Anti-money laundering: Files did not have risk assessments
A Coventry law firm has been fined more than £46,000 for failing to have proper anti-money laundering (AML) procedures in place, one of the largest such penalties to date.
The Solicitors Regulation Authority (SRA) said Band Hatton Button (BHB) “failed in its basic duties”.
The regulator has also handed out an £18,000 fine to Stockport firm Stratford Solicitors for similar failures, the latest in a stream of penalties over recent months for law firms that were not complying with AML rules (see here and here).
BHB is an alternative business structure, which is why the SRA was able to fine it more than the £25,000 limit applied to traditional law firms.
A regulatory settlement agreement published yesterday said that, between June 2017 and February 2018, BHB did not have a firm-wide risk assessment (FWRA), and then the one it put in place was not compliant with the 2017 Money Laundering Regulations.
The same happened with AML policies, controls and procedures (PCPs) – initially the firm had none and then inadequate ones.
Between June 2017 and September 2023, BHB also did not have in place an independent audit function, as required by the regulations where appropriate with regard to the size and nature of its business.
An SRA review of selected client files revealed that five did not contain a client and matter risk assessment, while two did not have adequate source of funds checks.
In mitigation, BHB came into compliance within two months of the SRA’s feedback and fully cooperated with the regulator.
The SRA said a fine was “a proportionate outcome in the public interest because it creates a credible deterrent to others and the issuing of such a sanction signifies the risk to the public, and the legal sector, that arises when solicitors do not comply with anti-money laundering legislation and their professional regulatory rules”.
There was no evidence of harm to consumers or third parties, it went on, while BHB “recognises that it failed in its basic duties regarding statutory money laundering regulations and regulatory compliance”
Applying its fining guidance, the SRA initially came to a figure of £77,412, representing 1.6% of BHB’s £4.8m domestic turnover. It then reduced this by 40% to reflect the mitigation and BHB’s “appetite to bring the investigation to an end now with full and frank admissions”.
This meant a fine of £46,447 plus costs of £1,350.
Stratford Solicitors was similarly found to have had no FWRA in place in 2017/18 and then an inadequate one, while the non-compliant PCPs were in place for nearly six years to February 2023.
An SRA notice said: “Its conduct was a breach of its regulatory obligations which persisted for longer than was reasonable and formed a pattern of misconduct.
“The firm was responsible for its own conduct which was serious and had the potential to cause harm to the public interest and to public confidence in the legal profession.”
Its fine was 2% of turnover, taking into account co-operation with the SRA and taking remedial action to be fully compliant.
Stratford was fined £18,425 and ordered to pay costs of £1,350.
