AML: Conveyancing is main cause of SRA reports
The Solicitors Regulation Authority (SRA) reported transactions potentially involving money laundering worth over £75m to the National Crime Agency (NCA) in the last financial year.
Small firms dominated once again, with 70% of the 24 suspicious activity reports (SARs) sent by the SRA to law enforcement involving sole practices or law firms with 10 or fewer fee-earners, and the majority relating to conveyancing.
In her annual report presented to last month’s SRA board meeting, the regulator’s money laundering reporting officer, Sara Gwilliam, said a further 359 investigations with potential money-laundering, terrorist financing or sanctions-related risks were flagged for monitoring.
This is a big rise on the 178 additional cases flagged for monitoring in the 18 months ending in April 2022. At the same time, the regulator reported £161m worth of transactions during that period.
Ms Gwilliam said that “more than half” of the SARs submitted involved conveyancing transactions and this “continued to be the highest money laundering risk area”. Misuse of client account also featured prominently.
“Firms failing to spot money laundering red flags or carry out due diligence and source of funds checks on clients, as well as any associated third parties, were present in nearly all SARs made by us.”
Along with residential and commercial conveyancing, the main risk areas were “aborted or fake property transactions used as means to circulate funds through a law firm” and transactions with no underlying legal purpose.
Other risks were funds being broken up before being sent or received in multiple transactions, funding and clients from “high-risk countries”, individual or corporate third-party involvement, use of informal money transfer systems and tax evasion.
Ms Gwilliam said that while feedback from law enforcement on the effectiveness of SARs was not routinely provided, there was “follow-up engagement” from law enforcement agencies such as the NCA, HMRC, and police.
This showed that that some of the information provided by the SRA was “assisting financial and organised crime investigations involving tax evasion, money laundering, fraud and asset recovery”.
Ms Gwilliam said that quality assurance work carried out by the SRA included an independent review of a small number of cases each month, which acted as “a second line of defence” to ensure any concerns had been “appropriately escalated” to her.
“It is also an opportunity to identify and share good practice, give feedback to individuals or teams, and make recommendations if any issues or concerns are found.”
The Office for Professional Body Anti-Money Laundering Supervision carried out a week-long inspection of the SRA in October last year, including its money laundering team. No “follow-up recommendations, actions, or remedial steps” were required.
The NCA, which reviewed “a sample of SARs” sent by the SRA, said they were “of a consistently good standard”.
Meanwhile, SRA board minutes recorded that the SRA was working with NCA on its IT reform programme, which was bringing the SARs reporting system online.
Despite feedback from the law enforcement agencies, Ms Gwilliam said, in response to questions from board members, that the impact of SARs was “not always clear as we often did not know the result” of reports to the NCA.
“We did know that we were having an impact on fraud, including where property was sold by those who did not own it, and had both helped and instigated police investigations through our reporting.”
Is the full report published anywhere? lots of great insights