SRA updates AML sectoral risk assessment

The Solicitors Regulation Authority (SRA) has updated its sectoral risk assessment for anti-money laundering (AML) and terrorist financing in the legal sector.

The SRA’s risk assessment follows the publication of HM Treasury’s third national risk assessment (NRA) in December 2020.

Published in January 2021, the SRA’s risk assessment identifies the following emerging risks to the profession:

COVID-19

The coronavirus (COVID-19) pandemic has potentially left firms vulnerable to exploitation.

The SRA acknowledges that the culture of AML compliance is much more mature in the legal sector, but it highlighted that any firm without robust policies, controls and procedures (including the accurate assessment of risk at every level) is at risk of exploitation.

Technology

The SRA highlighted the risk in the use of new types of financial technology, such as fund transfer systems and crowdfunding platforms.

Any use of new technology should be preceded by:

  • an assessment of the risks they may introduce
  • effective mitigation of any risks where possible

Wider economic pressures

An issue of growing importance is sufficient resourcing of AML work.

With firms under pressure to reduce costs, elements of businesses that do not directly generate revenue might see their budgets reduced.

Firms need to understand that economic conditions do not change the requirement to comply with the regulations.

Legal status of cannabis

With partial or total decriminalisation of cannabis in some countries overseas, and its increased use in therapeutic settings, how firms handle funds generated through the sale of cannabis has become a greater issue.

This has made it more challenging to draw the boundary between legal and illegal revenue in the UK.

Read the SRA’s sectoral risk assessment

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