Anti-money laundering: Firms brought back into compliance
More than 40% of firms of licensed conveyancers inspected by their regulator in the past year were non-compliant with anti-money laundering (AML) rules, a review has revealed.
But the Council for Licensed Conveyancers (CLC) said its ‘assisted compliance’ approach had brought almost all back into compliance.
In the year to 5 April 2023 – at which point the CLC oversaw 203 practices and 28 sole practitioners – it inspected 52 firms, of which just five were fully compliant, 25 ‘generally’ compliant (48%) and 22 (42%) non-compliant.
The CLC said: “After extensive post-inspection assisted compliance work with each practice’s assigned regulatory supervision manager, however, each of these practices was either brought back into compliance (20) or was still working towards compliance (two practices) at the end of the relevant period for this report.
According to the Solicitors Regulation Authority’s annual AML report [1] last month, of the 224 firms it reviewed, 19% were compliant, 51% partially compliant and 29% non-compliant. Some 6,000 of the firms it regulates fall within the AML regime.
The main three areas of non-compliance among licensed conveyancers were inadequate documented policies and procedures – such as out-of-date AML policies, not including key obligations or procedures, and the policy not reflecting the actual procedure followed at the practice – inadequate customer due diligence procedures, and inadequate practice-wide risk assessments (PWRAs).
“Often this was found to be because the PWRA didn’t come to a conclusion as to risk, that it was out of date as it had not been reviewed in a long time or that it did not take into account the areas which are mandated by the 2017 [Money Laundering] Regulations.”
In early 2023, the CLC changed its approach to AML inspection, moving away from visiting every firm every three years to a more risk-based approach and now considers 27 firms and sole practitioners to be high risk (up from 11 the previous year), 27 medium risk (one fewer than last year) and the rest low risk.
The report said the increase in high-risk firms reflected the emergence of new issues and “better targeting of CLC resources to identify issues”.
Speaking at the Society of Licensed Conveyancers annual conference in Derby last week, CLC director of finance and operations Jason Hinrichsen said AML was the most requested topic for training and guidance and that AML compliance would be a monitoring focus in 2024.
“We will specifically look at matter-based risk assessments, source of funds and source of wealth checks and politically exposed person and sanction checks,” he said.
On assisted compliance, he explained: “We encourage practices to work with us, and in turn we will work closely with them to remediate any code breaches. Our firms know our expectations for compliance and we seek to ensure that by jointly agreeing actions, and then checking on their implementation we can prevent reoccurrence.
“Our availability and reasonable approach has fostered a culture of self-reporting, which combined with our high-touch inspections means we have an excellent track record in resolving breaches before any harm comes to consumers.”