Access Legal [1] has revealed five key barriers that are impacting law firms’ ability to prove Anti-Money Laundering (AML) compliance following a review of firms’ AML practices.
In the last 12 months, the Risk and Compliance Team at the legal technology specialist has carried out AML policies and procedure visits at the request of firms across England and Wales. The reviews help firms prove compliance and prepare for the Solicitors Regulation Authority’s (SRA) Thematic Reviews.
The following findings have regularly surfaced, and now Access Legal has published them as part of its AML campaign to help firms understand what their AML obligations are and how to meet them:
Firm Wide Risk Assessment Not Being Updated: On many occasions, it has been found that firms do not treat their firm wide risk assessment as a working document and opt for annual reviews. Yet firms must update regularly in response to changing legislation and events.
Policies & Procedures not Being Followed: This was usually found to be either employees choosing not to follow procedures or new processes, like a new tech solution or a fee earner doing things differently, not being reflected in documentation.
Confusion Over Source of Funds/Wealth: The reviews have found that many firms don’t have a full understanding of the difference between the two. And on many occasions, for example with property transactions, not enough evidence has been documented to show fee earners understood where the money comes from. If it’s not documented properly – you can’t demonstrate AML compliance.
A Lack of Training: Many practitioners had not had efficient training in AML compliance. This was both for fee and non-fee earners. The SRA Code of Conduct requires obligations to competency and there’s a requirement under Money Laundering Regulations that ‘relevant people’ in a firm have appropriate training.
Updated Tax Advisor Definition not Being Considered: This came in with the 5th amendments to AML regulations. Many matters now fall under a tax advisor with firms not considering this. SRA says the definition now extends beyond advice, to providing assistance and material aid and activities that may be known informally as other terms including estate planning, tax planning and tax mitigation.
Some of these findings are in line with those that the SRA has published itself on the subject in recent years including in its Money Laundering Governance: Three Pillars of Success [2] report.
Access Legal’s AML campaign is designed to ultimately help firms protect themselves from the operational and regulatory risks money laundering poses. To support firms understanding around AML compliance it has released a Law Firm AML Guide [3] which includes information on the typical three stages of money laundering, guidance around regulations and audits, case studies and the consequences of non-compliance.
Speaking on AML and the barriers Access Legal has found firms face to compliance, its Regulatory Director, Brian Rogers FCMI, said;
“Money laundering has a devastating impact on society. Funding organised crime, money laundering is estimated to cost the UK £37bn each year, though some estimates make it £100bn. The burden of preventing money laundering falls on a number of different sectors, including legal.
“Should an unsuspecting solicitor be found to have aided in money laundering, the personal consequences can be dire – that’s aside from the reputational damage this would bring to a lawyer and their firm. Given the severity of the consequences, it’s important for everyone in a law firm carrying out regulated work to understand the rules and their obligations.
“This is why we have released key findings from our AML reviews we carry out with firms and hope that they support other firms experiencing similar challenges with their compliance. All five are key to ensuring firms can prove compliance with AML regs and I think a key takeaway from most of our visits is, if it’s not written down it didn’t happen. Often, we find the documentation doesn’t match the reality. But the SRA will only consider what’s written down, so even if in practice your policies and procedures are up-to-date or your considering new risks, it won’t cut it.
“We hope our new AML guide will support firms who need to improve their policies, procedures and practices around AML. It’s crucial to the reputation but also the operational validity of their firm.”
For more information about Access Legal [4] and how it can support with AML compliance, visit: https://pages.theaccessgroup.com/LEGAL-Compliance-Bundle-Brochure-LP.html [5].