AML: Breaches lasted for over four years
A property law firm in Manchester has been handed a fine of nearly £22,000 for failures in anti-money laundering (AML) procedures, towards the top end of the Solicitors Regulation Authority’s (SRA) powers.
The fine represented 2.4% of the firm’s turnover, with the SRA acknowledging that “there was no evidence that actual harm had materialised”.
According to an SRA notice, an inspection in early 2023 identified various areas of concern surrounding the firm’s compliance with the 2017 Money Laundering Regulations.
This led to an investigation that found that GD Legal, which handles both residential and commercial property work, did not have a documented and compliant firm wide risk assessment in place between March 2019 until October 2022.
It was not until June 2023 that the firm implemented a client and matter risk assessment process, and December 2023 that it had in place fully compliant policies, controls and procedures.
The SRA said the risks posed by the breaches were “heightened given the high proportion of the firm’s work that was ‘in scope’ of the MLRs 2017”.
Further, the breaches “persisted for longer than was reasonable” and had the potential to cause harm to the public interest and public confidence.
Applying the SRA’s fining guidance led to the 2.4% figure and a figure of £21,843.
In mitigation, the regulator acknowledged that GD Legal had co-operated with the investigation, had taken “remedial action” and there was “no evidence that actual harm had materialised”.
The firm was also ordered to pay costs of £1,350.
As a traditional law firm, the most the SRA could fine GD Legal was £25,000, although that is set to change with the unlimited fining powers being introduced for matters related to economic crime as a result of the Economic Crime and Corporate Transparency Act 2023.
The SRA’s current consultation on amending its fining regime said: “The types of misconduct for which we now have unlimited fining powers include criminal offences involving the Money Laundering Regulations, violations of international sanctions, financial dishonesty, theft, and the improper use of client monies where this amounted to a fraud, or where there were inadequate controls in place to prevent or detect offences of this kind.”
To engage this power, the offences must have occurred after 4 March 2024.
The consultation said the change was likely to lead to more fines exceeding 5% of a firm’s turnover but fewer of these cases going before the Solicitors Disciplinary Tribunal.
There has been a stream of penalties over recent months for law firms that were not complying with AML rules, including a recent one of £46,000 for a Coventry law firm which, as an alternative business structure, is already subject to effectively unlimited fines from the SRA (the limit is £250m).
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