The Solicitors Regulation Authority (SRA) has imposed a new round of fines on law firms that failed to demonstrate compliance with anti-money laundering (AML) regulations. The latest enforcement actions highlight ongoing concerns about the ability of smaller legal practices to meet regulatory expectations in this critical area.
The latest firm fines range from £3,300 to £25,000 as the SRA continue to clamp down on firms failing to meet their AML and compliance obligations. The SRA is determined to see the regulations met and have demonstrated on several occasions over the past year, failing to adhere will see firms face the consequences.
Law Firms Fined for AML Failings
Hertfordshire-based Duffield Harrison LLP received the highest fine in this round, amounting to £25,000, which is the maximum penalty the SRA can issue. The regulator assessed six client matters and found that the firm had failed to adequately conduct client risk assessments in each case. Furthermore, the firm did not maintain records of its risk assessment processes, leaving it unable to demonstrate the extent of its compliance efforts.
While the firm has since provided evidence that it had been conducting risk assessments since at least 2012, the absence of documentation for the selected cases led to the penalty. Following the investigation, Duffield Harrison LLP has implemented a new, fully compliant risk assessment policy and communicated it to all fee earners.
Despite these breaches, the SRA acknowledged that the firm’s failures were not deliberate. The firm has since apologised and invested in additional compliance support to prevent future issues. Notably, there was no evidence that these regulatory lapses resulted in financial harm or facilitated money laundering activities.
Initially, the SRA calculated the fine at £26,359, including a mitigation discount. However, to avoid unnecessary escalation to the Solicitors Disciplinary Tribunal (SDT), the penalty was reduced to £25,000. The SRA noted that a tribunal referral would have led to increased costs and delays without serving the public interest.
Additional Firms Penalised
Several other law firms were also fined for AML compliance failures, although their breaches were deemed less severe. The penalties issued were:
– The Commercial Law Practice (Dorchester) – fined £11,579
– Burch Phillips & Co (West London) – fined £3,370
– Steinbergs Solicitors (Liverpool) – fined £3,778
In each case, there was no evidence of consumer harm, a low risk of recurrence, and full cooperation from the firms involved.
SRA’s Risk-Based Approach to AML Supervision
The SRA has reiterated that it adopts a risk-based approach to AML oversight. While it prioritises high-risk firms for inspections, it also reviews medium- and low-risk firms. However, the regulator clarified that being selected for an inspection does not automatically imply that a firm is at high risk of facilitating money laundering.
The increased scrutiny on AML compliance underscores the importance of robust risk assessment procedures and thorough record-keeping. Law firms, particularly smaller practices, are urged to proactively enhance their compliance frameworks to avoid regulatory penalties.
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Conclusion
The latest round of fines serves as a clear warning to law firms about the importance of AML compliance. With smaller firms facing heightened scrutiny and regulatory bodies showing a willingness to impose significant penalties, legal practices must ensure that their risk assessment protocols are comprehensive, well-documented, and consistently followed. By doing so, firms can avoid costly fines, maintain client trust, and uphold the integrity of the legal profession.
