SRA updates its AML Risk Outlook

AML Risk Outlook

Money laundering

Why this risk matters


  • The number of Suspicious Activity Reports (SARs) submitted by the legal sector has risen for the first time in seven years, but is still disproportionately low.
  • Reports to us relating to money laundering have increased over recent years, with around a third relating to residential conveyancing.
  • HM Treasury have recently expanded their enforcement powers under sanctions legislation. These regulations reinforce the obligation on law firms to report to the Treasury if they act for anyone subject to financial sanctions. Significant financial penalties can be applied for serious breaches.
  • The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 are now in force. The new obligations cover a range of areas including:
    • client due diligence
    • policies, controls and procedures
    • a central register of beneficial ownership
    • politically exposed persons
    • registration of trust and company service providers
    • criminality testing.


  • We expect all law firms to comply with their legal obligations.
  • The government has specifically targeted its ‘Flag it up’ campaign at helping solicitors and accountants identify potential money laundering signs.
  • The Office of Financial Sanctions Implementation have updated their guidance, and released a quick guide.
  • We will be updating our guidance on the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 during 2017. We are working with other regulators across the UK to provide a consistent approach.
  • Any action we take in relation to breaches of the new regulations will be proportionate and in accordance with our enforcement strategy.
  • We recognise the short lead-in time businesses have been given to implement the new requirements. We will take a proportionate and pragmatic approach as firms take steps to comply with the new requirements.

Lawyers face prosecution over financial sanctions compliance

Passmore: Risks exist for every single solicitor and law firm

Lawyers are among those who could face prosecution if they fail to report information that could undermine UK financial sanctions, after a change to the law [1] that came into force this week.

“Independent legal professionals”, along with trust or company service providers, accountants and others are now captured by the European Union Financial Sanctions Regulations 2017.

The existing regulations already placed an obligation on businesses to report to the Treasury if they were acting for anyone subject to financial sanctions, but until Tuesday enforcement action could only be taken against financial services firms.

Those caught by the new regulations will commit an offence if they fail to inform HM Treasury if they know or have reasonable cause to suspect that a person has committed an offence under the relevant regulations – such as dealing with funds that must be frozen or activities that circumvent an asset freeze – or is a person who is the subject of an asset freeze.

There are sanctions placed on people and entities from 25 countries around the world – from Afghanistan to Zimbabwe – plus ISIS and al-Qaeda.

Crispin Passmore, the SRA executive director for policy, said: “The new financial sanctions regulations mean legal firms are obliged to comply with the reporting regime. These regulations, and the approaching Financial Action Task Force inspection, are further reminders of the importance the UK and global community places on tackling terrorist financing.

“Risks exist for every single solicitor and law firm whether conveyancing on the high street or handling global transactions, and each should be thinking about their responsibilities for tackling these issues.”

Guidance [2] from the Office of Financial Sanctions Implementation (OFSI) said lawyers are not required to provide information that is subject to legal professional privilege.

But it continued: “OFSI expects legal professionals to approach their disclosure obligations with rigour and carefully consider where legal professional privilege applies, and to what information.

“OFSI will challenge any blanket claims of privilege where we are not satisfied that such careful consideration has been made.”

AML regulations – update SRA

AML regulations – update

We are working through the new Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations, which came into force on 26 June this year.

The regulations place new requirements on firms and on us as a “supervisor” – those who regulate or oversee the work of professionals – to tighten up controls to prevent money laundering and terrorist financing. A particular focus of the new regulations is transparency; both in terms of firms being aware of who they are dealing with, and also supervisors being aware of and approving those who work within relevant firms.

We will soon publish an assessment of the regulations which will set out our views on the international and domestic risks of money laundering for firms we regulate. We are also required to collect data on our firms that are offering services set out within the regulations.

We will have to approve beneficial owners, officers, managers and sole practitioners of those firms. Our intention is to write to firms to ask whether they are performing any of the activities caught by the money laundering regulations.

We expect to do this over the winter, but in the meantime we are not asking firms to apply to us for approval under the Money Laundering Regulations. We also expect that you should all be familiar with your obligations to prevent money laundering, and the new requirements under the 2017 Money Laundering Regulations.

 New AML EU 4th Money Laundering Directive now in force


The Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 implement the EU 4th Money Laundering Directive. The final version includes changes from a draft published earlier in the year.

Amy Bell, who runs Amy Bell Compliance and chairs the Law Society’s money laundering task force, said the new regulations repeal and replace the 2007 version and are 118 pages long.

“Whilst much of the 2007 regulations remain intact, there are some considerable amendments and additions which will take firms some time to consider and implement,” she said.

In a statement on Friday, the Treasury said the regulations would “improve the quality” of checks done on the source of money.

“They ensure that businesses can spot suspicious activity and report it, enabling the police to act swiftly and decisively to prevent corruption or terrorist attacks.”

Legal bodies have not yet published guidance on the new regulations, in light of the government’s decision that in future there can only be only one Treasury-approved piece of AML guidance per sector.

This means the sign-off process now requires the agreement of 11 legal sector regulatory and representative bodies across the UK.

The SRA said: “We expect law firms to comply with their legal obligations and are urging law firms to familiarise themselves with the new regulations as soon as possible, and take action to comply.”

In a statement, the Law Society said: “While we had hoped to have had the guidance approved and published ahead of the commencement of the new regulations, this has unfortunately not been possible…

“We recognise that many of the changes required under the new regulations will mean significant changes to firms’ systems and controls.”

It said the Legal Sector Affinity Group – a group representing the legal sector AML supervisory bodies to government, including the Law Society and SRA – has told the Treasury that “a sensible supervisory approach towards the new regulations would be to give firms and individuals a period of time to adjust to their new obligations.

“The group feels this is particularly important given the extremely short timeframe between when supervisors and those they supervise will see the final version of the MLRs and when those MLRs come into force.”

Ms Bell said a central theme of the regulations was firms needed to take a risk-based approach, meaning they need to complete a risk assessment of their practices and review their AML policies.

There were a number of practical changes firms were likely to need to make to their customer due diligence process, she said, such as expanding the list of information obtained on a corporate client to include information about its constitution, possible from review of the articles of association.

“This could add considerable time to the process,” Ms Bell said.

Another issue was a wider definition of beneficial owners, while the definition of a politically exposed person (PEP) now included domestic PEPs, and the definition has changed to include the governing bodies of political parties, and the boards of international organisations.

SRA highlights publication of Treasury money laundering regulations

SRA highlights publication of Treasury money laundering regulations

We are working on new guidance for law firms, which we aim to publish shortly, following the announcement of new money laundering regulations by the Treasury.

The Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 have been published here:

Go to the regulations

We are reviewing the full detail of the requirements. We will then work with other regulators across the UK to provide updated guidance for law firms. Solicitors can also contact our Ethics Guidance helpline if they have queries.

Robust anti-money-laundering arrangements are important and a priority for the sector, law firms and the global economy. We expect law firms to comply with their legal obligations and are urging law firms to familiarise themselves with the new regulations as soon as possible, and take action to comply.

However, we recognise the short lead-in time businesses have been given to implement the new requirements. We will take a proportionate and pragmatic approach as firms take steps to comply with the new requirements.

Money laundering is a priority risk for us. Further information is available here:

Go to the AML page

Lockton boosts AML advisory expertise ahead of impending Government regulation

Subject: Lockton boosts AML advisory expertise ahead of impending Government regulation

Lockton, the world’s largest privately owned insurance broker, is boosting its AML expertise with the hire of Amy Bell, who joins as Risk Management Consultant within the Lockton Solicitors team.

Lockton boosts AML advisory expertise & upcoming webinar on preparing for changes

Bell will provide key expertise on upcoming Government regulation and help UK law firms to prepare and implement these policies.

She has over 12 years’ experience advising law practices across the UK and globally, helping firms to adapt to the changing legal landscape and adopt best practice in implementing compliance procedures. This includes providing training and support for everyone in the firm on how to apply these risk management principles to improve client service and deliver maximum efficiency.

Brian Boehmer, Partner of Lockton’s Solicitors Practice said: “We are thrilled to have Amy on board. She brings with her extensive knowledge and experience within this sector, particularly the changing regulation on Anti-Money Laundering and GDPR, as well as a whole host of other regulation on the horizon. We look forward to offering our clients the opportunity to learn and engage with us on these changes with a range of topical events, videos and articles, including our ‘Prepare for the biggest changes to AML in a decade’ webinar in June.”

“I’m delighted to be working with Lockton, as a client, I found their commitment to helping firms manage risk is unrivalled” said Bell. “I’m excited to join the team and help their clients navigate through the changes ahead”.

Bell is the Chair of the Law Society’s Money Laundering Task Force, where she represents the Solicitors profession at Government and in Europe. Her work in the last 18 months has been focused on the implementation of the 4th EU Money Laundering Directive and she has been heavily involved in discussions regarding these new Regulations. She is also the author of the Law Society’s Anti-Bribery Toolkit.

AML 4th Directive an unnecessary burden on Law Firms

‘Gold plated’ regulations transposing the EU’s fourth money laundering directive into UK law threaten to impose unnecessary burdens on law firms, the Law Society has told the government.

Responding to a consultation by HM Treasury on the proposed Money Laundering Regulations 2017, Chancery Lane says that small firms and sole practitioners ‘will struggle more than most to bear the cost of additional red tape’ resulting from the regulations. ‘Gold plating’ the directive could place UK firms at a competitive disadvantage compared with other EU firms, and those based elsewhere in the world after the UK leaves the EU.

The response, prepared by the Society’s Money Laundering Task Force, identifies numerous examples of what it calls ‘unjustified gold plating’. These include:

The requirement for some firms to appoint an individual at the level of ‘board of directors’ to ensure compliance – despite the fact that firms already have a compliance officer for legal practice and a money laundering reporting officer.
The extension of certain obligations to ‘agents’ in addition to employees. This will impose a ‘significant additional burden on the regulated sector’ with no additional benefit.
The obligation to apply due diligence to domestic ‘politically exposed persons’, including all members of governing bodies of political parties. ‘Given that there are over 400 registered parties in the UK, most of which are small… we think the definition in the draft regulations is excessively broad and not risk based,’ the Society states.
The register of beneficial owners of trusts. Trustees could be required to submit duplicate information. This will be time consuming, onerous and, where trustees are professional trustees, will incur associated, duplicate costs. The proposed obligation to report on events in the same tax year that they occur is ‘unworkable’.
The Society also describes as ‘unrealistic and unworkable’ a proposed requirement to provide due diligence information within two working days. ‘There are approximately 4,000 sole practitioners and 4,000 firms with two to 10 partners in England and Wales that will have many competing priorities and statutory deadlines to meet at any given time,’ the response notes. Responding within two working days ‘while continuing to meet clientss needs is an unrealistic expectation for sole practitioners and legal professionals working in small firms’.

The consultation closed on 12 April. HM Treasury says it is ‘analysing feedback

Solicitor is suspended for money laundering breaches

A solicitor who transferred nearly £1.3m to an offshore bank account in Belize has been suspended for a year for breaches of the money laundering regulations and accounts rules.

The Solicitors Disciplinary Tribunal (SDT) said that by doing so, Susan Barrington-Binns “may have, however unwittingly, effectively facilitated the movement of monies during the course of a suspected pension fraud”.

The tribunal said trust in the profession was undermined “whenever a solicitor is involved in a suspicious transaction which involves the use of their client account as a bank”.

The SDT went on: “The police have not charged the respondent with any criminal offence, not have they charged the respondent’s clients with criminal offences at the time of this hearing.

“However, it is understood that a decision may be made by the Crown Prosecution Service in respect of her clients in or about the spring of 2017.”

The tribunal took into account that Ms Barrington-Binns – who was admitted in 1999 – eventually admitted all the allegations made by the Solicitors Regulation Authority (SRA) against her and its ruling took the form of a judgment on an ‘agreed outcome’ with the regulator.

An earlier attempt to have an outcome agreed by the SDT was rejected because of the lack of any practising restrictions on the solicitor once she returned to practice.

The allegations relating to breaches of the money laundering regulations centred on the receipt of around £1.3m on behalf of a client, referred to as DG, from the Cornerstone Friendly Society (CFS), which entered liquidation in June 2015 “following a police investigation into fraud and money laundering allegations regarding pension investments”.

The SDT said almost £1.27m was then transferred from the client account of Barringtons Legal to an offshore bank account in Belize “without proper due diligence as to the source of the funds”.

Ruling in SRA v Barrington-Binns, the tribunal said the sole practitioner received the money from CFS in October 2013, and recorded the following month that the client was “reputable” and there were “no money laundering issues”.

However, acknowledging receipt of the money in February 2014, the bank in Belize asked for supporting documentation on the source of the funds. Ms Barrington-Binns replied that DG had satisfied all the law firm’s due diligence for money laundering purposes.

The SDT said the solicitor should have been alert to “suspicious features” of the transaction, including that the money came from a friendly society, the CFS account statement was not a bank statement and that the money was being sent to an offshore bank account in Belize.

Ms Barrington-Binns not only failed to obtain bank statements relating to the source of funds, she “failed to obtain from DG any documents evidencing the provenance of the £1.3m” and there was no evidence she saw any documents establishing a link between CFS and DG.

The tribunal accepted that she had “genuine links” to Belize, having lived and worked there and being an attorney at law in the nearby Turks and Caicos Islands, but she was still required to have regard to the money laundering regulations.

She was found to have allowed her client account to be used as a banking facility by DG, failing to consider whether there were underlying legal transactions for the transfers of £1.27m to Belize and of £235,000 back to CFS.

The sole practitioner was “failed to be alert” to the transcation’s suspicious features, breaching SRA principles 3 and 6, and failed to have sufficient regard to the Money Laundering Regulations 2007 and the Law Society’s Warning Card.

On the accounts rule breaches, the SDT found that there had been a “substantial failure to comply” by Ms Barrington-Binns for a period of over two years.

“The accounts were not properly written up to show dealings with client and office money. That resulted in the respondent being unable to prepare proper reconciliations over that period.”

However, the tribunal said that although the solicitor failed to operate a proper client account, there “did not appear to have been any loss of client money”.

In mitigation, Ms Barrington-Binns said she had previously undertaken work for DG, she trusted him and he told her that CFS was a related company and that the money received was from the sales of property and investments.

The tribunal concluded that a striking-off order was not merited in the absence of dishonesty or lack of integrity. A suspension of 12 months would ensure that the solicitor was “meticulous in her compliance with the rules” in the future.

At the end of her suspension, the SDT ordered that Ms Barrington-Binns should be subject to conditions preventing her from being a sole practitioner, acting as COLP or COFA, or being the sole signatory on any client account.

She was ordered to pay costs of £6,000.

Firm fined £80,000 for AML breach by SRA

Clyde & Co hit with biggest joint fine for money laundering breach

Three partners at a City of London law firm have been hit with the biggest joint fine ever handed out by the Solicitors Disciplinary Tribunal as part of a £70,000 penalty for breaching money-laundering rules.

Clyde & Co, an international law firm that specialises in insurance, maritime and aviation law, was found to have allowed a client bank account to be used as an escrow facility in 2013, which breached professional regulation.

The tribunal fined the three partners – Christopher Duffy, Simon Gamblin and Nick Purnell – £10,000 each. The rest was levied against the firm as a whole.

All three are understood to have admitted breaching the professional rules. The tribunal also found that they had technically failed to adhere to the Money Laundering Regulations 2007.

A statement from the Solicitors Regulation Authority said that the three partners “failed to heed the guidance in the Law Society’s fraudulent financial arrangements warning and/or the warning notice on money laundering, in that they acted as escrow agent in transactions on behalf of a client that had the hallmarks of dubious financial arrangements or investment schemes”.

The regulator added that the firm also “failed to have in place adequate procedures to deal with dormant client balances”.

In a statement given to The Lawyer magazine, the firm said it acknowledged that “the firm and three of its partners did act in breach of the SRA accounts rules and money-laundering regulations, which also led to breaches of certain SRA principles and code”.

It maintained that the mistakes were inadvertent and made honestly. “It is not alleged that the firm or the three partners lacked integrity, probity or trustworthiness, or laundered or misappropriated money,” the statement said.

  • The SRA has clarified the recent fine levied on Clyde & Co, the City of London law firm that was found to have breached money-laundering regulations. The firm itself was fined £50,000 in addition to three individual partners being fined £10,000 each, bringing the total penalty to £80,000. Earlier reports suggested that the total fine was £50,000.