Firms should relieve lawyers who hold their anti-money laundering (AML) compliance roles of some of their fee-earning workload and consider appointing deputies too, the Solicitors Regulation Authority (SRA) has said.
The regulator identified authority, independence and resources as the key pillars of the roles of money laundering compliance officer (MLCO) and reporting officer (MLRO) – while most it talked to were generally fulfilling the first two, the third was the biggest challenge.
A thematic review of law firms’ AML governance, published this week, said that 46 of the 54 AML officers contacted had fee-earning roles; of them, only 15 had reduced billing targets and two of those still did not match the actual time they spent on AML.
The SRA commended the approach of one firm that had its AML officer record both chargeable time and “accountable time” on work which was not billable but benefitted the firm. Both types of time went towards the officer’s monthly target.
The review noted that, as well as holding a partnership role, the majority of AML officers also held other “substantial management roles” – on average three. This excluded sole practitioners who necessarily held all of their firm’s roles.
A few firms thought that some roles such as COLP and COFA naturally went together with the AML posts and that it made sense to have all of the ‘compliance’ activity centred on one individual.
The review said: “This may be so in some cases, but it will depend on the nature of the firm and its work and the support available within the firm to the AML officer.”
It added: “We consider that, in all but the smallest firms, holding one or both AML officer roles without any adjustment to case holding and/or other duties is unrealistic.
“While the roles of MLRO and MLCO may not make constant demands on an AML officer’s time, they should be given appropriate priority.”
A key way to help manage an AML officer’s workload was to appoint a deputy, providing “absence cover, a sounding-board, and a succession plan”, the SRA said.
“A deputy does not need necessarily to have the same depth of knowledge as the AML officer themselves but should have a working knowledge of the regulations and related legislation and guidance.
“Quick decisions may be needed, particularly where the MLRO is concerned, which may not be able to wait for their return from court, a meeting or a holiday.”
But of the 54 AML officers contacted, 28 did not have a deputy. The SRA talked to 30 in more depth and said six stated they did not need a deputy as they were always contactable, even while on holiday. “This attitude is somewhat short-sighted,” the review observed.
In terms of authority, the MLCO must hold a position on the firm’s board if it has one, or otherwise be part of senior management.
An MLRO does not face this requirement but will still need to have unquestioned access to the firm’s data and support from the MLCO, and the wider management, if they are to be effective.
All but one of the AML officers interviewed by the SRA held a position at or near the top of their firm’s hierarchy but two MLCOs said their decisions could theoretically be outvoted by the rest of the firm’s management.
“An AML officer does not need to be at the very top of the firm’s hierarchy but should hold sufficient authority for their decisions to be automatically followed without further approval being required,” the SRA said.
Few MLCOs and MLROs experienced resistance to AML measures from their colleagues, but around half experienced it from clients, although the review noted that clients were “generally more aware of AML requirements and the reasons for them than in previous years”.
Only around 10% of law firms split the two AML roles. The SRA said: “Firms should make this decision based on their own particular structure, work and expertise.
“Where MLCOs and MLROs are different people, we found that they also tend to delegate and divide the firm’s AML duties between them to some extent, rather than follow the division in the regulations.
“While AML officer need to be mindful of the distinct responsibilities of their roles, these are sensible practices, and we would not wish to curtail firms’ discretion.
“We do, however, expect that the MLCO will take their role as guarantor of the firm’s AML compliance seriously.”