AML: Firms warned against complacency ahead of FCA takeover

Firms have been warned not to ignore the threat of a knock on the door from the Solicitors Regulation Authority despite the transfer of anti-money laundering regulation.

The Law Society risk and compliance conference this week heard experts predict that it may be three years before the Financial Conduct Authority becomes the sole supervisor of the AML regime.

At the same event, SRA chief executive Sarah Rapson said the organisation should be less ‘enforcement-led’. But regulatory experts warned this should not be taken as a sign that the regulator will be any less strict, even as it prepares to hand over the reins.

‘I am seeing senior leadership [of law firms] so worried about the FCA coming [that] they are throwing resource at that,’ said Colette Best, director of AML at Kingsley Napley and former AML policy manager at the SRA. ‘They are not worried about what the SRA is doing – I think that is quite a dangerous position.’ 

Emma Williams, director of risk and compliance with City firm Simpson Thacher & Bartlett, said: ‘[The SRA] is continuing, so don’t think for one second you can take your eye off the ball when it comes to [AML].’

The conference heard speculation that the FCA may be more data-led than the SRA, while another school of thought – not verified by any of the authorities involved – holds that the financial regulator may be less inclined to penalise smaller firms for technical breaches.

Williams said the uncertainty is causing headaches for risk and compliance officers who are waiting for clarity about what the FCA will expect. ‘We don’t really know when it is going to hit, we don’t know whether the infrastructure we have in place is going to withstand and we don’t really know what we are preparing for, which makes it really difficult to do business as usual,’ she said.

The conference heard suggestions that the FCA regime could be expensive for firms in serious breach: the organisation is able to fine offenders up to 20% of turnover. The FCA rules also allow it to charge the costs of a third party audit.

Meanwhile, Susanna Heley, legal director of Russell Cooke, said there would ‘inevitably be double jeopardy’, where the FCA deals with a law firm over an AML breach but the SRA investigates an individual who may have committed misconduct over the same matter.