Fines: The sky’s the limit
The Solicitors Regulation Authority (SRA) has finally sought permission to activate its power to issue unlimited fines in cases involving economic crime.
It said that implementing the power granted in the Economic Crime and Corporate Transparency Act 2023 (ECCTA), which came into force on 4 March 2024, would allow it to deal with such cases much more quickly as they would no longer need to be referred to the Solicitors Disciplinary Tribunal (SDT).
The SRA has first to revise the guidance on its approach to fines and have this approved by the Legal Services Board (LSB).
The application went in recently and the SRA suggested that it did not need to go through the approval process that usually applies to significant rule changes. It is not clear whether the LSB has agreed to this.
ECCTA removes the cap on financial penalties – currently £25,000 – that can be imposed on solicitors, traditional law firms and their employees for rule breaches and misconduct falling within its definition of economic crime, where the conduct started on or after 4 March 2024.
The definition includes theft, fraud, false accounting, bribery, tax evasion, money laundering, terrorist financing, and breaches of financial sanctions.
The application highlighted three cases referred to the SDT last year for breaches of anti-money laundering requirements.
“Each case was settled by way of an agreed outcome approved by the tribunal, ranging from £58,000 to £300,000, plus costs. With the removal of the SRA’s cap on fines for breaches of economic crime, these three cases would have been resolved more quickly, and without associated costs.”
Though the SRA guidance provides that a fine would usually be no more than 5% of a firm’s turnover, this “cannot… fetter the discretion of our authorised decision makers”, the application said.
“There may be exceptional cases where an authorised decision maker departs from the guidance, for example by imposing a fine that is higher than 5% of annual domestic turnover, or using a different metric to determine an appropriate fine.”
The application said the new power would apply to those regulated by another legal regulator, such as a barrister or chartered legal executive, where employed by an SRA-regulated firm.
It has talked to both the Bar Standards Board and CILEx Regulation and, in the event either was conducting their own probe, the SRA’s existing guidance [1] on how it approaches parallel investigations would apply.
ECCTA made changes to the Solicitors Act 1974. Alternative business structures and those working in them are subject to a different regime, under the Legal Services Act 2007, and the SRA can already fine them up to £250m and £50m respectively. They are not affected by this.
In 2024, the SRA consulted on revised fining guidance [2] that went much further than the ECCTA changes but received a strong backlash from the profession [3].
This was put on the backburner [4] as a result but the SRA has been slowly progressing the ECCTA changes and carried out a limited consultation on the guidance with the national Law Society and local law societies.
The application added that the SRA was separately conducting an internal review to establish whether other changes to its fining framework still needed making.