A review of money-laundering compliance at 59 law firms has resulted in 26 firms being referred to Solicitors Regulation Authority (SRA) disciplinary processes.
The SRA issued a stern warning this week that it will take ‘strong action’ against firms with inadequate procedures in place, after its review revealed a ‘significant minority’ were not doing enough to meet their obligations under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (SI 2016/692).
The firms were chosen because they create and administer trusts and companies on behalf of clients, a high-risk area for exploitation by criminals.
Poor risk assessment procedures were uncovered at 24 firms, including four firms with no risk assessment procedures in place at all. Inadequate customer due diligence was found at 14 firms.
Only ten firms had submitted suspicious activity reports (SARs) in the past two years. The SRA notes this tallies with concerns raised by the National Crime Agency that generally law firms are not being proactive enough in looking to identify and then report suspicious activity.
The review found no evidence of actual money laundering or intent to become involved in criminal activities.
The SRA has now launched a second review, of 400 law firms.
Paul Philip, SRA chief executive, warned: ‘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.’
John Binns, partner at BCL Solicitors, said HMRC fines for non-compliance with money laundering regulations rose by more than 90% in 12 months last year as ‘part of an increasingly hostile environment’.
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