“Too many law firms” are falling short on anti-money laundering rules, the Solicitors Regulation Authority (SRA) has warned following an investigation that resulted in 26 firms entering disciplinary processes.
The warning forms part of a new crackdown on money laundering at law firms providing trust and company services – the two areas of the law most commonly associated with criminal activity.
According to the Government, the creation and administration of trusts and companies on behalf of clients are the legal service areas at highest risk of exploitation by criminals to launder money.
While the SRA did not, in fact, find any evidence of actual money laundering or involvement in criminal activity, it did find activity that would be considered a breach of the 2017 Money Laundering Regulations.
Essentially, this means law firms could be “unwittingly assisting money launderers” through poor training and/or processes.
Risk assessments were also identified as one of the most common areas where law firms failed to comply with money laundering regulations. According to the study, more than a third of firms reviewed fell short in this area, including four that had no risk assessment at all.
Customer due diligence also ranked poorly among law firms, with inadequate processes identified in almost a quarter of firms.
In total, 26 of the 59 law firms involved in the investigation were placed into disciplinary processes. Meanwhile, the SRA said it had begun a further review of 400 other law firms to check compliance with money laundering regulations.
Commenting on the report, Paul Philip, SRA Chief Executive, said: “Money laundering damages society, supporting terrorists, drug dealers and people traffickers. The stakes are too high for solicitors to be anything but fully committed to preventing money laundering and the crime its supports.
“Most solicitors take their responsibilities seriously, but too many firms are falling short. Those firms should be on notice that compliance is not optional. They need to improve swiftly. Where we have serious concerns that a firm could be enabling money laundering, we will take strong action.”