Regulators have been forced to make repeat visits to some firms over concerns about the potential for money laundering, it has emerged.
The Solicitors Regulation Authority yesterday published its latest risk report which identified inadequate systems and controls over the transfer of money as a key problem facing the sector.
Regulators are concerned that law firms handling large sums of money can make attractive targets for those wishing to launder the proceeds of crime.
The SRA said reports about potential breaches of anti-money laundering rules continue to rise, with 184 in the last year.
Investigators have visited a number of firms to examine systems and controls, with a ‘small proportion’ requiring a second visit to discuss how they can be improved.
Examples of areas for improvement included staff training, the quality and consistency of customer due diligence and knowledge of when to report a matter to the National Crime Agency.
The SRA said money laundering is an issue that could affect firms of all sizes.
The biggest corporate practices with commercial clients need to carry out extra due diligence on high-net-worth individuals and should consider approving high-risk work on a case-by-case basis.
In smaller firms, particularly those that do conveyancing, senior partners will have to equip themselves with the knowledge to act as the firm’s money laundering reporting officer.
By law, firms are required to have a reporting officer, have a process to set out how and when to report suspicious activity, identify and verify the identity of clients and train relevant employees.
‘Anti-money laundering systems and controls do not have to be expensive, and should be proportionate to risk,’ added the SRA.
Other areas identified as risks to the solicitors’ profession are poor standard of service, misuse of client money, lack of diversity, improper or abusive litigation, lack of independence, information security and bogus law firms.
The number of reports received about bogus law firms has continued to increase.
In 2014 the SRA received 701 reports, which represented a 28% increase on 2013, and a 101% increase on 2012. Almost half of all reports of bogus law firms received in 2014 involved the identity theft of a genuine law firm or solicitor.