Enforcement of the Money Laundering Regulations 2017
With apologies to some, we return again to the topic of compliance with the anti-money laundering obligations this month in the light of the publication in October by the SRA of its annual report on its enforcement activities of the Money Laundering Regulations 2017. This is to meet the requirements imposed on it by HM Treasury and the Office for Professional Body Anti-Money Laundering Supervision (“OPBAS”) as one of the 22 professional bodies responsible for the enforcement of the AML regime with those regulated by them. Little wonder, perhaps, that the enforcement of the legal and professional obligations of the entire AML regime by those firms subject to these requirements seems to remain such a dominant element of the SRA’s supervisory activities.
Another element of this developing picture is that the National Strategic Assessment of Serious and Organised Crime was also updated earlier this year. This suggests that some £12bn of cash is now being laundered within the UK and that although the total scale of laundering activity remains difficult to assess, it is reckoned to amount to hundreds of billions of pounds. The perceived extent of the problem is certainly one of the main factors in the increased pressure now being applied to banks, law firms and other professionals to meet their responsibility to counter this activity.
So far as the SRA report is concerned, it stated that just over 250 firms were subject to inspection resulting in a total of 29 “enforcement actions” being taken, with fines of £160,000 having then been imposed on some of those concerned. The minutes of the SRA Chief Executive’s report also included the comment that “proactive AML visits will resume on a face-to-face basis from September, Covid 19 guidance permitting”. We know from various of our member firms that such enquiries continue and are assisting a number of them at present to respond effectively to the enquiries being made of them. If you should become subject to such an investigation please let us know if we can assist, and note again the SRA’s recent report that:
“The most common reason for non-compliance with the anti-money laundering regulations was not having a proper risk assessment in place for AML matters, while other issues included poor client due diligence and checks on the source of funds. A failure of staff to follow procedures, inadequate training or supervision, and poor policies were other reasons for breaches of the regulations.”
As of April this year just over 6,500 firms were regarded as being within the scope of the MLR 2017, but given the likely consequences of the changed definition of what it means to be a “tax adviser” under the changed definition of that term in the ML Amendment Regulations 2019 this figure is likely to increase substantially from the other 3,300 or so during the current year to April 2022 (see our Compliance Bulletin of October 2021).
Should firms be required to pay for the AML regulation to which they are subject?
So far as the costs and risks of enforcement activity are concerned, there may be greater concern from the fact that the consultation on HM Treasury’s proposals to levy fees for the enforcement of the AML regime against those concerned, has now been closed. Law firms are, of course, already required to pay to be regulated through their practising certificate fees. However, a proposal has been made in the Budget 2020 that a new levy should be charged to “help fund new government action to tackle money laundering”, and also to meet other related plans to counter all forms of economic crime. There is therefore, in effect, a proposal to raise a levy beyond PC contributions to contribute to the government’s efforts to counter money laundering activity.
The earlier SRA response to this proposal can be found through the link below and expresses broad support to detect and prevent money laundering as long as “proportionality” is embedded in any regime now to be developed. They express support for a “banded approach” to the fees to be charged and argue that small firms should be exempt from paying the levy at all (para 20). They also expressed little enthusiasm for the suggestion that they should become responsible for the collection of these fees to be determined when they do take effect.
This is certainly an issue to watch. In her introduction to the October report just issued Anna Bradley – the Chair of the SRA Board – commented that meeting their obligations to counter AML activity “is something that matters a lot to the profession”. This may well be correct, but whether that enthusiasm will extend beyond their responsibilities to undertake these commitments as part of their general overhead, and then require them instead to pay for the privilege of the additional regulation that they will become subject to, remains to be seen.
 SRA Board minutes, para 17 https://www.sra.org.uk/globalassets/documents/sra/board-meetings/2021/ceo-report—-14-september-2021.pdf?version=4a7f20: