SRA attacks “disproportionate and unnecessary” money laundering regulations


Money laundering: SRA warns of greater costs

New anti-money laundering (AML) regulations planned by the Treasury would impose “disproportionate and unnecessary” burdens on law firms, the Solicitors Regulation Authority (SRA) has warned.

The regulator said the draft 2017 regulations did not fit “with the existing regulatory landscape or the SRA’s approach to regulation”, and it was particularly unhappy about a new ‘criminality test’ for law firm managers and owners.

“As drafted, the criminality tests in the regulations may cause considerable difficulty in supervising businesses in our sector, and would cause a significant increase in the regulatory burden and costs.“We believe that there will be a considerable impact on those we regulate because of the differences between the 2017 regulations (requiring criminality tests) and the legal services regime (requiring fit and proper tests).

“This additional test will not significantly improve controls around those with influence over the running of firms, but would impose additional regulation that is disproportionate and unnecessary.”

In its response to a second Treasury consultation on the regulations, the SRA said the imposition of the regulations as they stood would “go against” its plans to reduce unnecessary burdens and costs on law firms.

The SRA said that since the existing regulatory framework for legal services had “already achieved the aim of the 2017 Money Laundering Regulations in safeguarding the propriety of those offering legal services”, there should be a “carve-out” for the sector that recognised the strength of the current arrangements.

“Criminality tests should not be required where there is an equivalent fit and proper test already in place, such as is the case for SRA-regulated entities.

The SRA also complained that the definition of owners and managers in the Legal Services Act was different from that in the new regulations, and additional approvals for some managers and owners would be needed.

Partly as a result of the need to identify additional managers, the SRA called for a two-year transitional period, postponing the implementation date for criminality test until June 2019.

Despite being slapped down by the Treasury last month for using the consultation to repeat its call for full independence from the Law Society, the SRA made its point once again in response to the second consultation.

Referring to the Treasury’s comment that the government intended to require professional body supervisors to ensure that “advocacy and supervisory functions are operationally independent”, the SRA said: “Operational or functional independence is insufficient to provide public confidence, as it does not provide for complete separation in governance terms or in terms of public perception.

“To ensure public confidence in regulation, supervision needs to take place through a separate corporate entity.”

The government is also looking to introduce a levy to fund the new Office for Professional Body Supervision, which will add to the cost of regulation.

Tags:




Leave a Comment

By clicking Submit you consent to Legal Futures storing your personal data and confirm you have read our Privacy Policy and section 5 of our Terms & Conditions which deals with user-generated content. All comments will be moderated before posting.

Required fields are marked *
Email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Reports

Our latest special report, produced in association with Temple Legal Protection, looks at the role of after-the-event (ATE) insurance in commercial litigation post-LASPO. We are at a time when insurers, solicitors, clients and litigation funders work ever more closely to create funding packages that work for all of them, with conditional fee and even damages-based agreements now part of many law firms’ armoury.

Blog

6 December 2019

Still running Windows 7? Cyber-criminals are on your trail

When the end-of-life date arrives, it is estimated thone in four PCs will still be running Windows 7. This figure will be higher in industries slower to embrace IT developments – legal is likely to be amongst those.

Read More

Loading animation