The coronavirus crisis has hindered the Solicitors Regulation Authority’s (SRA) efforts to pursue law firms that have ignored its efforts to check they are complying with its anti-money laundering rules.
It also has the potential to generate significant extra costs for the regulator, which may ultimately need to be borne by the profession through practising fees.
Last December, the SRA wrote to the 6,500 law firms that fell within the scope of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, asking for a declaration that they have a compliant firm-wide risk assessment in place.
According to a report to last week’s special meeting of the SRA board – convened solely to discuss the impact of the pandemic – a “significant number of firms” have not done this.
The plan had been to send a letter to the COLP at each one, but the report said: “However, anticipating that many firms will not have staff in the office, we will delay this and consider other ways to bring down the number of non-responders.”
Further, anti-money laundering visits to firms have been moved to a conference call. “We will not review firm files, however, until we are able to attend offices in person. We will continue to call in firms’ risk assessments, policies, procedures and controls.
“However, we have given firms longer to return the documents to us and asked any firms experiencing difficulties due to coronavirus to contact us about an extension.”
The report said various targets would be affected by the virus, with potential increased sickness “likely to impact adversely and significantly on our operational timeliness, for example in authorisation, investigation and supervision and client protection”.
With hearings at the Solicitors Disciplinary Tribunal (SDT) stopped until at least after Easter, prosecutions have obviously been halted, but the SRA is currently continuing to undertake all proposed interventions, “with additional risk assessments and precautions being taken to protect the welfare of all the people involved”. There have been three in the past week.
The report warned that disruption to the timetable for upgrading the SRA’s IT systems “would have very significant financial consequences”, while it had to spend £300,000 on purchasing laptops to facilitate home working.
“The longer-term financial impacts are not yet clear but are likely to include a significant extra resourcing cost to ‘catch up’ activities which fall back over this period.”
Another impact of the virus is a possible delay in the SRA’s review of disproportionality in its operational processes.
“We have cancelled the planned use of temporary staff to undertake the retrospective review of our records needed to identify individuals and therefore their diversity profile. We plan to use staff with capacity now freed up elsewhere in the organisation to undertake this work. This may delay this project.”
Meanwhile, though the SDT adjourned all substantive hearings due to commence between 23 March and 9 April, it has told Legal Futures that it is now starting to use remote hearings.
Paper-based application (for example, to vary directions) can still be made and dealt with, while new applications are also being considered and, if appropriate, issued and served by email. However, the SDT cannot take delivery of items by DX, courier or post at the current time.