A London-based firm and its compliance officer have both been fined £25,000 after several compliance failures were discovered throughout the course of an investigation by the Solicitors Regulation Authority.

SRA investigators discovered a client shortfall of over £40,000 when they assessed the books of a firm based in East Ham back in 2021. These shortfalls were reportedly spread over as many as 423 client matters. 

It has also been reported that the firm held £288,000 in residual balances across 1,786 matters. These were found not to have been touched for at least a year. SRA investigators reviewed AML documents provided by the firm on 15 conveyancing matters – resulting in twelve issues being identified as cause for concern.

Source of funds checks were revealed to be insufficient in certain matters. The correct risk assessments were also found to be missing in some cases.

A second respondent before the resulting tribunal was the firm’s manager – the East Ham-based firm’s compliance officer for finance and administration. The compliance officer failed to correct any of the firm’s breaches or report them to the regulator.

The compliance manager had made a declaration to the SRA back in February of 2020, stating that the firm had a fully compliant firm-wide risk assessment in place. However, it has since come to light that this document was not drafted until February 2022.

The compliance officer in question admitted that he only realised a firm-wide risk assessment was required once the SRA investigation began. The tribunal found that he acted recklessly in making a declaration without ensuring that he understood what firm-wide risk assessments were.

The London firm’s compliance manager confessed to feeling “confused” when answering the AML declaration. He also stated that he was “by no means the only person to have ticked “yes” in answer to a question from the SRA in a mistaken belief that his firm had a compliant FWRA when it did not”.

Both the compliance manager and the firm had an unblemished regulatory record before the investigation. Yet, both have been fined £25,000 and ordered to pay £38,000 costs. The compliance officer was also barred from being a head of legal practice or compliance officer without expressed SRA permission.

Source: lawgazette.co.uk/

Regulation & Compliance Services

We at Regulation and Compliance Office are experts in assisting firms with policies and documentation (including FWRAs). We work with firms to make sure a firm has everything in place to ensure compliance with their regulation obligations, and can assist on both a one-off and continual basis. We also offer extensive training programmes to firms’ compliance managers and staff.

Our effective and competitive offering has five core elements:

• Discovery – The commencement of the service is to review what your firm is doing now through a discovery phase. We will learn about your firm and then work with you to adjust or update your current Policies, Controls, and Procedures (PCPs) to implement what is missing and update where necessary to ensure your firm is compliant.

We will not change your processes unless you are non-compliant or wish to improve what you do now. By the end of the discovery, drafting, implementation, and training phase, you can be confident that your firm will be compliant. We will thereby continue maintaining the policies alongside the other services provided as part of the solution.

• Updates – We then keep the PCPs updated as rules change or the firm changes to ensure compliance. We will take action to update and issue new policies so the firm does not have to.
• Training – When we have established your PCPs, we will provide a training course.
• Risk Assessments – We will also complete an annual risk assessment, which is obligatory under the MLR 2017, and we will ensure this meets the expectations of the SRA.
• Maintenance – We will also attend the firm’s offices for a full audit annually. The audit involves reviewing files, speaking to staff, etc. to ensure they are implementing the policies (including AML) and that we can prove that the policies are being applied. A written report is provided for reference and future use to demonstrate that the firm has been independently assessed.

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The Regulation and Compliance Office’s Detailed Risk Management and Compliance Review provides a Law Firm with a ‘deep dive’ into its business across all areas of risk and compliance. The purpose of the review is for the Firm to identify and appreciate any gaps in its process and for us to establish solutions with them and make improvements where necessary.

This review can be independently secured by the Firm or through Professional Indemnity Insurers. For many firms, this is an essential step in the professional indemnity renewal process, which assists Insurers in gaining a greater understanding of the risk profile for their Insured Law Firm. This, in turn, will assist with renewal terms.

This review can be extended to include an Independent Audit for the purposes of Regulation 21 of the Anti-Money Laundering Regulations (MLR) 2017. Please click here to see our brochure on this service.

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