A prominent Coventry law firm, Band Hatton Button (BHB), has been fined more than £46,000 by the Solicitors Regulation Authority (SRA) for failing to implement adequate anti-money laundering (AML) procedures. This penalty ranks among the largest imposed by the SRA to date.

Coventry Law Firm Fined – SRA’s Critique of BHB

The SRA has stated that BHB “failed in its basic duties,” highlighting the gravity of the firm’s shortcomings. As an alternative business structure, BHB was subject to a higher fine than the £25,000 limit that applies to traditional law firms. This distinction underscores the SRA’s determination to enforce compliance across different types of legal entities.

According to a regulatory settlement agreement published recently, between June 2017 and February 2018, BHB lacked a firm-wide risk assessment (FWRA), and the subsequent assessment they implemented did not meet the 2017 Money Laundering Regulations. Furthermore, BHB initially had no AML policies, controls, and procedures (PCPs) in place, and when they did introduce them, they were found to be inadequate.

From June 2017 to September 2023, BHB also failed to establish an independent audit function, a requirement deemed appropriate given the size and nature of its business. This absence further exemplifies the firm’s disregard for regulatory requirements.

Deficiencies in Client File Reviews

The SRA’s review of selected client files revealed significant deficiencies: five files lacked a client and matter risk assessment, while two did not include adequate checks on the source of funds. These lapses indicate a broader pattern of non-compliance with AML regulations, potentially exposing the firm and its clients to significant risks.

In mitigation, BHB acted promptly to come into compliance within two months of receiving feedback from the SRA and fully cooperated with the regulator throughout the process. This cooperation and swift action were considered in the SRA’s decision to reduce the initial fine.

Determination of the Fine

Applying its fining guidance, the SRA initially calculated a fine of £77,412, equivalent to 1.6% of BHB’s £4.8 million domestic turnover. However, this amount was reduced by 40% in recognition of BHB’s mitigation efforts and their willingness to resolve the investigation with full and frank admissions. Consequently, BHB was fined £46,447 and ordered to pay costs of £1,350.

Wider Implications and Deterrent Effect

The SRA has emphasised that the fine serves as a proportionate outcome in the public interest, acting as a credible deterrent to other firms. The imposition of such sanctions signifies the risk posed to the public and the legal sector when solicitors fail to comply with AML legislation and professional regulatory rules. The SRA noted that there was no evidence of harm to consumers or third parties in this instance, and BHB has acknowledged its failure to adhere to statutory money laundering regulations and regulatory compliance.

Fines for Other Firms

In addition to BHB, the SRA has also fined Stockport firm Stratford Solicitors £18,425 for similar AML failures. Stratford Solicitors was found to have had no FWRA in place during 2017/18, and the PCPs implemented were non-compliant for nearly six years up to February 2023. The firm’s conduct was deemed a serious breach of its regulatory obligations, with potential harm to the public interest and confidence in the legal profession.

Mitigate Risk and Ensure Compliance With Verify 365

As authority figures continue to clamp down on firms that fail to meet the requirements, viable solutions are available to mitigate risk, prevent fraud, and ensure compliance. The rise of legal technology is one such solution, and Verify 365 is at the forefront of legal innovation.

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Our unified platform is built to ensure everything you need is in one place. Verify individual and business address information, complete comprehensive source of funds checks, and complete KYB checks to confirm the structure of a business. Our innovative platform has been crafted by legal experts for legal professionals and law firms to ensure they can tackle the day-to-day challenges and practice compliantly within regulatory guidelines.

The fines imposed on BHB and Stratford Solicitors reflect the SRA’s commitment to upholding AML regulations within the legal profession. These penalties serve as a stark reminder to law firms about the importance of maintaining robust AML procedures and the consequences of failing to do so. As the SRA continues to enforce compliance, it is crucial for legal firms to review and strengthen their AML policies and procedures to avoid similar repercussions.