Brian Rogers, regulatory director at Access Legal
By Brian Rogers, Regulatory Compliance Director at Legal Futures Associate Access Legal
The Solicitors Regulation Authority (SRA) has been fining more firms for breaching the Money Laundering Regulations, with one firm being fined £77,412, reduced to £46,000 to reflect mitigation and the firm’s “appetite to bring the investigation to an end now with full and frank admissions”; the firm is an alternative business structure (ABS), which could have exposed it to a fine of up to £250m and £50m for individuals.
Breaches included not having a firm-wide risk assessment (FWRA), and when one was put in place it was not compliant with the 2017 Money Laundering Regulations; the same happened with AML policies, controls and procedures (PCPs) – initially the firm had none and then inadequate ones. The firm also failed to have an independent audit function in place between June 2017 and September 2023; another firm was fined £18,000 for similar breaches.
But it is not just those regulated by the SRA that have been found wanting, but the SRA itself that was found to have brought a “flawed and misconceived” case against a non-solicitor and now needs to pick up the £5,000 costs bill; this follows on from the recent case where the SRA’s approach resulted in it (solicitors) being landed with costs of £189,000 (currently being appealed in the High Court).
Complaints about the SRA’s handling of cases rose by 29% last year, with the increase in interventions part of the reason. The majority of complaints concerned decisions not to investigate cases.
SRA clarification
We approached the SRA because of the confusion around whether firms needed to make notes in their AML firm wide risk assessments (FWRA) where something did not apply, for example, proliferation funding. The SRA Ethics Team has confirmed that where something doesn’t apply to a firm it should still be written down to say it has been considered.
Following on from a question asked at the end of our last update about what VAT information needed to be disclosed under the Transparency Rules, we contacted the SRA and it confirmed that both the VAT rate and amount must be shown with costs information; a number of firms have been sanctioned for failing to show all of this information.
Compensation fund
The SRA has said that it is pressing ahead with increases in the compensation fund contributions in the wake of the spiralling cost of law firm failures; the contribution for individual solicitors will go from £30 to £90 and for law firms that hold client money from £660 to £2,220.
Sanctions update
The SRA recently announced that it had reported two law firms to the Office of Financial Sanctions Implementation (OFSI), for breaching sanctions on Russia; in both cases it was alleged that transactions worth more than £300,000 had been facilitated.
Regulatory review
The Legal Services Consumer Panel (LSCP) has said that the new Lord Chancellor, Shabana Mahmood, needs to recognise the need for an overhaul of the legal regulatory regime, which is something the previous Lord Chancellor also said should happen.
Bearing in mind the proposal put forward by the Chartered Institute of Legal Executives (CILEx) to move to become regulated by the SRA, and the current spat between the Legal Services Board (LSB) and Bar Standards Board (BSB) where it is said that the relationship between the two is close to breaking point, now may be the right time for regulatory change, namely a move to a single legal sector regulator.
Legal Ombudsman backlog
The Office for Legal Complaints’ annual report for 2023/24 has revealed there were 3,376 cases still waiting in the pre-assessment pool, and although this was a 21% reduction compared to the previous year it was still well short of the Legal Ombudsman’s (LeO) own target to end the year with less than 2,600 cases; it has a target of getting to 1,000 cases by the end of 2025/26.
Over the last few years the LeO has said it will clear backlogs and has been given budget increases to assist with this, yet its own targets continue to be missed; the question for many will be, “How many more chances will the Legal Ombudsman be given to sort itself out?”!
Reminder
Don’t forget to provide the Solicitors Regulation Authority with your firms AML and sanctions data; the portal opens imminently – https://www.sra.org.uk/sra/news/firm-anti-money-laundering-sanctions-data-requirements/
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