COMPLIANCE: many struggling to meet reporting duties.

Smaller law firms are risking fines, closure ‘or even prison’ as they struggle to meet anti-money laundering regulations, a survey has revealed.

The independent survey commissioned by professional services information provider LexisNexis UK found that, six months after the Money Laundering Regulations 2007 came into force, more than half of respondent smaller firms (with 50-100 staff) were still struggling to meet reporting duties.

Identifying politically exposed persons (PEPs) remained ‘difficult’ for 54% of participants; 52% were finding it ‘increasingly hard’ to maintain awareness of regulatory obligations; and 52% still found the risk-based approach ‘challenging’.

Other problem areas included identifying beneficial ownership of companies, and screening against sanctions and watch-lists.

LexisNexis UK managing director Josh Bottomley said: ‘The key concern is smaller firms may be... exposing themselves to risk of fines – or even prison.’

Simon Young, co-author of Tolley’s Money Laundering Handbook, consultant and Law Society council member, said: ‘All firms, irrespective of size, are subject to the same regulations, and for smaller firms compliance is a problem. Many sole practitioners are talking of merging to share the regulatory burden.’

London firm Peters & Peters regulatory litigation partner David McCluskey said: ‘Where the risk of money laundering is low, the cost of compliance should be low, but that is not the case. Compliance is a fixed cost, the same for everybody, which can be ruinous for smaller firms.’

Sue Mawdsley, anti-money laundering partner at Liverpool firm Legal Risk, said the regulations used ‘sledgehammers to crack nuts’. She said: ‘A two-partner high street firm has a slim chance of working with a PEP, but still has to make full enquiries.’

A spokesman for the Solicitors Regulation Authority said compliance was not only a financial issue, but also one of management.

He added that visits from the practice standards unit had pointed to ‘evidence of a systematic breach of the regulations in about 11% of firms and of occasional