SRA Discipline 26 Firms Following Severe Money Laundering Failings 

26 Solicitors Regulatory Authority (SRA) regulated firms out of a sample size of just 59 law firms providing trust and company services (TCSP) have been placed into the SRA’s disciplinary process for inadequate money laundering procedures.

The review focused on the creation and administration of trusts and companies on behalf of clients, an area of law the government deemed to be at most significant risk of money laundering as criminals look to exploit the system and launder their ill-gotten gains.

The SRA speculate that two thirds of its regulated firms need to comply with Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 (MLR 2017).

The regulator will therefore be extremely disappointed to learn that almost 44% of firms legally required to comply with MLR 2017 are failing in their obligatory requirements to some extent.

The report found that too many risk assessments, which are considered as vitally important to MLR 2017, were viewed as inadequate. In total over a third of firms (24) had failed to create robust risk assessments with many areas of the regulatory strands missing completely. Worryingly, 4 law firms had failed to create any risk assessments at all.

Firms were accused of failing to complete the necessary customer due diligence (CDD), especially concerning Politically Exposed Persons (PEPs) and Suspicious Activity Reports (SAR).

Only a sixth of the sample (10 firms) had completed a SAR in the past two years, confirming the National Crime Agency data that the legal sector is struggling to comply with its AML regulatory obligations.

The recently published ‘Economic Crime – Anti-Money Laundering Supervision and Sanctions Implementation’ report found that legal service providers were particularly poor at completing Suspicious Activity Reports (SAR) that form part of a solicitors’ regulatory requirements when it comes to money laundering compliance. Of the 634,113 reports submitted between October 2015 and March 2017, 525,361 (82.85%) SARs were completed by credit institutions and banks.

In stark contrast, reports made by estate agents were a mere 0.12% (766) of the total, with independent legal professionals deeming it necessary to make 4,878 (0.77%) SARs reports. Overall, this means that the property sector completed less than 1% of all SARs reports.

In the past year, the 2,660 reports made by the legal sector represent only 0.57% of the total and a considerable decrease when compared to previous years.

The SRA will now write to 400 firms reminding them of their AML obligations and asking them to demonstrate their compliance with the MLR 2017.

Paul Philip, SRA Chief Executive, said: “Money laundering damages society, supporting terrorists, drug dealers and people traffickers. The stakes are too high for solicitors to be anything but fully committed to preventing money laundering and the crime its supports.

“Most solicitors take their responsibilities seriously, but too many firms are falling short. Those firms should be on notice that compliance is not optional. They need to improve swiftly. Where we have serious concerns that a firm could be enabling money laundering, we will take strong action.”

SARs and SRA disciplining firms