Font Size: A A A

Home > News > Case Studies > Law firms falling short on money laundering

Case Studies

Law firms falling short on money laundering

Too many law firms falling short on anti-money laundering, according to the Solicitors Regulation Authority (SRA), the UK regulator. An SRA review took in 59 law firms providing trust and company services. The creation and administration of trusts and companies on behalf of clients has been highlighted by the UK Government as one of the legal service areas at highest risk of exploitation by criminals to launder money.

The review did not find evidence of actual money laundering or that firms had any intention of becoming involved in crimes. However, it did find a range of breaches of the 2017 Money Laundering Regulations, as well as poor training and processes. This means, the SRA adds, firms could be unwittingly assisting money launderers.

A concern was raised over firms’ risk assessments; or rather lack of them, as four had no risk assessment at all. A firm risk assessment is required in legislation and should be the backbone of a firm’s anti-money laundering approach. More than a third (24) of firms reviewed fell short.

As for customer due diligence, the SRA found inadequate processes in almost a quarter (14) of firms to manage risks around ‘Politically Exposed Persons’, known as PEPs. However, in some instances effective customer due diligence did result in firms turning down work. Some 15 firms had done this, with one of the main reasons being evasive clients.

As a result of the review the SRA put near half, 26 firms into disciplinary processes. The regulator also published a warning notice reminding the profession of their obligations, particularly in relation to firm risk assessments. And its new dedicated anti-money laundering unit has begun a further review of 400 other law firms to check compliance with the Government’s 2017 Money Laundering Regulations.

Paul Philip, SRA Chief Executive, said: “Money laundering damages society, supporting terrorists, drug dealers and people traffickers. The stakes are too high for solicitors to be anything but fully committed to preventing money laundering and the crime its supports. Most solicitors take their responsibilities seriously, but too many firms are falling short. Those firms should be on notice that compliance is not optional. They need to improve swiftly. Where we have serious concerns that a firm could be enabling money laundering, we will take strong action.”

The SRA regulates around 7,000 law firms that fall under the scope of the Government’s Money Laundering Regulations.


Tags

Related News