SRA AML firm visits report card 2019 to 2020
The Solicitors Regulation Authority (SRA) visited 74 firms between September 2019 and October 2020 to review:
- their anti-money laundering (AML) policies, controls and procedures (PCPs)
- a sample of each firms’ client files
The SRA identified the following common issues:
Some firms misunderstood the requirement for an independent audit and failed to test the effectiveness of their AML regimes.
More than half of firms (over 38%) required follow-up action. Of those, 14 firms (19%) had never carried out an audit.
Firms generally complied with their obligation to screen employees on appointment, but 21% of firms failed to carry out ongoing checks.
Matter risk assessments
Matter risk assessments had not been carried out on 29% of files, meaning firms may have been unaware of high-risk matters passing through their hands.
Source of funds
The source of funds had not been checked adequately or at all in 21% of matters.
Failing to check a client’s source of funds is likely to mean a failure to properly understand the risks involved in the transaction.
SRA engagement action
Most firms (64%) required some form of engagement from the SRA. This included asking firms to either:
- update their policies and review revised versions to ensure compliance, or
- agree a compliance plan that tackled the identified shortcomings
Nine firms were referred to the SRA’s AML investigations team to review whether there were serious breaches of the rules and to determine the appropriate sanctions.
The SRA found that most firms were determined to prevent money laundering and were taking steps to comply with their AML obligations.
Firms generally understood that they needed to keep their PCPs updated, but some firms were failing to monitor the effectiveness.
The SRA noted that in several cases there were differences between:
- the actions set out in the firms’ PCPs and by their money laundering compliance officers, and
- what happened in practice
This was often because fee earners were not following PCPs.
The SRA noted that where it referred firms for further investigation where its investigations suggested a systematic lack of compliance. This included where:
- at least half of the reviewed files showed serious issues
- there was no effective compliance framework and/or AML PCPs
- MLCOs were failing to carry out their role properly
- there were serious breaches by senior members of the firm
The SRA’s report should act as a guide on how firms should approach the areas where they are unsure about and improve their understanding.