SRA Warns Lawyers To Shape Up On Money Laundering

The recent Solicitors’ Disciplinary Tribunal decision to hand down a fine for allegations of money laundering is a matter all legal professionals should have at the forefront of their minds.

What Happened In The Case?

A provider of legal services emanating from Scarborough in the county of Yorkshire was found to have negated to comply with the legal obligations related to Anti-Money Laundering which were introduced way back when in the year 2017 and related to work that fell within the requisite regulations. All appeared to have been progressing well until an investigation was launched around the year 2020 when numerous worrying trends were highlighted regarding the keeping to their side of the bargain when it comes to the issue of the standards imposed by the Solicitors Regulation Authority Code of Conduct for solicitors and the obligations to be adhered to by the respective anti-money laundering regulations. 

Matters came to a head when the investigators appeared to uncover documentary evidence about the matter which to independent onlookers tended to suggest that the relevant provider of legal services subject to the legal proceedings had somewhat wrongly communicated to the Solicitors Regulation Authority in around January 2020 that the measures it implemented to identify, evaluate and assess risk complied with the legal requirements and obligations. 

Be Sure Your Sins Will Find You Out…

However, far from complying with the standards set down under the aforementioned obligations under the Code of Conduct for Solicitors and the Anti-Money Laundering Regulations the regulator sought to highlight five worrying headline matters which it wanted to be dealt with such as:

• transfers of title

• distribution lines

• items and services

• consumers and 

• jurisdictions.  

Deep-diving further into the concerns raised by the Regulators they flagged that the provider of legal services did not appear to have taken any measures to criticize surprising transfers of title, the provider had failed to update its client verification processes, negated to communicate its standing on the affluence of its clients and astonishingly neglected to assess and identify the factors indicating the probability of money laundering occurring. The evidence suggested that the provider had neglected to implement basic requirements thirty-six months after the legal obligations entered force.      

What Did The Firm Do?

The provider performed the verification process. However, the SRA was cynical about evidence showing that the process only appeared to have occurred on relevant members of the workforce solely when they commenced employment. There was no evidence suggesting that any verification was ever carried out throughout their period of employment with the business. Whilst the lay reader may not see much wrong with this, the matter was concerning because it appeared to flagrantly disregard their obligations under the Anti-Money Laundering Regulations. 

And There’s More…

This on its own would have been an extraordinary dereliction of duty on the law firm’s part. However, the Regulator uncovered more evidence concerning the negating to keep, maintain or disclose any records about any training which had been laid on for the workforce. Decision makers within the organization had not independently inspected the origin of the monies. 

Pages Turned…Lessons Learned

The circumstances are food for thought for all legal professionals and the safest strategy is for legal services providers to:

• ensure the firm knows where the funds emanate from

• gathering all identity, property, and financial documents 

• compile and cross-reference them for fraud indicators 

• implement risk assessments 

• bring in a workforce culture of fraud indication and

• compliance with the current Code of Conduct for Solicitors and Anti-Money Laundering rules

to will lower the chances of legal service providers facing regulatory sanctions.  

ASSESSING FIRMS

THE ARTICLE WAS WRITTEN USING THE FOLLOWING SOURCES 

[SOURCE 1] Hyde, John – ‘Reckless’ firm not meeting AML requirements fined £2,000 – 28 October 2022 – Law Society Gazette - ‘Reckless’ firm not meeting AML requirements fined £2,000 | News | Law Gazette

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

[SOURCE 3] Money Laundering – Regulations and who they apply to – Solicitors Regulation Authority - SRA | Regulations and who they apply to | Solicitors Regulation Authority

[SOURCE 4] Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017

[SOURCE 5] Money Laundering and Terrorist Financing (Amendment) Regulations 2019

[SOURCE 6] Money Laundering and Terrorist Financing (Amendment) (EU Exit) Regulations 2020

[SOURCE 7] Proceeds of Crime Act 2002

[SOURCE 8] Terrorism Act 2000

[SOURCE 9] Solicitors Regulation Authority – What does my firm need to do? – 12 July 2021 - SRA | What does my firm need to do? | Solicitors Regulation Authority