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SRA Fines Firm Employee for Breaching Internal AML Policies, Controls, and Procedures
July 7, 2023

SRA Fines Firm Employee for Breaching Internal AML Policies, Controls, and Procedures

Introduction

A law firm employee (who was not a solicitor) has been individually fined by The Solicitors Regulation Authority (SRA) for breaching obligations under Regulation 28(11)(a) of the Money Laundering, Terrorist Financing (Information on the Payer) Regulations 2017 and in doing so breaching Principle 2 of the SRA Principles 2019. The summary of the decision showed that the SRA fined the employee £3,500 plus costs of £1,350 for failing to follow the firm’s internal anti-money laundering (AML) policies, controls and procedures requiring her to adequately investigate source of funds when acting for clients in two residential conveyancing transactions.

It is very important for Firms and Compliance Officers to note that there is no evidence of action being taken against the Firm or any of the compliance officers as it is assumed that the investigator was satisfied that the Firm itself and complied with the various requirement of the MLR 2017 and therefore was running a compliant environment. If our assumption is correct, it very strongly sets out that the SRA will look at individuals and their conduct and take action if such individuals are not following the expectations set by the firm through their Policies Controls and Procedures (PCPs) and training etc.

It is a very clear and obvious warning for those who work for a law firm to ensure they comply with regulations and follow the Firms PCPs.

In publishing the facts of the misconduct under recent decisions, it was detailed that the employee’s conduct was placed in the mid-bracket of the regulator’s approach to financial penalties because of the risk of harm caused by her conduct. Emphasising why a financial penalty was an appropriate and proportionate sanction, the regulator stressed that carrying out adequate source of funds checks is a key measure for limiting opportunities for criminals to use criminal property.

“It protects the public from the risk of firms being used to conduct transactions involving money laundering.” 

Failing To Comply with AML Obligations 

In light of this incident, it is essential for law firms to prioritise ongoing training and education on AML compliance for all employees. Furthermore, ensuring robust auditing, policies, controls, and procedures are in place and that these are followed correctly. The warnings from the SRA regarding their stance on AML obligations have been un-floundering and, through a series of continued announcements, have made their enforcement strategy clear, stressing that firms and all staff must be compliant with the AML regulations.

A comprehensive understanding of AML regulations and procedures is vital to ensure that potential risks are effectively identified and mitigated.

Robust AML Policies, Controls and Procedures

The message is loud and clear that firms must comply with the AML regulations. Firms are well-advised to review their AML policies, application at case level, and their firm-wide risk assessment and take immediate action to ensure they are sufficiently robust or update them to achieve and maintain compliant status.

For many firms, dealing with this in-house without sufficient understanding, resources, or time can be highly debilitating to partners and their business, as compliance with the AML regulations is not as simple as it may first seem. Expert advice and guidance is often essential to ensure your firm achieves and maintains a compliant status.

At The Strategic Partner, we work with firms to ensure that the AML procedures align with expectations. Importantly, we work with them continuously to assess and adapt them to ensure they remain relevant. In addition, our standard service extends beyond AML and covers other areas of risk and compliance that are essential for a law firm.

Compliance Solutions, including AML, Risk Assessments, and Independent Audits

If you believe your firm may be at risk or wish to confirm your firm is achieving the required standard, we offer a range of solutions at The Strategic Partner.

    • Regulation 21 AML 2017 Independent Audit – A review of the firm’s approach to regulation and compliance to include AML procedures with the audit meeting the requirements of Regulation 21 of the AML 2017. The output of which provides the firm with a written gap analysis and solutions to remedy any issues that arise and ensure the firm is compliant.
    • TrainingOur Typical AML Training Includes
      • AML Training for ALL staff to meet the firm’s obligation to provide annual training.
      • 1-2-1 training for the MLRO and MLCO on their obligations and requirements.
      • Practical training for those involved in client onboarding to ensure their ID and AML checks are correctly completed.
    • File Reviews/Auditing – At TSP, we engage with firms undertaking file reviews where we consider procedure, staff, systems, and files to ensure the procedures are up to the required standard and being implemented at case level with a report of the outcome.

Our Packaged Compliance Solutions

Implementation of robust solutions to ensure the firm achieves compliance and then maintains compliance through the provision of ongoing support and assistance: –

  1. Risk Regulation & Compliance Service, including AML  – Our Risk, Regulation and Compliance Service (including AML) has been designed to provide law firms of all sizes with a compliant environment. We provide bespoke policies and procedures for how your firm works, whilst drawing your attention to any gaps in your risk and compliance activities, whilst drawing your attention to any gaps in your risk and compliance activities. We work with firms of all sizes and types, from partnerships to ABSs, high street firms, and multinational firms. Each firm is different, and whilst there is a commonality of regulation and expected standards, it is essential to recognise how a firm implements compliance to tailor the solution to each firm’s working practices.
  2. Risk, Compliance, AML Guidance and Register Administration Service– Running a compliant law firm is not just about implementing a set of policies and procedures; the obligations of the Compliance Officers stretch way beyond this, as there is an ongoing responsibility to manage, maintain and monitor the application of the firm’s compliance strategy. The Strategic Partner’s Risk, Compliance, AML Guidance and Register Administration Service is an outsource solution providing all staff with access to an experienced and knowledgeable Compliance Manager for guidance and ensuring the regulatory requirement active management of the firm’s registers is met.

SRA Investigations

Our immediate focus is to work with firms to ensure they are compliant and therefore avoid investigations, but that is not always possible.

If you have been contacted by the Solicitors Regulation Authority (SRA) to advise of an enquiry or investigation, you should contact our SRA Investigation Response Helpline for immediate guidance on 020 3947 3699. Calling us will enable quick and decisive action to be taken.

Being investigated by the SRA is a very worrying time for law firms, their owners and staff, and it is not always immediately apparent why an investigation has commenced.

At The Strategic Partner, we offer support to law firms and their staff at the commencement and throughout any investigation by the SRA. We will work with you to understand the issue and guide you on the best action.

Find out more about our SRA Investigation support services.

Get In Touch with Our Compliance Team

We would be pleased to discuss your current approach to regulation and compliance and how our services will assist you in ensuring your firm is protected.

Often expert advice and guidance is essential to ensure your firm achieves a compliant status and maintains it.

For more information about our Regulation and Compliance Services (including Anti Money Laundering), you can call us on 0203 911 9710 or please email us at info@thestrategicpartner.co.uk.

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