Recently, the Solicitors Regulation Authority (SRA) has published a decision that serves as a stark reminder of the importance of strict adherence to anti-money laundering (AML) compliance and SRA rules and regulations. The firm was fined for failures relating to customer due diligence and source of funds, client and matter risk assessments (CMRAs), and policies, controls and procedures, under the Money Laundering, Terrorist Financing (Information on the Payer) Regulations 2017 (MLRs 2017.
£32,106, Fine for Failure to Conduct Client and Matter Risk Assessments
A Launceston based firm was fined £32,106 plus costs after the SRA’s AML Proactive Supervision team found areas of concern in relation to the firm’s compliance with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs 2017), the SRA Principles and the SRA Code of Conduct for Firms. The inspection and subsequent investigation found failures in relation to:
- Source of funds (SoF): failures to conduct appropriate customer due diligence (CDD) measures, including the scrutiny of transactions undertaken (including, where necessary, the source of funds (SoF)), pursuant to Regulation 28(11)(a) of the MLRs 2017.
- Client and matter risk assessments (CMRAs): failures to conduct client and matter risk assessments (CMRAs), pursuant to Regulation 28(12)(a)(ii) and Regulation 28(13) of the MLRs 2017.
- Policies, controls and procedures (PCPs): failures to follow or implement its own policies, controls and procedures (PCPs), pursuant to Regulation 19(3)(e) of the MLRs 2017.
In publishing its findings and decision, the SRA highlighted that the firm ‘has since confirmed it has put in place measures to ensure continuing and future compliance, including reviewing all active matters to ensure they contain a documented CMRA, provided training to fee earners on the completion of CMRAs and the importance of obtaining and scrutinising SoF.’
The SRA placed the firm on a compliance plan to address the identified issues, and the regulator confirmed that it is satisfied that the firm has met the requirements of the compliance plan. From the sample files reviewed, there was no evidence of any actual harm caused by the misconduct identified.
You can read full details on the decision here: https://www.sra.org.uk/consumers/solicitor-check/341398/
Client and Matter Risk Assessments – Meeting the Regulatory Requirements
The MLRs 2017 require all firms in scope to maintain a documented, up-to-date firm-wide risk assessment that identifies and assesses the specific money laundering and terrorist financing risks the firm faces. Alongside this, firms must have policies, controls and procedures in place to manage those risks effectively, as well as ensuring that individual client and matter risk assessments are completed and recorded at file level.
The recent decision highlighted here is not an isolated case. There have been several recent examples of the SRA being stringent in its dealings with anyone it found in breach of its rules. The regulator has made it clear it will focus on all cases of misconduct and compliance failures, not just on areas of obvious regulatory requirements such as FWRAs, CMRAs, and AML PCPs.
Regulatory Guidance and Support from Industry Experts
At the Regulation and Compliance Office (RACO), we work with firms and their COLPs, COFAs, and MLROs to help them manage risk, compliance, and regulatory requirements through a range of training and outsourced support solutions. For many firms, the gap between believing they are compliant and being able to demonstrate compliance is significant, and it’s a gap the SRA’s Proactive Supervision Programme is designed to expose.
Our goal is to ensure the firms we work with have and retain a compliant structure, enabling the firm, its managers, and owners to focus on running their businesses and serving their clients.
If you believe your firm may be at risk or wish to confirm your firm is achieving the required standard, RACO provides a range of solutions, including:
- Detailed Risk Management and Compliance Review – which provides firms with a structured, firm-wide gap analysis of your approach to risk, supervision, and regulatory compliance. Designed for law firms and professional indemnity insurers, the review delivers a comprehensive evaluation of your current framework, identifies areas of exposure and sets out clear, pragmatic recommendations for improvement.
- Client Due Diligence & Risk Assessment Service – our Due Diligence and Risk Assessment Service is designed to provide an outsourcing option for the completion of Client Due Diligence and completion of the Client and Matter Risk Assessment, including, where necessary, perform source of funds and source of wealth and enhanced due diligence.
- Auditing and File Reviews – procedural staff, systems, and files to ensure the procedures are up to the required standard and being implemented at case level with a report of the outcome.
- Training – whether you seek training on a 1-2-1 or group basis, online or in person at your chosen location, RACO has a range of training courses and mentoring programs to suit any legal practice. We can also design bespoke courses tailored to your firm’s needs. We have provided training to firms of all sizes, and our clients range from sole practitioners and CLC practices to multi-service firms with overseas offices.
- Packaged Solutions – Implementation of robust solutions to ensure the firm achieves compliance and then maintains compliance through the provision of ongoing support and assistance: –
- SRA Compliance Essentials – SRA Compliance Essentials gives you ongoing, specialist support to meet SRA Standards and Regulations and, where relevant, Anti-Money Laundering Regulations. It’s designed to give you peace of mind and free up time, while helping you demonstrate a robust compliance environment to the SRA and insurers.
- Fully Outsourced Risk and Compliance Management – Dedicated, day-to-day risk and compliance management for law firms. The Risk & Compliance Management service provides your firm with an outsourced compliance team, delivering structured register administration, regulatory guidance and monthly reporting to support your COLP, COFA and MLRO. Designed to ensure ongoing oversight, documented monitoring and clear evidence of effective compliance management.
Speak to Our Compliance Specialists
For more information on the Regulation and Compliance Office and to discuss how we may be able to assist in accelerating your risk management or compliance and regulation, or to simply keep this up to date, please call us on 0203 985 8550, complete the online enquiry form below, or email us info@regulationandcomplianceoffice.co.uk
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