Record Number Of SRA Fines

SRA: Significant Increase In The Number of Fines Handed Down To Law Firms

The amount of sanctions imposed by the Solicitors Regulation Authority have significantly risen over the past half-decade.

What Was The Increase?

The Regulator which oversees just over ten thousand legal service providers in the jurisdiction of England and Wales handed down a mere six sanctions in the form of fines in 2018. However, these statistics have increased remarkably and in 2022 when there were just under forty financial sanctions imposed on legal service providers.

Oh Yeah…So…What About the Previous Three Years?

The Solicitors Regulation Authority also enlightened on the situation over the last three years. It found that the number of fines imposed more than doubled not only for one year but for every year for the previous three years.

What Has Caused This Increase?

There appears to be a direct correlative and causative relationship between the introduction of tougher Anti-Money Laundering Regulations in 2017 and as such the increase in financial sanctions appears to have been attributable to the emphasis on the governing body enforcing the requirements under the Anti-Money laundering regulations. The SRA appears to have successfully cracked down on money laundering by compelling service providers to take measures to stop money laundering from taking place via risk assessments. The enforcement action has been so successful that nearly twenty-five legal service providers faced money laundering sanctions over the previous year.

The SRA has adopted a double-pronged attack on money laundering and the approach has brought about a rise in the number of sanctions being imposed. Throughout the project, the SRA investigated to see if legal service providers were adhering to the anti-money laundering standards and keeping to the transparency rules. Under the more robust Anti-Money Laundering standards firms are obliged to put simple information into the public domain regarding the costs for the provision of their services and complaints raised. In terms of the future direction of travel for the legal industry, the Regulator confirmed that the enforcement of Anti-Money laundering regulations will be continuing for the foreseeable future.

Cultural Shift?

Within the profession, Andrew Pavlovic, a law firm partner at CM Murray observed that the SRA has moved from focussing on cases involving wrongdoing of a personal nature such as sexual harassment to possible financial misconduct and adherence to AML regulations.

Triple Chance

Between 2018 and 2021 the total amount of fines has tripled from nearly ninety thousand pounds to just short of three hundred thousand pounds. However, for the sake of balance, the total figures were distorted by the mammoth fine in the amount of just shy of a quarter of a million pounds handed down to Mishcon de Reya for breaches of the Anti-Money Laundering Requirements.

Deep diving into the numbers most of the financial sanctions imposed by the SRA were low level. Most of the fines were shared between less than twenty-five legal service providers and the majority were less than one thousand pounds.

Way Forward?

Lawyers are going to be central to the seeming cultural shift. In-house legal teams and external lawyers need to pay attention to the recent changes made to the highest levels of fines that the SRA can impose. From May 2022 the regulator has the power to hand down a maximum fine in the amount of twenty-five thousand pounds, this is an increase from two thousand pounds before this point. Law firms need to be keeping their eyes open as there are likely to be further changes coming down the track with the regulator targeting handing down financial sanctions to a maximum of five percent of the legal provider’s turnover.

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THE ARTICLE WAS WRITTEN USING THE FOLLOWING SOURCES

[1] Goss, Louis and Barnett, Jack – ‘Number of law firms fined by SRA increases following anti-money laundering compliance crackdown’ – 01st August2022 – City A.M. - Number of law firms fined by SRA increases following anti-money laundering compliance crackdown (cityam.com)

[2] Solicitors Regulation Authority - Money Laundering – 19 May 2022 - SRA | Money laundering | Solicitors Regulation Authority

[3] Bateman, Robert – Law Firm Fines Quartrupled Over Two Years, Mostly Due to Money Laundering Compliance Failings – GRC World – 1 August 2022 - Law Firm Fines Quadrupled Over Two Years, Mostly Due to Money-Laundering Compliance Failings (grcworldforums.com)