The latest Anti-Money Laundering Annual Report from the Solicitors Regulation Authority (SRA) makes for some concerning reading. Almost a third of inspected firms were found non-compliant, enforcement actions have doubled, and fines totalled nearly £1.5 million. Source: The Law Society Gazette, ‘AML: One third of inspected firms not compliant, SRA reveals in annual report.’

No solicitor or firm wants to be the subject of an enquiry from the Solicitors Regulation Authority (SRA) or face a hearing before the Solicitors Disciplinary Tribunal (SDT). However, as these latest figures suggest, and amid increasing regulatory scrutiny, these situations are becoming more common.

If your firm is one of them, you need to understand what comes next. As we discussed in our previous article on public outcomes and SRA transparency, regulatory failures don’t stay private. The question isn’t whether you’ll face consequences, but how severe they’ll be and how you manage them.

At the Regulation and Compliance Office (RACO), we’re seeing more firms contact our regulatory defence team at different stages of the process. Some call when they find an issue, others wait until an inspection notice arrives or until they’re already deep into an investigation. The earlier you act, the more options you have.

Read our previous article for related information: ‘Navigating SRA Enquiries and Investigations.’

What Are the Figures in The Latest Anti-Money Laundering Annual Report?

According to published information, the regulator’s AML annual report reveals:

• The SRA carried out 935 proactive AML engagements, a 72% increase on the previous year. That’s one in six firms under direct scrutiny.
• Only 13% of inspected firms were fully compliant. That’s down from 22% the year before.
• 32.4% were non-compliant and referred for investigation.
• 151 enforcement actions were taken, nearly double the 78 from the previous year.
• The SRA issued fines totalling £953,333. The Solicitors Disciplinary Tribunal added another £545,650. Total penalties came to nearly £1.5 million.

Outcomes of these cases can range from no action through to temporary suspensions and fines to full strike-offs. Recently, the SRA has conducted several high-profile investigations and publicised them, and the Solicitors Disciplinary Tribunal (SDT) has issued several judgements. More SDT cases are expected to be heard in the new year, and the SRA has pledged to maintain its stringent approach against firms that breach their obligations.

What are the Common AML Failures?

Half of non-compliant firms failed to carry out proper client and matter risk assessments. Only 47% had compliant firm-wide risk assessments. 10% of files lacked source of funds checks – Read our recent article, ‘SRA Publishes Thematic Review of Source of Funds and Wealth Compliance.’

The SRA has been warning about these issues for years. Firms that haven’t fixed them are now facing fines rather than advisory letters.

Introducing the annual report, Paul Philip, chief executive, said he was proud of the SRA’s work:

‘This past year has been marked by significant progress in our efforts to prevent and detect money laundering, as we continue to prioritise anti-money laundering initiatives. While most firms demonstrated a strong understanding of their obligations and a clear commitment to compliance, the identification of non-compliance in nearly a third of cases highlights the continued need for sector-wide improvement and sustained regulatory attention.’

The legal industry is also bracing itself for the Financial Conduct Authority (FCA) to assume its responsibility for AML supervision, as outlined in our previous article, ‘AML Supervision Change: The FCA to Replace SRA As AML Supervisor for Law Firms’. Whilst there is no confirmed date for this transition and it is still subject to the passage of enabling legislation, it is strongly advised that all legal practices ensure that their approach to compliance with the Money Laundering Regulations 2017 (MLRs 2017) is robust.

In the immediate term, this means meeting the SRA’s while also preparing for the transition to FCA Compliance.

What Happens During an SRA Investigation?

If you or your law firm has been referred for investigation, here’s roughly what to expect:

Stage 1: Investigation – An Enquiry or Investigation is the first step, where the SRA will collate evidence and take statements. At this stage, you should involve our specialists at RACO. Although this is the first step in the process, it is the critical stage.

Your responses matter more than you think. Inconsistent answers, incomplete documentation or attempts to fix things retrospectively will make your position worse. This is where firms without specialist support often stumble.

Stage 2: Enquiry/Defence – Depending on the seriousness of the breach, the SRA can conclude to: 

• Take no action.
• Issue a warning.
• Issue a rebuke.
• Impose a fine under a Regulatory Settlement Agreement.
• Refer the matter to the Solicitors Disciplinary Tribunal (SDT) for:
  • A fine above the SRA maximum limit for Firms and Individuals.
  • Suspension (which will tend to be due to an allegation of lack of integrity).
  • Strike Off (which tends to be dishonesty).
• Intervene – This is a last resort and is rare.

Stage 3: Mitigation – If a breach has occurred, mitigation is a critical stage, that involves either stopping the breach if it continues and then implementing strategic actions to ensure the firm can present mitigation in the event the SRA decides to take regulatory action. This is often a tactical strategy that involves the firm taking key actions to demonstrate to the SRA that the breach has been recognised, controlled, and will not be repeated.

Stage 4: Referral to the SDT – The Solicitors Disciplinary Tribunal (SDT) will intervene in cases of serious regulatory breaches when sanctions that can be imposed by the Solicitors Regulation Authority (SRA) are not considered sufficient to address the breach that has occurred. A referral notice indicates that the SRA has determined the breach is serious enough to warrant referral to the SDT, and they cannot address the issue themselves. This notice represents your final opportunity to address the matter and potentially prevent a referral to the SDT.

Stage 5: If the SRA decides to proceed, the next stages will likely be the publication of the referral and the service of regulatory proceedings by the SRA’s appointed Solicitor.

Stage 6: Following this, the next stage will be the procedural process, which will end with either:

• An Agreed Outcome (which still requires approval of the SDT).
• A Hearing.

At RACO, we work with firms throughout the entire process. Our regulatory defence specialists help you understand what the SRA is actually investigating, prepare responses that address their concerns properly and identify mitigating factors that could reduce sanctions. If you need support with an SRA enquiry, the earlier you engage us, the better.

The Real Cost Goes Beyond the Fine

The financial penalty is usually the smallest part of what non-compliance costs you. Partners and senior staff will spend weeks responding to information requests and attending interviews. That’s time not focused on billing or running the firm. Additionally, SRA and SDT proceedings are expensive. Not only will you need to address the action that the SRA/SDT impose, which often involves a fine, but costs associated with the investigation and hearing will follow a successful prosecution, which can and will be significant.

Furthermore, your PI insurer will likely take an interest. Premiums may increase. Excess levels may rise. In serious cases, they may not renew at all. Finding alternative PII cover after regulatory action is difficult and expensive.

Once regulatory action becomes public, a firm’s reputation can be significantly damaged, affecting existing and future client confidence. Reputational damage can have financial implications that reach far beyond an investigation and a fine.

The approach to minimise financial impact is largely out of a firm’s control, but avoiding these fees from escalating is possible.

Why is Seeking Early Expert Advice Crucial in SRA Engagements?

The most common question we hear: “When should we engage specialist support?”

The answer is straightforward. As soon as you know there’s a problem. The earlier expert advice is taken, the better the outcome can be. Dealing with the SRA and SDT is complex, and independent guidance can often produce better results. At RACO, our industry specialists have unique insight into self-reports, SRA investigations, enquiries, and SDT proceedings. We work with and advise firms and individuals at the start of an SRA investigation, or we can assist with representation at a Disciplinary Tribunal.

If you have identified a breach internally, the decision about whether to self-report is critical. Get it wrong and you can make things worse. Get it right and it becomes a decisive mitigating factor. Our self-reporting service helps you decide whether to report, what to say, and how to frame it.

If the SRA has started an investigation, every response you provide becomes evidence. You need to be clear, consistent and complete. Through our SRA Enquiries and Investigations service, we help firms understand what the SRA is really asking for and how to present their position effectively.

If you’re facing the SDT Tribunal, proceedings are formal, adversarial and public. The stakes are at their highest. Our SDT support service provides specialist guidance throughout the process, working with barristers who specialise in regulatory defence.

Free Initial Enquiry

An initial enquiry is free and without obligation. We will provide you with a clear estimate of the expected costs so you will be fully aware of our services and support fees. We will time record our work and ensure you are fully updated at every step. We appreciate that costs will be a concern and will aim to minimise them wherever possible.

Prevention Still Beats Defence

At RACO, our specialist regulatory defence teams have the expertise to help when things go wrong. However, most of our work is helping firms avoid investigations altogether.

The failures in the SRA report are preventable. Firms with robust compliance frameworks, regular audits, and proper training are far less likely to be in that 32.4% who get referred for investigation.

Our compliance experts support hundreds of firms with ongoing compliance. That includes anti-money laundering (AML) processes, audits, risk assessments, staff training and systems reviews.

Our approach helps firms stay ahead of their regulatory obligations, reducing the risk of receiving unwanted attention from the SRA. Learn more about our full suite of compliance products, outsourced compliance management, and law firm consultancy services:

• Regulatory Compliance and Risk Management Services for Law Firms
• Due Diligence & Risk Assessment Services for Law Firms – Outsourced solution for Client Due Diligence and Risk Assessment
• Law Firm Management Consultancy

For firms preparing for the transition to FCA AML supervision, we have published detailed guidance on what this change means and how to prepare: Preparing Your Law Firm for the FCA’s AML Supervision.

What to Do Now

If the SRA has contacted you, or if you have identified a potential breach that needs reporting, call us today.

Emergency Helpline: 0203 947 3690

For non-urgent enquiries: 0203 985 8550 or info@regulationandcomplianceoffice.co.uk

We provide practical support to firms and individuals facing regulatory challenges. While we cannot guarantee an outcome, we can help prepare the case, the firm, and the individual for any sanctions that may follow. It is hoped that, where possible, a full defence will be provided to prevent prosecution.

Support and Defence from Experts Who Understand the Pressure

At RACO, our regulatory defence and disciplinary support consultants understand what is at stake personally and professionally if you or your firm is facing an investigation by the SRA.

We have a proven track record of delivering honest, pragmatic advice and building strategies that ensure any breach is managed correctly and the engagement with the SRA is controlled and measured. Whilst we cannot guarantee an outcome, we can help to prepare the case, the firm, and the individual for any sanctions that may follow.

We provide tailored services that deal with the following:

• SRA Enquiries
• Self-Reporting – including for the SRA, ICO, CLC, CILEX
• Solicitor Disciplinary Tribunal Support
• Regulatory Settlement Agreements
• Agreed Outcomes – Statements and Judgments

Regardless of the reason for engaging with the regulator, RACO has supported multiple law firms and individuals in addressing and overcoming issues.

Get in Touch

Partnering with RACO ensures that you have the necessary support and expertise to navigate SRA enquiries and investigations effectively. For personalised assistance and to discuss your specific requirements, contact our team today. Please call us on 0203 985 8550, complete the online enquiry form below, or email us at info@regulationandcomplianceoffice.co.uk