The Solicitors Regulation Authority (SRA) could face a cash shortage if the new anti-money laundering (AML) rules increase the number of firms it supervises, it has warned.
Meanwhile, it has agreed to exclude those handling immigration work from its new rules allowing solicitors to practise from unregulated businesses,
According to the report of chief executive Paul Philip to last month’s meeting of the SRA board, the new regulations, which came into force on 10 January, extended its AML supervision to include firms offering tax advice.
The regulator is to ask the 7,000 firms it already supervises for AML purposes – out of the 10,200 total of private practice law firms – whether they offer tax services, and Mr Philip said “we will communicate to firms we do not supervise for AML purposes that we can offer supervision in this area”.
“If a large number of new firms come into our AML supervision, it is likely to have an impact on our resources,” he cautioned.
“It could also impact on the fee we pay to the Office of Professional Body AML Supervision (OPBAS), which is set based on the number of beneficial owners, officers and managers we supervise under the money laundering regulations.”
The Law Society’s most recent annual report – for the year to 31 October 2018 – said it/the SRA paid OPBAS £651,000 for 2018.
Mr Philip said the SRA would also publish guidance for firms offering tax advice “on which areas are high risk and what best practice looks like”.
His report also revealed that the SRA is to make permanent the change to its Standards & Regulations (STaRs) in relation to immigration work that was announced on the eve of the STaRs coming into force, at the request of the Office of the Immigration Services Commissioner (OISC).
Solicitors working in SRA-regulated firms are exempt from OISC regulation, but if they are not working in such practices, OISC requires them to apply to be authorised as part of an OISC-registered organisation. If approved, they act as an OISC-registered adviser rather than as a solicitor.
However, the OISC was worried about the overlap between its regime and the provisions in the STaRs allowing solicitors to practise from unregulated businesses. As a result, the position under the old rules was temporarily maintained while discussions continued.
Mr Philip said the SRA would now consult on making this permanent.
“This means that solicitors can provide immigration advice and services to the public from organisations authorised by us or another qualifying legal services regulator, and a narrow range of OISC-regulated organisations – law centres and other non-commercial bodies…
“This will provide long-term certainty for the sector.”