“Inadequate” risk assessments put firms at risk of regulatory action

Over the last 12 months, the SRA has doubled its engagement with firms, with 254 inspections and 258 desk-based reviews between April 2023 and April 2024.

This means the chance of being audited by the SRA is increasing.

Over three-quarters of firms (77%) were found to be fully (21.5%) or partially (55.5%) compliant with their AML and financial sanctions obligations.

But the SRA found 23% of firms to be non-compliant, with corrective or enforcement action including:

• 44 fines levied totalling £556,832
• two findings and warnings issues
• one condition placed on a firm’s authorisation
• four cases referred to the Solicitors Disciplinary Tribunal (SDT)

The SDT:

• issued two fines totalling £511,900
• suspended or placed controls on employment on one individual
• dismissed or did not uphold the findings in two cases

Common compliance issues

Of the 118 firms found not be compliant, the most common breaches were failures to:

• carry out client and/or matter risk assessments
• have a compliant firm-wide risk assessment
• have adequate AML policies, controls and procedures
• carry out staff training
• adequately identify and verify clients at the outset
• assess and identify client or matter risks
• carry out ongoing monitoring of transactions
• carry out source of funds checks

The SRA published a thematic review on AML training in October 2024 emphasising the importance of not treating AML training as a tick-box exercise.

Steps your firm can take include:

• making sure staff are well-versed in money laundering regulations and data protection
• keeping comprehensive and detailed records of all sessions, materials and assessments for SRA inspections
• keeping detailed and up-to-date training logs
• adopting the ROLE framework:
  • relatable: tailor training to specific roles and risks, making it bespoke to your firm or work types
  • ongoing: don’t treat AML training as a one-time event and update staff regularly
  • leadership-driven: senior involvement and buy-in is crucial
  • engaging: use a mix of interactive methods (such as e-learning, workshops, webinars and more) to keep your team alert and informed, with real-life scenarios to keep it relevant

There is an upcoming thematic review on source of funds.

How we can help

As the professional body for solicitors, we have a range of expert resources to help you keep ahead of your regulatory obligations and minimise risk. 

Explore our anti-money laundering hub to access expert, practical and time-saving resources, including guidance on:

• practice-wide, client and matter risk assessments
• carrying out customer due diligence
• your source of funds obligations

When it comes to due diligence, take a risk-based approach and ask yourself “does it make sense?’

The anti-money laundering guidance for the legal sector also contains expanded guidance on:

• policies, controls and procedures
• understanding and evidencing source of funds and source of wealth
• governance and internal controls