How the SRA is Changing Its AML Audit Process
The market is well aware that the Solicitors Regulation Authority (SRA) is auditing Firms for compliance with the MLRs 2017, and for many firms, this is resulting in a fine.
What Has Changed?
It seems the SRA has changed its approach to the ongoing MLR 2017 compliance audits. Firms can still get a Desk Based Audit or a Visit from the SRA and the SRA will choose their approach. However, they now appear to be providing advance warning that your firm has been selected with a clear message that you need to prepare now. By doing so, it is hoped, firms can avoid issues later.
This advance warning provides firms with the opportunity to ensure they are compliant by the time the SRA commence the audit. Whilst being compliant on arrival will not prevent a potential investigation and prosecution for historical noncompliance, being compliant now will provide a level of mitigation.
The SRA have also issued guidance on what to expect – SRA | Guidance on desk-based reviews | Solicitors Regulation Authority
This is all helpful and a welcome approach by the regulator.
We have also seen several firms that have been audited before having a second audit. There does not appear to be a trigger for this, so no advice can be provided, and it remains essential for firms to continue to maintain compliance and not to become complacent.
The reasons we see for firms being referred for investigation are:
- Fee earners not completing due diligence checks correctly.
- Fee earners not performing a compliant and documented Client and Matter Risk Assessment.
- The firm’s policies being out of date or inadequate.
- The Firm Wide Risk Assessment not being present or not meeting the expectations of the Regulations and covering all areas.
- Fee earners failing to perform source of funds checks on ALL transactions funds arriving into the Client Account.
- Failure to organise or have completed a Regulation 21 Independent Audit.
There are two areas the SRA audit will focus on. The documents (current and past) and the activity on files. The SRA will only review a handful of files across the Firm and they will base the outcome on their review. It is therefore essential to ensure ALL files are maintained in line with the regulations.
Compliance Solutions for Law Firms
At Regulation and Compliance Office (RACO) we have four solutions to offer Firms
- For a fixed price of £1500 we will review your AML Policies Controls and Procedures and Firm Wide Risk Assessment and provide you with confirmation if they meet the requirements and set out where they may fall short to enable the documents to be brought up to date.
- With pricing starting from £3000 we will perform a full Regulation 21 Independent Audit which is a requirement of the regulation and compulsory according to the SRA – See brochure.
- For Firms who are concerned that they may not be meeting the standard you can consider our Regulation and Compliance Service, which, amongst other regulatory requirements, will cover MLR 2017 policies controls and procedures. Training and the Firm Wide Risk Assessment for a fixed price starting from £333.33 a month (annual agreement) – see brochure for the full service and more details below on our compliance services.
- If you face an audit, and would like guidance and support, whether you are on our service or not we can and will support you. Please contact us for how we will achieve this.
Ensuring your Firm is compliant if and when the SRA arrive is a must for all Firms. You may not be able to stop the SRA taking action for what has not been right in the past but being compliant by the time they arrive is a significant factor for mitigation.
You can see full details of each service by clicking the links below:
- Regulation & Compliance Service – Our Risk Management Assessment Service has been specifically designed to review and update a firm’s approach to risk and compliance management.
- MLR 2017 Regulation 21 Independent Audit – A review of the firm’s approach to regulation and compliance, including AML procedures, with the audit meeting the requirements of Regulation 21 of AML 2017. The output provides the firm with a written gap analysis and solutions to remedy any issues and ensure compliance.
- AML Training Courses – Our Typical AML Training Includes:
- AML Training for ALL staff to meet the firm’s obligation to provide annual training.
- One-to-one training for the MLRO and MLCO on their obligations and requirements.
Contact Us
To ask any questions about the Regulation and Compliance Office and how we can support your Law Firm, please call us on 0203 985 8550, complete the online enquiry form, or email us info@regulationandcomplianceoffice.co.uk
