The latest report from the Solicitors Regulation Authority reveals that only 22% of law firms met full compliance with anti-money laundering (AML) regulations over the past year.
Nearly twice as many firms and individuals faced enforcement action compared to the previous year due to non-compliance with AML regulations. The primary issues identified included a lack of importance placed on AML controls by senior executives, inadequate supervision or training of fee-earners, and systems that failed to halt transactions when customer due diligence was incomplete.
The report covered activities over the fiscal year ending 5 April 2024, highlighting that 5,683 of the 9,308 firms authorised by the SRA were subject to AML regulations. Among these, 512 firms underwent inspection or a desk-based review for AML compliance. A worrying 78% were only partially compliant or non-compliant, with 110 firms achieving full compliance.
Partial compliance was found in 284 firms, indicating some adherence to AML rules but also deficiencies in one or more areas. Non-compliance was noted in 118 firms, prompting investigations and the imposition of compliance plans or letters of engagement to guide improvements, monitored by the SRA.
The SRA found only 10% non-compliance in firm-wide risk assessments, and improvement in client/matter risk assessments, with 19% lacking them and 12% ineffective. Previously, over half were deemed ineffective, showing progress in this领域.
Customer due diligence was mostly adhered to, but 25% of files failed in source of funds checks, lacking necessary evidence or audit trails. Larger firms must regularly audit their compliance, and the SRA has begun a cyclical review of these audits, finding most firms took adequate action on recommendations.
Enforcement action by the SRA nearly doubled, with 74 matters leading to fines and other regulatory outcomes, including 35 fines totalling £557,000. Although fewer cases reached the Solicitors Disciplinary Tribunal, the SRA attributed this to its increased fining capabilities.
Suspicious activity reports submitted to the National Crime Agency remained consistent, with most cases arising from conveyancing. Financial sanctions reports under the Russia sanctions regime involved funds of over £369,000, and high levels of compliance were found in proactive sanctions inspections.
The findings underscore significant issues in AML compliance across law firms, calling for enhanced measures and vigilance to meet regulatory requirements.
