A review by the Solicitors Regulation Authority (SRA) has revealed that a significant minority of law firms are not doing enough to prevent money laundering, with some falling seriously short.
The SRA’s review focused on 59 law firms providing trust and company services – identified by the government as one of the legal service areas at greatest risk of money laundering exploitation.
Although the review did not find evidence of actual money laundering or involvement in criminal activities, it did find a range of breaches of the 2017 Money Laundering Regulations and poor training and processes. This means firms could be unwittingly assisting money launderers.
A main area for concern was firms’ risk assessments where the SRA found that more than a third (24) of those reviewed fell short – four undertook no risk assessment at all. There were also, however, issues around appropriate customer due diligence including inadequate processes to manage risks around Politically Exposed Persons. However, in some instances effective customer due diligence did result in firms turning down work. Fifteen firms had done this, with one of the main reasons being evasive clients.
As a result of the review 26 firms have been put into disciplinary processes by the SRA.
The SRA have also published a warning notice reminding the profession of their obligations – particularly in relation to firm risk assessments – and we have begun a further review of 400 other law firms to check compliance with the Governments 2017 Money Laundering Regulations. This review will be led by a new dedicated anti-money laundering unit, being set up to bolster resources to prevent and detect money laundering.
Use the following links to access the various SRA resources: