Oxfordshire law firm fined £20,000 by SRA for “reckless” AML non-compliance.

An Oxfordshire law firm, Ferguson Bricknell, has been fined £20,000 by the Solicitors Regulation Authority (SRA) for being “reckless” in failing to meet anti-money laundering (AML) regulations.

This fine is the largest sum imposed by the regulator on a traditional law firm since the limit for fines was increased from £2,000 to £25,000 last year.

“This is a clear indication that the SRA is taking a zero tolerance approach to AML non-compliance among law firms,” said Rudi Kesic, CEO of Verify 365. “Firms must take their AML obligations seriously and ensure they have adequate policies and procedures in place to prevent money laundering and terrorist financing.”

Ferguson Bricknell’s AML policy outdated and not regularly maintained

The Solicitors Regulation Authority imposed the fine on Ferguson Bricknell for failure to implement the appropriate checks required to uncover signs of money laundering by clients. Lord Chancellor Dominic Raab recently announced that the SRA would be increasing its fining power to impose fines for a broader range of offenses.

The SRA stated that the firm’s failure to comply with AML regulations demonstrated a “failing AML control environment” at the firm.

In an outcome published this week, the SRA stated that the anti-money laundering policy provided by Ferguson Bricknell at the start of its investigation was undated and did not state the author of the policy. Additionally, the policy had not been regularly updated and/or maintained, and referred to outdated legislation, the Money Laundering Regulations 2007, as opposed to the current regulations from 2017.

According to Law Society records, Ferguson Bricknell has two partners, one admitted in 1974, the other in 1979. The SRA revealed that one of the partners was not aware that the policy existed, indicating a lack of adequate training practices at the firm. Another partner, or possibly the same one, had not received any AML training on the 2017 regulations.

The only AML training employees received was a personal compliance booklet sent to them in January of last year, which referred to the outdated and superseded regulations from 2007.

Furthermore, the law firm incorrectly declared to the SRA in January 2020 that its firm-wide risk assessment was compliant with the latest regulations and in line with relevant guidance, despite the SRA issuing two warning notices in 2019.

 

Law firm failed to address risks associated with conveyancing in firm-wide risk assessment.

 

The SRA stated that the law firm failed to address the risks associated with conveyancing, which accounted for around 75% of the law firm’s income, and that these risks should have been addressed in the firm-wide risk assessment but were omitted.

Furthermore, the firm lacked an independent audit function and a partner at the firm had been unaware of this requirement under the Money Laundering Regulations 2017. A review of a sample of the firm’s client files revealed weak ongoing monitoring of transactions, if any, and no source of funds checks where funds were received from third-party sources, despite incidences of this happening, and no due diligence.

Additionally, no client or matter risk assessments had been undertaken, and there was no documentary evidence to demonstrate how the firm had identified and assessed the level of risk.

 

SRA cites “substantial aggravating circumstances” in decision to impose fine.

The SRA stated that the misconduct displayed by the firm showed a disregard for statutory and regulatory obligations and had the potential to cause harm by facilitating dubious transactions that could have led to money laundering and/or terrorist financing.

However, the SRA noted that although the misconduct was reckless, there was no evidence of harm to consumers or third parties. The firm also cooperated with the investigation and did not financially benefit from the misconduct.

Ferguson Bricknell agreed to pay £1,350 in costs.

“It is alarming to see that a law firm, which is responsible for handling large sums of money and sensitive client information, had such a lackadaisical attitude towards AML compliance,” added Kesic. “It’s essential for firms to use AML technology such as Verify 365 and regularly review and update their AML policies, and ensure that all employees receive proper training on the latest regulations. This case serves as a reminder that the SRA will not hesitate to impose significant fines for non-compliance.”

If you run a law firm and want to implement Verify 365 AML-compliance technology platform, please get in touch with us.