In the past year, the Solicitors Regulation Authority (SRA) has significantly increased the frequency and severity of sanctions for breaches of anti-money laundering (AML) regulations, according to recent research. This heightened enforcement reflects the SRA’s commitment to maintaining integrity and trust within the legal profession.
The Solicitors Regulation Authority Step Enforcement Actions
The first quarter of 2024 saw ten decisions regarding AML breaches, indicating a robust start to the year in terms of regulatory action. This surge in activity builds on a trend from late 2023, during which 20 law firms faced fines for failing to comply with money-laundering regulations. These decisions highlight the SRA’s proactive stance in combating financial crimes and ensuring compliance among solicitors.
The SRA has utilised its enhanced fining powers to impose substantial penalties. In the first quarter of 2024 alone, fines amounted to nearly £170,000. April witnessed a series of fines that illustrated the financial impact on small and medium-sized law firms, with penalties ranging between £10,000 and £25,000.
Common Breaches Identified
The recent cases primarily involved failures in due diligence. Specifically, law firms neglected to adequately investigate clients and third parties, assess matter risks and conduct due diligence on funds from other jurisdictions. Furthermore, enhanced due diligence was often overlooked, and many firms did not complete necessary checks before accepting funds. These lapses underscore the importance of robust AML policies, controls, and procedures within legal practices.
Reforming Financial Penalties
In mid-2023, the SRA introduced significant reforms to its approach to financial penalties. Under the new framework, fines are typically calculated as a percentage of the firm’s annual domestic turnover, up to a maximum of 5%. This change aims to create a deterrent effect, discouraging firms from repeating offences and reinforcing public confidence in the legal profession. They are also considering increasing the base limit of fines for firms failing to comply with the regulations in place.
Ensuring Compliance and Upholding Standards
The SRA’s intensified focus on AML compliance serves as a reminder to all law firms of their obligations under the regulations. By increasing the frequency and severity of sanctions, the SRA aims to ensure that firms take their compliance responsibilities seriously. The legal sector is expected to adhere to stringent standards, and these enforcement actions demonstrate the consequences of failing to meet those expectations.
Impact on the Legal Profession
The heightened enforcement measures have significant implications for the legal profession. Firms are now more aware of the risks associated with non-compliance and the potential financial penalties they face. This awareness is expected to drive improvements in AML procedures and policies across the sector. By prioritising compliance, firms can avoid substantial fines and contribute to the overall integrity of the legal profession.
As the SRA continues to enforce AML regulations rigorously, law firms must remain vigilant and proactive in their compliance efforts. The trend of increasing fines and sanctions is likely to persist, reflecting the ongoing commitment to combating money laundering within the legal sector. Firms are encouraged to review and strengthen their AML policies and procedures regularly to ensure they meet the required standards and avoid regulatory action.
How Verify 365 Ensures Regulatory Compliance
Verify 365’s innovative client onboarding platform is the ultimate AML, KYC and compliance platform. Our proprietary technology is built within the framework of the SRA, ensuring you don’t run the risk of breaching regulations and consequently facing further sanctions.
Our technology is crafted by legal experts who understand the critical importance of practising compliantly. With Verify 365, our DynamicID technology enables you to confirm the identity information of your client within a few minutes in a compliant manner. The checks you initiate via our platform meet the required guidelines, and because our technology is proprietary, we can schedule updates at convenient times to ensure you remain compliant.
In addition to meeting the requirements set by the SRA, Verify 365 is an approved supplier of the Law Society of Scotland, and we meet HM Land Registry’s Digital ID Standard, further protecting you and your firm.
Conclusion
The Solicitors Regulation Authority’s recent actions underline the importance of AML compliance within the legal profession. With the increase in both the frequency and severity of sanctions, law firms must take their responsibilities seriously to maintain public trust and uphold the integrity of the profession. The SRA’s robust enforcement approach serves as a powerful deterrent and a reminder of the critical role that due diligence and effective risk management play in preventing financial crime.
