An investigation by the Solicitors Regulation Authority (SRA) found that more than 20% of law firms in the UK weren’t adhering to 2017 anti-money laundering (AML) rules.
The SRA asked 400 UK firms to carry out risk assessments around anti-money laundering regulations. Of the 83 that failed to comply:
- 43 did not address all required risk areas
- 40 did not return the correct documents
In addition, the organization found that 38% of the risk assessments submitted were completed recently, possibly after the request was made. And some firms had not conducted any risk assessments before the investigation, raising concerns around UK law firms being targets for money laundering, fraud and other financial crime.
What are the consequences?
The SRA made a statement indicating it would increase its checks on law firms and enforce AML action against those that do not stay compliant. In the past 5 years the SRA has taken more than 60 AML cases to the Solicitors Disciplinary Tribunal, resulting in the suspension or removal of more than 40 lawyers. It has opened 172 AML investigations so far in 2019.
How will legal firms be regulated in the future?
In 2017, lawyers reported less than 1% of suspicious activity reports (SARs) to the National Crime Agency. But last year a new regulator, the Office for Professional Body Anti-Money Laundering Supervision (OPBAS) was launched to support AML regulations for lawyers and accountants.
The UK also plans to adopt new EU rules on money laundering by January next year which will require stricter checks by lawyers concerning their clients. And last year the UK government also passed the Sanctions and Money Laundering Act in order to operate its own sanctions policy following the planned departure from the EU.