Passmore: Risk assessment methodology to change
The body that oversees the legal profession’s anti-money laundering (AML) efforts has expressed concern over both the Law Society and Solicitors Regulation Authority (SRA) offering solicitors helpline advice.
The Office for Professional Body Anti-Money Laundering Supervision (OPBAS) said the current situation risked providing solicitors with conflicting advice.
OPBAS was set up earlier this year to ensure the professional body AML supervisors provide consistently high standards of AML supervision. It oversees some 22 professional bodies and in the summer conducted its first supervisory visit to the SRA and Law Society.
SRA executive director Crispin Passmore revealed last week that eight OPBAS assessors interviewed 39 people during its visit and were given over 1,000 pages of documents.
He said they found only three areas for improvement, of which one was the competing helplines.
“As expected, during the visit OPBAS expressed a lot of interest in the SRA/Law Society relationship.
“In our findings letter, OPBAS expressed concern about us operating a separate phone line to the Law Society providing advice on AML issues.
“OPBAS suggest that there needs to be a protocol in place which is clear and workable to decide which organisation provides advice on AML…
“If callers are seeking to rely on advice, it is crucial that it is correct and in line with our supervisory approach, particularly if we subsequently decide to pursue disciplinary action against the individual or firm. We are in discussion with the Law Society on this point.”
A Law Society spokesman said: “The Law Society’s Practice Advice Service, staffed by solicitors, has been providing confidential AML advice for over a decade. We make it clear to callers that we are not the regulator.
“This is in line with OPBAS’s view that both organisations need to take steps to avoid ambiguity or confusion.”
OPBAS’s second issue was that the methodology the SRA used to risk assess firms for AML “should measure the likelihood of a firm being used for money laundering, rather than the proxy of the likelihood of us receiving an AML-related report about the firm that we currently use”.
Further, it said the SRA’s methodology should take into account firms’ mitigation of AML.
In a paper to the recent SRA board meeting, Mr Passmore said: “We intend to combine the existing risk methodology with some new tools, so that from next year we will use:
- The current artificial intelligence-based model, which will continue to learn from new information we feed into it
- A more traditional model based on human intelligence that takes account of our likely risk based on factors we will feed in from the SRA sectoral risk assessment and the government national risk assessment; and
- An assessment of how well the firm is mitigating money laundering risk, where we have this information available.”
The third issue was that the SRA’s supervisory regime should include an examination and assessment of firms’ AML risk mitigation.
Mr Passmore said: “Our AML supervision programme does include some assessment of firms’ policies, procedures and controls, but we do not currently make a formal assessment of their effectiveness or feed this information back into the firm’s risk rating…
“We will introduce a rating system that will allow us to formally assess a firm’s systems and controls, which can be fed into the firm’s AML risk assessment.”
This article was amended on 13 November having wrongly suggested that one of the bodies would have to give up their helpline.