AML: Small firms’ discretion is on how they do checks, not whether
A sole practitioner from Norwich who compared himself to Andrew Malkinson and the Post Office subpostmasters has lost his appeal against a £3,500 fine for anti-money laundering (AML) failures.
The Solicitors Disciplinary Tribunal (SDT) said that while small firms have discretion around how they fulfil their obligations under the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 (MLRs), that is not the same as having discretion not to comply at all.
Last September, the SRA decided that Max Wiley, who has led Max Wiley & Co since 1993, committed four breaches of the MLRs between June 2017 and May 2025.
The firm-wide risk assessment (FWRA) and policies, controls and procedures (PCPs) were not fully compliant, client and matter risk assessments (CMRAs) were lacking on the files reviewed, and that there had been a failure to undertake adequate identification and verification checks.
The private client solicitor, who holds all the compliance roles at his firm, was ordered to pay a penalty of £3,500, based on 2.8% of his £125,000 annual turnover, and £1,350 towards the costs of the SRA’s investigation.
However, Mr Wiley, who became a solicitor in 1980, continued to deny the allegations and, after an unsuccessful appeal to a Solicitors Regulation Authority (SRA) adjudication panel, appealed to the SDT, criticising how the SRA conducted its investigation.
Calling the SRA’s findings “wrong” and “unjust”, he said his case was similar to that of Andrew Malkinson, who served 18 years for a rape he did not commit, and the subpostmasters who were accused of theft, fraud and false accounting in the Horizon IT scandal and went on to face jail and bankruptcy.
Representing himself, Mr Wiley told the SDT that the SRA had not “properly applied” the regulations or guidance to his one-man firm, which had a client base stretching back 40 years.
Their investigation, he said, “had been conducted on a false premise” – with the SRA investigator referring to “senior management” and “fee-earners” in correspondence, neither of which existed in his sole practice. Mr Wiley said “this mattered” because “compliance under the MLRs depended upon the size and nature of the business”.
He said the SRA’s adjudication panel was “wrong”, because the regulations allowed sole practitioners “a significant measure of discretion as to how money-laundering policies and procedures are to be applied, provided they are applied with reasonableness and honesty”.
He said the panel was also wrong to accept that CMRAs were needed for every file. That was down to his discretion too, he told the SDT, because this “obligation” only arose when a business relationship was established.
He said three-quarters of the files at the heart of the SRA investigation pre-dated the 2017 regulations.
The SRA stressed to the tribunal it had “never alleged dishonesty or bad faith on the part of the firm; it accepted that the firm had acted in good faith and in the honest belief that its approach was satisfactory”. Mr Wiley, the SRA said, had simply “got it wrong”.
It described the investigator’s references to senior management and fee earners as “unfortunate”. But the regulator reminded the SDT that its adjudication panel upheld three of the four findings in full, and the fourth in large part. In each case, the MLRs and the guidance had been applied accurately.
As a result, the SRA said the analogies that Mr Wiley had drawn with the case of Andrew Malkinson and with prosecuted subpostmasters – as victims of miscarriages of justice – were “not apt” and the regulator called for the appeal to be dismissed.
The tribunal agreed with Mr Wiley that discretion existed, based on the size and nature of the firm, and that “a sole practice in a rural market town is not to be measured against the apparatus of a large City firm”.
But the tribunal ruled that this “did not carry the weight the appellant placed upon it”.
It explained: “The discretion went to the manner in which the required tasks are approached and documented, the ‘how’. It did not extend to whether the tasks were performed at all, or whether the outcomes the regulations require were in fact achieved.
“A practitioner retained a broad latitude in how they assess and record risk; they do not have a discretion to conclude that the assessment need not be made, or need not be evidenced.”
The SDT found Mr Wiley’s conduct in relation to the FWRA did not meet the standard under the MLRs. The solicitor said that proliferation financing was self-evidently irrelevant to a practice such as his.
This illustrated, rather than answered, the difficulty, it said. “It may well be that the risk was negligible and that the proper conclusion was that no further measures were required; but the obligation was to undertake that consideration and to record having done so.
“The error was not that the appellant reached the wrong conclusion, but that, on the face of the document, the exercise of considering and recording was not carried out.”
The tribunal took the same view of Mr Wiley’s approach to PCPs and CMRAs. The recording was described as “thin”, leading to “inadequate compliance”.
The SDT also noted that a relationship of long standing “does not relieve a practitioner of the requirement that identity be verified, as distinct from known”.
The references to senior management and fee-earners, though errors, did not detract from the conclusions reached.
The tribunal dismissed Mr Wiley’s appeal and ordered him this time to pay costs of £12,300.