require a legal qualification.

The SRA emphasised the importance of proper systems and controls to mitigate the risk of money laundering, pointing to the importance of following international guidance from the Financial Action Taskforce (FATF). This has identified four main areas of focus for due diligence for law firms around money laundering: clients, source of funds, choice of lawyer and the nature of the retainer.

The update also covered the risks of cybercrime and bogus law firms reported by the SRA last week.

The regulator said yesterday that a further e-mail scam has been discovered claiming to be from the SRA and targeting law firms.

Reports have been received from solicitors’ firms saying they had again received e-mails purportedly from the SRA, some of which referred to pending investigations. These have been sent from an e-mail account that does not end in @sra.org.uk.

As before, firms are advised not to open the email, to forward it to fraud@sra.org.uk, and then to delete it. Firms that have opened the attachment should report it to their bank and IT provider as it may host a virus.

The SRA said the information the scammers are using is freely available in the public domain, meaning there is nothing it can do to prevent the e-mails being sent.

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