The Solicitors Regulation Authority (SRA) revealed last week it will consult next year on introducing fixed financial penalties for anti-money laundering (AML) systems and controls failings, for example, not undertaking a matter risk assessment.
However, Law Society president Nick Emmerson said: ‘The SRA has implied that solicitors could possibly face unlimited fines by the regulator for all sorts of misdemeanours going forward.
‘However, the regulator fails to present a compelling argument for such a change. We are concerned that through its proposals the SRA could become the investigator, prosecutor and judge.’
Amy Bell, chair of the Law Society’s money laundering taskforce, added: ‘Enforcement must be truly risk-based and not arbitrary in nature.
‘Otherwise, this drives firms to deploy disproportionate processes, putting pressure on small firms in particular and driving up costs.’
Spot checks carried out on 30 firms found two firms did not have a process for carrying out risk assessments on clients and client matters, the SRA reported last week. The two firms have been referred to the SRA’s AML investigation team.
Of the remaining 28 firms, moreover, a ‘large proportion’ were found only to be partially compliant with AML regulations because their risk assessment process was not being used properly.
Most of the firms considered client and matter risk together in a single document, but failed to complete them comprehensively. One firm’s assessment of risk was limited to client risk only, and three firms’ risk assessment processes were limited to considering matter specific risks.
When reviewing the firms’ client files, the SRA found less than half had actual documented client/matter assessments. Moreover, of those who did, a quarter had not been done properly.
The SRA issued a warning notice to all firms, and has posted its review on its website along with a template and supporting notes to help firms with compliance.
Paul Philip, SRA chief executive, said: ‘What’s clear from our thematic review is that firms are well aware of what is required of them, but aren’t getting it right on the ground.’
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