Money laundering: Declaration delays
The Solicitors Regulation Authority (SRA) has published details of fines levied against six law firms for failing to confirm in time that they had a compliant anti-money laundering firm-wide risk assessment.
In December 2019, the regulator wrote to the 6,500 law firms [1] that fell within the scope of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.
It asked for a declaration that they had a compliant firm-wide risk assessment in place to identify and assess the business’s risks of money laundering and terrorist financing.
The SRA asked them to complete the declaration by 31 January 2020.
By April 2020, a significant number had not done so but follow-ups were delayed [2] due to the start of the pandemic.
The SRA has now named six firms that only provided their declarations in March or April 2021, for which it has fined them each £800 and ordered to pay costs of £600.
They are: Charles Hoile in Newbury, JE Bennett Law in Sevenoaks, Bradford firm Cartwright Solicitors, Fairhurst Menuhin & Co of Saffron Walden, South-East London firm Morrison Spowart, and recognised sole practice Alister Pilling in Camborne.
This is the second time that the SRA has deliberately published a series of fines on the same day for the same failure to make clear that it takes action over volume non-compliance – at the start of the year, several firms were sanctioned [3] for failing to publish price and service information, with compliance made a condition of their authorisation.
The decision to write to all firms followed a sweep of 400 firms [4] in 2019 that found 21% failed to comply with the 2017 regulations, either by not addressing all the risk areas, or by sending a client or matter assessment instead of one applying to the whole firm.
The sweep also identified a problem with firms using template risk assessments.
Last December, the government published the National Risk Assessment of Money Laundering and Terrorist Financing 2020, which ranked the overall risk of money laundering involving lawyers as high [5].
The SRA followed this up with a dedicated sectoral risk assessment [6] looking at the specific risks and challenges within legal services.
This identified emerging money laundering risks, such as firms getting into new areas of work because of the financial impact of Covid, and handling funds generated through the legal sale of cannabis abroad.
Large firms putting risk-based information in compliance silos, and practices being over-reliant on external support, were listed as potential problems too.