SRA Money laundering fines: How to protect your firm

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SRA AML Fines lessons

In recent years, the number of fines issued by the Solicitors Regulation Authority (SRA) concerning Anti-Money Laundering (AML) compliance has steadily risen. These fines serve as a wake-up call for law firms and businesses, signalling that compliance with AML regulations should be a top priority.

There are a number of key lessons we can learn from recent SRA fines and in our recent webinar, we provide guidance on how firms can stay compliant while avoiding penalties.

Watch now: SRA AML Fines: Lessons to be learned. Want to get a full deep dive into how your firm can learn from others’ experiences and mistakes? Catch up on our webinar with compliance expert, Jonathon Bray on-demand now.

The rising number of SRA fines: What it means for you

SRA fines related to AML compliance have surged over the past year. However, these fines are not just aimed at large firms—they affect businesses of all sizes, highlighting the importance of maintaining robust AML practices. The main reasons behind these penalties include a lack of adequate risk assessments, failure to maintain updated client due diligence, and inadequate AML policies.

Why AML compliance is more critical than ever

The SRA takes AML breaches seriously because non-compliance increases the risk of law firms being exploited by criminals seeking to launder money through legal channels. For businesses, the consequences of AML violations extend beyond financial penalties. They can lead to reputational damage, loss of clients, and even the possibility of more severe regulatory actions.

Six key lessons from recent AML fines

  1. Perform comprehensive risk assessments: One of the main reasons firms are fined is due to inadequate risk assessments. It’s essential to identify and document potential AML risks at the firm level and then subsequently at both client and matter level. A thorough risk assessment allows firms to tailor their mitigation steps accordingly and conduct the right level of due diligence. Remembering that no two firms are identical and neither are our clients.

  2. Implement robust AML policies, controls and procedures: Having an AML policy on paper alone is not enough. Firms must actively follow and enforce their policies, ensuring all staff are trained in identifying suspicious activity and following correct reporting procedures. AML procedures should be regularly reviewed and updated to align with current regulations and best practices. Firms should also ensure any written procedures are updated in line with changes to legislation, a few from this year to take into account are: 

    Have you already included these? If not take action now.

  3. Ongoing Monitoring of CDD: Failing to update or monitor client information and risk assessment can lead to fines for firms, especially when working with long-term clients. To satisfy AML regulations, client data and risk assessments should be reviewed at intervals appropriate to the transaction and level of risk, particularly where there is a trigger event such as changes in ownership, financial activities, or client behaviour.

  4. Monitoring compliance: A critical aspect of a robust AML programme is monitoring compliance. This is achieved via many different methods such as file reviews, internal audits or reviews and independent audits (regulation 21) all of these help firms identify weaknesses and areas of opportunity for improvement before a regulatory inspection and demonstrate the firm's commitment to AML compliance. 

  5. Record keeping: Maintaining detailed records of compliance activities, including client due diligence, risk assessment, staff training and suspicious activity reports is crucial for demonstrating adherence to AML regulations.

  6. Ongoing training: Implement a comprehensive AML training program for all relevant employees, know who these are, and maintain meticulous training records. Organisations often face regulatory consequences due to their personnel's lack of awareness regarding suspicious activities or proper protocols for addressing red flags. Establishing training as a continuous process rather than a singular event is crucial. Regularly scheduled webinars, knowledge reinforcement sessions, and updates on regulatory changes ensure that all employees are adequately prepared to fulfil compliance obligations.

Looking forward: How firms can stay compliant

To avoid SRA fines, businesses must treat AML compliance as an ongoing responsibility. This means:

  • Regularly updating risk assessments and client records.

  • Ensuring all staff are trained and aware of the AML compliance PCPs.

  • Utilising technology where possible to streamline compliance processes.

  • Create a monitoring programme and consider the value of an independent audit.

  • Reviewing and updating the firm's PCPs in line with any changes to the regulations, guidance and warning notices issued by the supervisor.

  • Senior management involvement, the senior leaders must actively engage in overseeing and promoting AML compliance throughout the organisation.

These lessons underscore the need for a proactive and comprehensive approach to AML compliance, by being proactive, firms can reduce the likelihood of non-compliance and avoid costly penalties.

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