SRA fines small firm £20,000 for AML breaches

The SRA outcome

A firm was fined after the SRA found it failed to put in place a practice-wide risk assessment compliant with regulation 18 of the Money Laundering Regulations (MLRs) 2017.

By omitting the risk from its conveyancing work – which amounted to 75% of fee income – the firm was held by the SRA to not have fully assessed its product/services risks.

This omission was despite conveyancing being one of the high-risk practice areas identified in HM Treasury’s national risk assessment of money laundering and terrorist financing.

The firm had previously declared to the SRA in January 2020 that its risk assessment was compliant with the MLRs 2017.

A compliant risk assessment was finally put in place after the SRA’s on-site investigation. It had previously issued warning notices on the need for a compliant risk assessment.

Other issues identified by the SRA included:

• the lack of an independent audit function
• failure to provide AML training to a partner
• failures to check the source of funds from third parties
• weak ongoing monitoring of transactions

The SRA said that the firm’s conduct “showed a disregard for statutory and regulatory obligations and had the potential to cause harm”.

The harm identified “could have been avoided had the firm established an adequate practice-wide risk assessment”.

The sizeable fine is the largest issued since the SRA’s fining powers increased from £2,000 to £25,000 in July 2022.

The scale of the fine was chosen to create a “credible deterrent” to other firms and signify the risk to the public and legal sector.

Explore the full story in the Law Society Gazette

Common causes of AML compliance breaches

Inadequate risk assessments were one of the common compliance issues flagged by the SRA in its November 2022 AML report.

Other common breaches include failures to:

• carry out or complete initial customer due diligence
• carry out a source of funds check
• identify a client
• have proper AML policies, controls and procedures

Explore the SRA’s AML findings in full

How we can support you and your firm

The outcome emphasises the importance of solicitors and firms understanding their obligations under the MLRs 2017.

We have a range of resources that can help you and your firm to detect and prevent money laundering.

The Legal Sector Affinity Group AML guidance for the legal sector is a comprehensive guide to best practice on AML issues. Make sure you understand your obligations