Money laundering: 273 reports of potential breaches of the regulations
The Solicitors Regulation Authority (SRA) has almost quadrupled the number of suspicious activity reports (SARs) it sends to the police about possible money laundering by law firms.
The SRA said it sent 39 SARs to the National Crime Agency (NCA) in the last financial year, up from only 11 in 2017/18, reporting on “£180m of potentially criminal funds”.
In its first report as professional supervisor under the latest anti-money laundering (AML) regulations, the SRA said many of the SARs related to conveyancing, fraud, tax evasion and bogus investment schemes.
Other problems were clients or funds from high-risk jurisdictions, high-risk commodities such as precious metals or complex offshore company structures or trusts.
The SRA said the increase reflected the presence of a dedicated money laundering reporting officer and AML team at the regulator from 2018, increased staff training and “more proactive supervision of firms carrying out work that falls under the regulations”.
In a preview of the report, we revealed last month that more than 10% of law firms whose compliance with the AML rules was checked by the SRA in the last year were referred for investigation.
The SRA said 29 “enforcement actions” were carried out in the last financial year, resulting in total fines of £160,000.
Three solicitors were struck off, three suspended, five fined and one rebuked. One non-solicitor was made subject to a section 43 order, banning the person from working for law firms.
For less serious matters, law firms received a letter of advice or rebuke from the SRA, a fine or conditions on their practising certificate.
The regulator said seven of the cases where there was enforcement action highlighted failure to conduct ongoing monitoring and five failures to perform enhanced due diligence where it was required.
“It was also concerning to see in around two-thirds of the outcomes, firms had also failed to establish the source of funds when required to do so.”
The SRA said there were 273 reports of potential breaches of the AML regulations last year, including internal reports, an increase from 197 the year before and 196 the year before that.
The regulator said this showed the impact of its “proactive work”, because the number of referrals from visits and desk-based reviews were “relatively low”.
Of the 273 reports, 63 were the result of failing to co-operate with the SRA’s firm-wide risk assessment exercise.
All law firms were required to say whether they had a firm-wide risk assessment in place, but 63 firms failed to respond despite “numerous” follow-up contact attempts.
Other failures related to carrying out source of funds checks (38 firms), carrying out customer due diligence (32), identifying the client (24), having proper AML procedures in place (19) and conducting ongoing monitoring (12).
Anna Bradley, chair of the SRA, commented: “The overwhelming majority want to do the right thing, but there is still a small but nonetheless significant proportion of firms which are just not doing enough to prevent money laundering.
“As well as allowing criminals to profit from their actions, they undermine the trust consumers place in the profession, damaging confidence in the rule of law and the administration of justice.”
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