Six out of 50 firms visited by the Solicitors Regulation Authority to review the sector's compliance with new money laundering regulations have been referred to 'disciplinary processes', the regulator revealed today. However its thematic review Preventing Money Laundering and Financing of Terrorism concludes that 'Overall, most firms we visited are taking appropriate steps to understand and reduce the risk of money laundering, and to comply with the new regulations.'
The Money Laundering Regulation 2017, which came in to force last June requires relevant firms to carry out a practice-wide risk assessment and to record decisions and policies in writing. It will also require many firms to appoint senior staff to a new role, that of money laundering compliance officer. This is in addition to the money laundering reporting officer role created in 2007.
While acknowledging that firms have had only a limited time to implement the regulation the SRA says: 'We expect firms to show us the steps they have and will take to meet the new obligations.'
In its review the SRA visited 50 firms with a combined total of 11,731 fee earners; the largest had 1,390 fee earners. It concludes: 'We were satisfied generally that most firms had showed the right approach' to compliance. Examples of good practice included firms having a variety of ways to establish the source of clients' wealth.
However it also found: 'A small number of firms who have a significant amount of work to do to improve both processes and practice. This is a serious issue. If firms fail to comply we will take regulatory action, and following our review have referred six firms into our disciplinary processes.'
Among the areas of concern were firms not keeping records of their decisions and not putting firm-wide risk assessment in place. 'We recognise that they had been given limited opportunity to implement the new regulations, but we expect firms to move towards compliance as a matter of urgency,' the report states.
Paul Philip, the SRA's chief executive, commented: 'The credibility of law firms makes them an obvious target for criminals wishing to launder money. Tackling it is crucial not only to maintain trust in the profession, but also for the good of society. Money laundering is not a victimless crime - it helps fund terrorism and those involved in drug trafficking and people smuggling.
'We are encouraged that most firms seem to be on top of the issues, but all firms in scope must now comply with the new regulations. It is not enough to want to do the right thing. Weak processes or undertrained staff leave the door open for criminals. If firms do not step up and treat this issue with the seriousness it deserves, we will take action.'