We know the complicated and daily challenges anti-money laundering (AML) and compliance bring on solicitors and conveyancers, but it appears many firms are falling fowl of common failings, which are ultimately leading to fines and sanctions.
Released in their annual report, the Solicitors Regulation Authority have confirmed over £550,000 worth of fines were handed to firms across England and Wales for breaches related to AML controls and failings across the year 2023/24. A total of 78 cases saw the SRA take regulatory action, an increase on the previous year, with 44 firms fined and over 50% of the cases concerned AML controls and risk assessments.
The SRA has demonstrated a clear intention to ensure the regulations are met, especially when it comes to AML failings. Let’s discuss some of the fines handed out, the current state based on the SRA’s current findings, viable solutions to combat challenges and what the future looks like as we approach 2025.
AML Fines Totalling Over £550,000 Given to Firms
The SRA and other regulation bodies like the Law Society of Scotland (LSS) and the Financial Conduct Authority (FCA) have been making a concerted effort to ensure the procedures and regulations in place are met, but in reality, it is proving very difficult for firms and ultimately, these failings are proving costly in more ways than one.
Fines vary in severity depending on how critical some of the failings are. The SRA announced earlier this year their intentions to increase the fine base in a major update to their fining framework in a bid to combat economic crime like money laundering and ensure firms are following protocol. However, firms have still crossed that fine line between compliance and non-compliance and unfortunately, that has led to action being taken.
Firms have been handed varied fines, for example, Edell Jones & Lessers were given a £3,711 fine for AML compliance failings while Coventry-based firm Band Hatton Button was handed a severe £46,000 fine for failing to implement adequate AML procedures. While other factors will have come into play when this fine was given, make no mistake it’s costly not just in the pockets but major reputation damage.
Other firms such as Fairbrother & Darlow and TTS Legal have also faced fines exceeding £10,000 for failings related to AML. Over half a million pounds in fines is a major figure, and it’s a sign that firms will face the consequences if they fail to meet the standards set.
SRA’s Annual Report Highlights Concerns Surrounding AML
With the SRA handing out a significant number of fines, it doesn’t come as too much of a surprise given some of the findings in their annual report, which highlighted some key points that show signs of concern.
In the SRA’s annual report, only 22% of firms were fully compliant, meaning a huge 78% were either partially compliant with the guidelines or not at all. The findings are a concern and also highlight should things not improve, fine totals each year are only going to increase unless firms understand the regulations and ultimately improve their AML procedures and protocols.
The report also confirms the main areas that firms were struggling with, the common themes that the SRA discovered during their investigations. Inadequate risk assessments, inadequate policies, controls and procedures, and issues concerning source of funds.
Carrying out firm-wide risk assessments is a critical element when it comes to ensuring compliance. Firms must assess all areas of their business and evaluate if their processes are effective against threats like money laundering and other financial crimes. If your risk assessments are inadequate, this will lead to procedures, controls and policies that are also inadequate. The SRA common themes would suggest a direct correlation between poor risk assessments and poor controls and procedures.
Viable Solutions to Combat AML Challenges & Avoid Fines
There are viable solutions available to law firms to deal with AML challenges and ensure they have effective procedures and policies in place, including technology. Firms are beginning to implement legal technology software and products into their processes to combat these challenges and ensure they meet the requirements set by the SRA and other regulation bodies to avoid falling foul of sanctions and fines.
Verify 365 is just one of those innovative legal technology products making an impact at law firms across the UK, we are the ultimate AML, KYC and compliance client onboarding solution. Because our technology is crafted by legal experts with extensive experience, we’ve ensured it meets the requirements needed for businesses operating within the legal sector to deal with and conquer these common challenges every day, streamline their processes and enhance their due diligence processes.
Through our innovative client onboarding platform, you can confirm the identity of an individual within a few minutes using our award-winning DynamicID technology. Using facial recognition, NFC technology and liveness scanning, our technology verifies over 10,000 legal documents from over 200 countries within a few minutes to confirm the identity of your client.
In addition to this, you can confirm an individual or business’s address through the Verify 365 platform. Our technology recognises proof of address documents from over 40 countries, including utility bills, bank statements, mortgage statements and electoral rolls. You can fully verify an individual lives where they say they do and confirm the physical location of a business.
We enable you to mitigate risk and prevent fraud through our comprehensive source of funds checks available through the Verify 365 platform. Our winning combination of open banking technology, advanced AI analytics, and a source of funds questionnaire enables you to analyse financial data and decipher an individual or business’s source of funds and source of wealth. Our source of funds checks will help you mitigate risk, confirm suspicious activity, and prevent fraud while also protecting your business from potential threats.
With everything a firm needs to be built into one effective platform, your workflows are much more efficient and faster, meaning you can onboard clients rapidly and increase the ability to expand your services. Crucially, Verify 365 is fully compliant, ensuring you don’t need to worry about any of your checks or onboarding processes being ineffective and at risk of potential sanctions. Verify 365 is built within the frameworks of the Solicitors Regulation Authority and we’re an approved supplier of the Law Society of Scotland.
SRA Fully Committed to Ensuring Regulations are Met
As we approach 2025, the SRA remain fully committed to ensuring the regulations in place are met. The findings from their report are a concern, but they have demonstrated clear intentions to help firms meet their AML and compliance obligations and not go down the route of handing out sanctions and fines.
Solutions are available to firms, but the large number of fines handed out to law firms is something that needs reducing, and it is down to firms to complete effective firm-wide risk assessments and put protocols in place that ensure they can meet their obligations.
