The Solicitors Regulation Authority (SRA) fines eight law firms £57,000 for inadequate anti-money laundering (AML) controls, highlighting continued issues in the sector.
- Key failings included the absence of client and matter risk assessments (CMRAs) and firm-wide risk assessments (FWRAs) in accordance with 2017 regulations.
- Despite improvements, 19% of reviewed files still lack proper CMRAs, showing gradual progress compared to last year’s 51% ineffectiveness rate.
- The SRA’s actions underscore the necessity for law firms to maintain robust AML procedures, as non-compliance poses significant risks.
- Firms showed varying levels of cooperation and corrective actions, resulting in adjusted fines, with Hill Johnson & Leo receiving the largest penalty.
The Solicitors Regulation Authority (SRA) has imposed fines totalling £57,000 on eight law firms for their failure to implement adequate anti-money laundering (AML) controls. A central issue was the lack of client and matter risk assessments (CMRAs) and firm-wide risk assessments (FWRAs), mandatory under the 2017 Money Laundering Regulations.
The SRA’s annual AML report reveals that 19% of the 3,048 files examined over the year lacked CMRA documentation, with 12% of those provided deemed ineffective due to unclear risk rationales. This marks an improvement from the previous year, where 51% of CMRAs reviewed failed to meet standards. In response, the SRA issued a warning notice on the need for proper CMRAs a year ago.
Hill Johnson & Leo, a Surrey-based firm, received the largest fine for not having an FWRA or conducting CMRAs from June 2017 to July 2023. Their work, mainly in conveyancing, placed them at higher risk of facilitating money laundering. Although there was no evidence of direct client loss, the firm’s fine was calculated at 2% of its turnover, amounting to £18,094 after reductions for remediation actions.
Similarly, Stafford’s Tedstone George & Tedstone was fined £13,030 plus costs for lacking CMRAs on reviewed client files during an SRA inspection. The firm has since implemented compliance plans and ensured CMRAs are completed for all active matters, acknowledging previous informal and undocumented assessments.
Andover’s Bull & Co and Birmingham’s Margetts & Ritchie also received fines for failing to maintain appropriate AML risk assessments and due diligence measures. Bull & Co’s penalty was set at £7,577, while Margetts & Ritchie’s fine amounted to £3,828, reflecting their cooperation and steps towards compliance.
Croydon-based Edridges & Drummonds, Kent’s Ratcliffes, and West Yorkshire’s Redfearns Solicitors faced similar penalties for leaving AML requirements unfulfilled. They received fines of £3,395, £6,727, and £2,435 respectively, all mitigated by their post-inspection corrections and cooperation with the SRA.
Rochdale’s Hartley Thomas & Wright was fined £2,398 after failing to conduct CMRAs over five years, with identified issues in documentation of customer due diligence. The SRA considered the impact minimal due to existing comprehensive AML policies, but noted the absence of CMRAs as significant.
These cases highlight ongoing challenges in ensuring law firms adhere to stringent AML regulations. While improvements are noted, the firms’ varying degrees of compliance and corrective actions reflect the broader industry’s progressive adaptation to regulatory requirements.
The SRA’s enforcement actions underline the critical importance of rigorous AML compliance within law firms to mitigate legal risks.
